AMB PROPERTY CORP, S-11, 1998-04-02

AMB PROPERTY CORP
S-11, 1998-04-02

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1998
REGISTRATION NO. 333-
================================================================================

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

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

<TABLE>
<S> <C> <C>
AMB PROPERTY, L.P.
(EXACT NAME OF ISSUER OF THE NOTES AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-3285362
(STATE OR OTHER (I.R.S. EMPLOYER
JURISDICTION AND ITS NOTES GUARANTORS IDENTIFICATION NO.)
OF INCORPORATION)
MARYLAND AMB PROPERTY CORPORATION 94-3281941
DELAWARE AMB PROPERTY II, L.P. 94-3285360
DELAWARE LONG GATE LLC 52-1936207
(STATE OR OTHER (I.R.S. EMPLOYER
JURISDICTION IDENTIFICATION NO.)
OF INCORPORATION)
</TABLE>

505 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94111
(415) 394-9000
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE AND TELEPHONE
NUMBER)
------------------------

S. DAVIS CARNIGLIA
MANAGING DIRECTOR,
CHIEF FINANCIAL OFFICER AND GENERAL COUNSEL
AMB PROPERTY CORPORATION
505 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94111
(415) 394-9000
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------

COPIES TO:

<TABLE>
<S> <C>
EDWARD SONNENSCHEIN, JR., ESQ. KENNETH M. DORAN, ESQ.
J. SCOTT HODGKINS, ESQ. GIBSON, DUNN & CRUTCHER LLP
LATHAM & WATKINS 333 SOUTH GRAND AVENUE
633 WEST FIFTH STREET, SUITE 4000 LOS ANGELES, CALIFORNIA 90071
LOS ANGELES, CALIFORNIA 90071 (213) 229-7000
(213) 485-1234
</TABLE>

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

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

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement of 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>
<S> <C> <C> <C> <C>
================================================================================================================================
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE(2)(3)
- --------------------------------------------------------------------------------------------------------------------------------
AMB Property, L.P. )
% Notes due 2008)
% Notes due 2018)
% Reset Put Securities due 2015) $350,000,000 100% $350,000,000 $121,725
Guaranty of AMB Property Corporation )
Guaranty of Long Gate LLC )
Guaranty of AMB Property II, L.P. )
================================================================================================================================
</TABLE>

(1) Estimated solely for purposes of calculating the registration fee.

(2) Calculated pursuant to Section 6(b) of the Securities Act of 1933, as
amended (the "Securities Act").

(3) Pursuant to Rule 457(o) under the Securities Act, which permits the
registration fee to be calculated on the basis of the maximum offering price
of all securities listed, the table does not specify the amount to be
registered, the proposed maximum offering price per security or the proposed
maximum aggregate offering price.
------------------------

THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
FORM S-11 ITEM NO. AND HEADING LOCATION OR HEADING IN PROSPECTUS
------------------------------ ---------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front Cover Page; Outside Back Cover
Page
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................ Prospectus Summary; Risk Factors
4. Determination of Offering Price.................. Underwriters
5. Dilution......................................... Not Applicable
6. Selling Security Holders......................... Not Applicable
7. Plan of Distribution............................. Underwriters
8. Use of Proceeds.................................. Use of Proceeds
9. Selected Financial Data.......................... Selected Financial and Other Data
10. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. Management's Discussion and Analysis of
Financial Condition and Results of Operations
11. General Information as to Registrant............. Prospectus Summary; Business and Properties;
Management; Principal Stockholders;
Description of Certain Provisions of the
Partnership Agreement of the Operating
Partnership
12. Policy with Respect to Certain Activities........ Policies With Respect to Certain Activities
13. Investment Policies of Registrant................ Policies With Respect to Certain Activities
14. Description of Real Estate....................... Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business and Properties
15. Operating Data................................... Business and Properties
16. Tax Treatment of Registrant and Its Security
Holders.......................................... Certain Federal Income Tax Considerations
Relating to the REPS
17. Market Price of and Dividends on the Registrant's
Common Equity and Related Stockholder Matters.... Risk Factors; Price Range of Common Stock and
Distribution History; Principal Stockholders
18. Description of Registrant's Securities........... Description of Capital Stock; Description of
Certain Provisions of the Partnership
Agreement of the Operating Partnership
19. Legal Proceedings................................ Business and Properties; Legal Proceedings
20. Security Ownership of Certain Beneficial Owners
and Management................................... Principal Stockholders
21. Directors and Executive Officers................. Management
</TABLE>
<PAGE> 3

<TABLE>
<CAPTION>
FORM S-11 ITEM NO. AND HEADING LOCATION OR HEADING IN PROSPECTUS
------------------------------ ---------------------------------
<C> <S> <C>
22. Executive Compensation........................... Management
23. Certain Relationships and Related Transactions... Risk Factors; Business and Properties;
Management; Certain Relationships and Related
Transactions; Principal Stockholders
24. Selection, Management and Custody of Registrant's
Investments...................................... Risk Factors; Business and Properties;
Policies With Respect to Certain Activities
25. Policies with Respect to Certain Transactions.... Risk Factors; Business and Properties;
Policies With Respect to Certain Activities;
Management; Certain Relationships and Related
Transactions; Principal Stockholders
26. Limitations of Liability......................... Management; Description of Certain Provisions
of the Partnership Agreement of the Operating
Partnership
27. Financial Statements and Information............. Index to Financial Statements
28. Interests of Named Experts and Counsel........... Not Applicable
29. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Not Applicable
30. Quantitative and Qualitative Disclosures About
Market Risk...................................... Risk Factors
</TABLE>
<PAGE> 4

This Prospectus and the information contained herein are subject to change,
completion or amendment without notice. These securities may not be sold nor may
an offer to buy be accepted prior to the time the Prospectus is delivered in
final form. Under no circumstances shall this Prospectus constitute an offer to
sell or the solicitation of an offer to buy, nor shall there be any sale of
these securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such jurisdictions.

PROSPECTUS (Subject to Completion)
Issued April , 1998

$350,000,000

AMB Property, L.P.
Unconditionally Guaranteed by AMB Property Corporation and Certain Subsidiaries
$ % NOTES DUE 2008
$ % NOTES DUE 2018
$ % RESET PUT SECURITIES (REPS(SM)) DUE 2015*
------------------------

Interest payable and
------------------------
AMB PROPERTY, L.P. IS THE OPERATING PARTNERSHIP (THE "OPERATING PARTNERSHIP")
THROUGH WHICH ITS SOLE GENERAL PARTNER, AMB PROPERTY CORPORATION, A MARYLAND
CORPORATION (THE "COMPANY"), OWNS 153 PROPERTIES ENCOMPASSING APPROXIMATELY 50.6
MILLION SQUARE FEET OF RENTABLE SPACE. THE COMPANY, WHICH OWNED AS OF DECEMBER
31, 1997 A 97.1% INTEREST IN THE OPERATING PARTNERSHIP, IS SELF-MANAGED AND
SELF-ADMINISTERED AND EXPECTS THAT IT HAS QUALIFIED AND WILL CONTINUE TO QUALIFY
AS A REAL ESTATE INVESTMENT TRUST FOR FEDERAL INCOME TAX PURPOSES BEGINNING WITH
ITS TAXABLE YEAR ENDED DECEMBER 31, 1997.
------------------------
THE % NOTES DUE 2008 (THE "2008 NOTES"), THE % NOTES DUE 2018 (THE "2018
NOTES") AND THE % REPS DUE 2015 (THE "REPS," AND COLLECTIVELY WITH THE 2008
NOTES AND THE 2018 NOTES, THE "NOTES") WILL MATURE ON , 2008, 2018
AND 2015 RESPECTIVELY. THE REPS WILL BE SUBJECT TO MANDATORY REDEMPTION FROM THE
THEN EXISTING HOLDERS ON , 2005 EITHER (I) THROUGH THE EXERCISE OF THE
CALL OPTION (AS DEFINED HEREIN) BY MORGAN STANLEY & CO. INTERNATIONAL LIMITED
(THE "CALLHOLDER"), OR (II) IN THE EVENT THE CALLHOLDER DOES NOT EXERCISE THE
CALL OPTION, THE AUTOMATIC EXERCISE OF THE MANDATORY PUT (AS DEFINED HEREIN) BY
THE TRUSTEE ON BEHALF OF THE HOLDERS. SEE "DESCRIPTION OF THE NOTES -- CALL
OPTION AND MANDATORY PUT WITH RESPECT TO THE REPS." THE NOTES WILL BE REDEEMABLE
AS SET FORTH UNDER "DESCRIPTION OF NOTES -- REDEMPTION OF THE 2008 NOTES AND THE
2018 NOTES AT THE OPTION OF THE OPERATING PARTNERSHIP" AND WILL BE
UNCONDITIONALLY GUARANTEED ON AN UNSECURED BASIS BY THE COMPANY, AMB PROPERTY
II, L.P. AND LONG GATE LLC. THE NOTES WILL RANK PARI PASSU WITH ALL OUTSTANDING
INDEBTEDNESS OF THE OPERATING PARTNERSHIP. THE NOTES WILL BE REPRESENTED BY ONE
OR MORE GLOBAL NOTES REGISTERED IN THE NAME OF A NOMINEE OF THE DEPOSITORY TRUST
COMPANY, AS DEPOSITARY (THE "DEPOSITARY"). BENEFICIAL INTERESTS IN THE NOTES
WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS
MAINTAINED BY THE PARTICIPANTS OF THE DEPOSITARY. EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THIS PROSPECTUS, NOTES IN CERTIFICATED FORM WILL NOT
BE ISSUED IN EXCHANGE FOR THE GLOBAL NOTES.
------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 13 HEREIN FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND OPERATING
PUBLIC(1) COMMISSIONS(2) PARTNERSHIP(1)(3)(4)
--------- -------------- --------------------
<S> <C> <C> <C>
Per 2008 Note............................................... % % %
Per 2018 Note............................................... % % %
Per 2015 REPS............................................... % % %
Total............................................. $ $ $
</TABLE>

- ---------------
(1) Plus accrued interest, if any, from , 1998.
(2) The Operating Partnership and the Company have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriters."
(3) Before deducting expenses payable by the Operating Partnership estimated
at $ .
(4) Represents consideration for the REPS, which includes consideration for
the Call Option.
------------------------

* REPS is a service mark of Morgan Stanley Dean Witter & Co.
------------------------

The Notes are offered, subject to prior sale, when, as, and if accepted by
the Underwriters, and subject to approval of certain legal matters by Gibson,
Dunn & Crutcher LLP, counsel for the Underwriters. It is expected that delivery
of the Notes will be made on or about , 1998, through the book-entry
facilities of the Depositary, against payment therefor in immediately available
funds.
------------------------

MORGAN STANLEY DEAN WITTER
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
, 1998
<PAGE> 5

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF NOTES TO COVER
SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITERS."
<PAGE> 6

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED HEREIN BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
OPERATING PARTNERSHIP, THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF ANY OFFER TO BUY THE NOTES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, 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 ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
OPERATING PARTNERSHIP OR THE COMPANY SINCE THE DATE HEREOF.
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.............................. 1
The Company and the Operating Partnership....... 1
Recent Developments............................. 3
Risk Factors.................................... 4
The Offering.................................... 6
Organization.................................... 8
Business and Operating Strategies............... 8
Summary Financial and Other Data................ 10
RISK FACTORS.................................... 13
General Real Estate Risks....................... 13
Debt Financing.................................. 14
Ranking of the Notes............................ 17
Contingent or Unknown Liabilities............... 17
Government Regulations.......................... 18
THE COMPANY AND THE OPERATING PARTNERSHIP....... 20
General......................................... 20
Recent Developments............................. 20
BUSINESS AND OPERATING STRATEGIES............... 21
National Property Company....................... 21
Two Complementary Property Types................ 21
Select Market Focus............................. 21
Property Management............................. 22
Disciplined Investment Process.................. 22
Renovation, Expansion and Development........... 23
Financing Strategy.............................. 23
AMB Investment Management....................... 24
STRATEGIES FOR GROWTH........................... 25
Growth Through Operations....................... 25
Growth Through Acquisitions..................... 25
Growth Through Renovation, Expansion and
Development................................... 25
USE OF PROCEEDS................................. 26
PRICE RANGE OF COMMON STOCK AND DISTRIBUTION
HISTORY....................................... 26
CAPITALIZATION.................................. 27
SELECTED FINANCIAL AND OTHER DATA............... 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.................................... 32
General......................................... 32
Company and Predecessor Results of Operations... 32
Properties Results of Operations................ 33
Liquidity and Capital Resources................. 34
Inflation....................................... 36
Year 2000 Compliance............................ 36
Funds From Operations........................... 36
Selected As Adjusted Property Financial Data.... 37
BUSINESS AND PROPERTIES......................... 38
Industrial Properties........................... 38
Industrial Property Summary..................... 40
Industrial Property Tenant Information.......... 45
Industrial Property Lease Expirations........... 46
Retail Properties............................... 47
Retail Property Summary......................... 50
Retail Property Tenant Information.............. 53
Retail Property Lease Expirations............... 54
Historical Lease Renewals and Retention Rates... 55
Recurring Building Improvements................. 55
Recurring Tenant Improvements and Leasing
Commissions................................... 55
Occupancy and Base Rent......................... 56
Renovation, Expansion and Development Projects
In Progress................................... 56
Properties Held Through Joint Ventures, Limited
Liability Companies and Partnerships.......... 56
Debt Financing.................................. 58
Insurance....................................... 60
Government Regulations.......................... 61
Management and Employees........................ 63
Legal Proceedings............................... 63
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES..... 64
Investment Policies............................. 64
Financing Policies.............................. 65
Lending Policies................................ 65
Conflict of Interest Policies................... 65
Policies with Respect to Other Activities....... 66
Policies with Respect to Investment Advisory
Services...................................... 66
Other Policies.................................. 66
MANAGEMENT...................................... 68
Committees of the Board of Directors............ 71
Compensation of the Board of Directors.......... 71
Executive Compensation.......................... 72
Option Grants in Last Fiscal Year............... 73
Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values............. 73
Employment Agreements........................... 73
Stock Incentive Plan............................ 74
401(k) Plan..................................... 74
Limitation of Directors' and Officers'
Liability..................................... 75
Indemnification Agreements...................... 75
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.................................. 76
Formation Transactions.......................... 76
Other Related Transactions...................... 76
Conflicts of Interest........................... 77
PRINCIPAL STOCKHOLDERS.......................... 79
DESCRIPTION OF NOTES............................ 80
General......................................... 80
Denominations, Maturity, Interest, Registration
and Transfer.................................. 81
Guarantees...................................... 82
</TABLE>

i
<PAGE> 7

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Redemption of the 2008 Notes and the 2018 Notes
at the Option of the Operating Partnership.... 82
Call Option and Mandatory Put with Respect to
the REPS...................................... 83
Coupon Reset Process if REPS are Called......... 85
Merger, Consolidation or Sale................... 86
Certain Covenants............................... 87
Definitions..................................... 89
Events of Default, Notice and Waiver............ 90
Modification of the Indenture................... 92
Discharge, Defeasance and Covenant Defeasance... 93
Global Notes.................................... 95
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
RELATING TO THE REPS.......................... 98
Treatment of REPS............................... 98
Backup Withholding.............................. 99
DESCRIPTION OF CERTAIN PROVISIONS OF THE
PARTNERSHIP AGREEMENT OF THE OPERATING
PARTNERSHIP................................... 100
General......................................... 100
Purpose, Business and Management................ 100
Engaging in Other Businesses; Conflicts of
Interest...................................... 101
Reimbursement of the Company; Transactions with
the Company and its Affiliates................ 101
Exculpation and Indemnification of the
Company....................................... 102
Sales of Assets; Liquidation.................... 102
Capital Contribution............................ 103
Removal of the General Partner; Transferability
of the Company's Interests; Treatment of Units
in Significant Transactions................... 103
Redemption/Exchange Rights...................... 104
Performance Units............................... 104
Registration Rights............................. 105
Duties and Conflicts............................ 105
Meetings; Voting................................ 105
Amendment of the Partnership Agreement.......... 105
Books and Reports............................... 106
Term............................................ 106
DESCRIPTION OF CAPITAL STOCK.................... 107
General......................................... 107
Common Stock.................................... 107
Preferred Stock................................. 108
UNDERWRITERS.................................... 109
LEGAL MATTERS................................... 110
EXPERTS......................................... 110
AVAILABLE INFORMATION........................... 110
GLOSSARY........................................ 111
INDEX TO FINANCIAL INFORMATION.................. F-1
</TABLE>

AMB and its logo are registered service marks of the Company. All other
trademarks and service marks appearing in this Prospectus are the property of
their respective holders.

In addition to historical information, the information included in this
Prospectus contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act"), and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
such as those pertaining to the Operating Partnership's and the Company's
(including for purposes of this paragraph, certain of its other subsidiaries')
capital resources, portfolio performance and results of operations. Likewise,
the pro forma financial statements and other pro forma information included in
this Prospectus also contain certain such forward-looking statements. In
addition, all statements regarding anticipated growth in the Operating
Partnership's and the Company's funds from operations and anticipated market
conditions, demographics and results of operations are forward-looking
statements. Forward-looking statements involve numerous risks and uncertainties
and should not be relied upon as predictions of future events, and there can be
no assurance that the events or circumstances reflected in such forward-looking
statements will be achieved or occur. Certain such forward-looking statements
can be identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," "seeks," "approximately," "intends,"
"plans," "pro forma," "estimates," or "anticipates" or the negative thereof or
other variations thereof or comparable terminology, or by discussions of
strategy, plans or intentions. Such forward-looking statements are necessarily
dependent on assumptions, data or methods that may be incorrect or imprecise and
they may be incapable of being realized. The following factors, among others,
could cause actual results and future events to differ materially from those set
forth or contemplated in the forward-looking statements: defaults or non-renewal
of leases, increased interest rates and operating costs, failure to obtain
necessary outside financing, difficulties in identifying properties to acquire
and in effecting acquisitions, failure to successfully integrate acquired
properties and operations, risks and uncertainties affecting property
development and construction (including, without limitation, construction
delays, cost overruns, inability to obtain necessary permits and public
opposition to such activities), failure to qualify as a real estate investment
trust under the Internal Revenue Code of 1986, as amended (the "Code"),
environmental uncertainties, risks related to natural disasters, financial
market fluctuations, changes in real estate and zoning laws and increases in
real property tax rates. The success of the Operating Partnership and the
Company also depends upon economic trends generally, including interest rates,
income tax laws, governmental regulation, legislation, population changes and
those risk factors discussed in the section entitled "Risk Factors." Readers are
cautioned not to place undue reliance on forward-looking statements, which
reflect management's analysis only. Neither the Operating Partnership nor the
Company assumes any obligation to update forward-looking statements.

ii
<PAGE> 8

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial data, including the financial statements and notes
thereto, set forth elsewhere in this Prospectus. Unless the context otherwise
requires, the "Company" shall include its subsidiaries, including the Operating
Partnership and with respect to the period prior to the IPO, the AMB
Predecessors (as defined). Additional capitalized terms shall have the meanings
set forth herein and in the Glossary beginning on page 111.

THE COMPANY AND THE OPERATING PARTNERSHIP

AMB Property, L.P. was organized in November 1997 and commenced operations
in connection with the completion of the initial public offering of AMB Property
Corporation, its sole general partner (the "IPO") and the consummation of the
Formation Transactions (as defined) in November 1997. AMB Property Corporation
is one of the largest publicly-traded real estate companies in the United
States. The Company owns 153 Properties, comprised of 116 industrial properties
(the "Industrial Properties") and 37 retail properties (the "Retail Properties")
located in 28 markets throughout the United States (including 21 Industrial
Properties and four Retail Properties acquired since December 31, 1997). The
Industrial Properties (comprising 412 buildings), principally warehouse
distribution properties, encompass approximately 43.8 million rentable square
feet and, as of December 31, 1997, were 96.1% leased to over 1,000 tenants. The
Retail Properties, principally grocer-anchored community shopping centers,
encompass approximately 6.8 million rentable square feet and, as of the same
date, were 95.4% leased to over 900 tenants. See "Business and Properties."

The Operating Partnership conducts substantially all of the Company's
activities and owns substantially all of the economic interests in the
Properties. As of December 31, 1997, the Company owned an approximate 97.1%
general partner interest in the Operating Partnership, with the remaining 2.9%
limited partner interest owned by nonaffiliated investors. As the sole general
partner of the Operating Partnership, the Company has control over the
management of the Operating Partnership and over each of the 112 Properties
(comprising approximately 36.0 million rentable square feet) owned directly by
the Operating Partnership. The Operating Partnership owns 99% of the economic
interests in the remaining 41 Properties (comprising approximately 14.6 million
rentable square feet) through AMB Property II, L.P., a Delaware limited
partnership, and Long Gate LLC, a Delaware limited liability company, and the
Company (through a wholly owned subsidiary) owns a 1% interest.

The Company is engaged in the business of acquiring and operating
industrial properties and community shopping centers in target markets
nationwide. The Company is led by Mr. Hamid R. Moghadam, its Chief Executive
Officer and one of the three founders of the Company. Messrs. Douglas D. Abbey
and T. Robert Burke, the other two founders, also play active roles in the
Company's operations as the Chairman of its Investment Committee and the
Chairman of its Board of Directors, respectively. The Company's nine executive
officers have an average of 23 years of experience in the real estate industry
and have worked together for an average of nine years building the AMB real
estate business. The Company employs 122 individuals, 98 of whom are located in
its San Francisco headquarters and 24 in its Boston office. The Company operates
as a self-administered and self-managed real estate company and expects that it
has qualified and that it will continue to qualify as a REIT for federal and
state income tax purposes beginning with the year ended December 31, 1997.

1
<PAGE> 9

The following table sets forth certain summary information with respect to
the Properties owned as of December 31, 1997.

INDUSTRIAL PROPERTIES

<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER NUMBER RENTABLE INDUSTRIAL ANNUALIZED OF
OF OF SQUARE SQUARE PERCENTAGE BASE RENT ANNUALIZED
REGION BUILDINGS PROPERTIES FEET FEET LEASED (000S)(1) BASE RENT
------ --------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Eastern.................. 43 16 5,009,032 13.4% 88.5% $ 18,211 12.0%
Midwestern............... 86 23 10,733,755 28.8 95.7 37,677 24.7
Southern................. 91 24 9,490,183 25.4 96.1 38,323 25.2
Western.................. 136 32 12,095,565 32.4 98.5 57,941 38.1
--- -- ---------- ----- ---- -------- -----
Total/Weighted Average... 356 95 37,328,535 100.0% 95.7% $152,152 100.0%
=== == ========== ===== ==== ======== =====
</TABLE>

RETAIL PROPERTIES

<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER RENTABLE RETAIL ANNUALIZED OF
OF SQUARE SQUARE PERCENTAGE BASE RENT ANNUALIZED
REGION PROPERTIES FEET FEET LEASED (000S)(1) BASE RENT
------ ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Eastern........................... 3 1,184,211 19.1% 99.6% $ 13,740 19.1%
Midwestern........................ 4 710,522 11.4 97.0 6,885 9.6
Southern.......................... 10 1,703,523 27.4 90.7 17,433 24.2
Western........................... 16 2,618,090 42.1 97.8 33,948 47.1
--- ---------- ----- ---- -------- -----
Total/Weighted Average............ 33 6,216,346 100.0% 96.1% $ 72,006 100.0%
=== ========== ===== ==== ======== =====
</TABLE>

TOTAL PROPERTIES

<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
NUMBER RENTABLE OF TOTAL ANNUALIZED OF
OF SQUARE SQUARE PERCENTAGE BASE RENT ANNUALIZED
REGION PROPERTIES FEET FEET LEASED (000S)(1) BASE RENT
------ ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Eastern........................... 19 6,193,243 14.2% 90.6% $ 31,951 14.2%
Midwestern........................ 27 11,444,277 26.3 95.8 44,562 19.9
Southern.......................... 34 11,193,706 25.7 95.2 55,756 24.9
Western........................... 48 14,713,655 33.8 98.4 91,889 41.0
--- ---------- ----- ---- -------- -----
Total/Weighted Average............ 128 43,544,881 100.0% 95.8% $224,158 100.0%
=== ========== ===== ==== ======== =====
</TABLE>

- ---------------
(1) Annualized Base Rent means the monthly contractual amount under existing
leases at December 31, 1997, multiplied by 12. This amount excludes expense
reimbursements and rental abatements.

2
<PAGE> 10

RECENT DEVELOPMENTS

Acquisitions. Since December 31, 1997, the Company has acquired 21
Industrial Properties and four Retail Properties, representing an aggregate of
7.0 million rentable square feet for an aggregate purchase price of
approximately $288.4 million. The following table sets forth certain information
with respect to the Properties acquired after December 31, 1997.

<TABLE>
<CAPTION>
OCCUPANCY INITIAL
NUMBER OF TOTAL AS OF PURCHASE
BUILDINGS/ RENTABLE ACQUISITION PRICE DATE
PROPERTY NAME LOCATION REGION CENTERS SQUARE FEET DATE (000S)(1) ACQUIRED
------------- -------- ------ ---------- ----------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES:
Cascade Tigard, OR Western 4 159,411 100.0% $ 11,302 1/15/98
Wilsonville Portland, OR Western 1 516,693 100.0 17,991 1/30/98
Atlanta South Phase III(2) Clayton County, GA Southern 3 113,700 100.0 6,036 2/26/98
Locke Drive Marlborough, MA Eastern 1 97,870 100.0 4,688 3/17/98
Forbes Boulevard(3) Mansfield, MA Eastern 1 30,912 100.0 1,481 3/17/98
Jamesburg(4) Dayton, NJ Eastern 3 821,712 96.0 46,802 3/20/98
Chancellor Square Orlando, FL Southern 3 141,788 67.3 5,429 3/24/98
Presidents Drive(5) Orlando, FL Southern 2 249,007 95.6 9,533 3/24/98
Sand Lake Service Center Orlando, FL Southern 6 400,591 95.4 15,338 3/24/98
Corporate Park(4) Memphis, TN Southern 6 658,322 100.0 20,823 3/24/98
Hickory Hill(4) Memphis, TN Southern 1 200,000 100.0 6,327 3/24/98
Braintree Industrial Braintree, MA Eastern 8 976,634 100.0 28,039 3/27/98
Braintree Office Braintree, MA Eastern 1 120,000 100.0 3,445 3/27/98
Stoughton Industrial Stoughton, MA Eastern 5 632,675 100.0 18,164 3/27/98
Arsenal Street Watertown, MA Eastern 1 191,850 100.0 5,508 3/27/98
Bedford Street Middleborough, MA Eastern 1 40,018 100.0 1,149 3/27/98
Brockton Industrial Brockton, MA Eastern 1 300,114 100.0 8,616 3/27/98
Collins Street Attleboro, MA Eastern 1 152,730 100.0 4,385 3/27/98
Hartwell Avenue Lexington, MA Eastern 1 40,800 100.0 1,171 3/27/98
United Drive West Bridgewater, MA Eastern 1 315,000 100.0 9,044 3/27/98
Braemar Business Center Minneapolis, MN Midwestern 2 108,091 100.0 5,201 3/30/98
Edenvale Business Center Eden Prairie, MN Midwestern 1 85,730 98.0 4,125 3/30/98
Parkway Business Center New Hope, MN Midwestern 1 43,660 100.0 2,101 3/30/98
Round Lake Business Center Arden Hills, MN Midwestern 1 74,625 93.0 3,573 3/30/98
-- --------- ----- --------
Industrial Total/Weighted Average...................... 56 6,471,933 98.2 240,271
-- --------- ----- --------
RETAIL PROPERTIES:
Northridge Fort Lauderdale, FL Southern 1 191,207 96.0 10,150 1/29/98
Springs Gate(6) Coral Springs, FL Southern 1 N/A N/A 6,115 3/3/98
Totem Lake Malls Seattle, WA Western 1 290,204 78.3 26,000 3/6/98
Mazzeo Randolph, MA Eastern 1 88,420 100.0 5,835 3/27/98
-- --------- ----- --------
Retail Total/Weighted Average.......................... 4 569,831 87.6 48,100
-- --------- ----- --------
Total/Weighted Average................................. 60 7,041,764 97.4% $288,371
== ========= ===== ========
</TABLE>

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

(1) Includes estimated closing costs.

(2) Represents the acquisition of an additional building. Such building is
considered a part of Atlanta South and is not counted as a separate property
in determining the aggregate number of Properties for this Prospectus.

(3) Represents the acquisition of an additional building. Such building is
considered a part of Cabot Business Park and is not counted as a separate
property in determining the aggregate number of Properties for this
Prospectus.

(4) Represents Properties in which the Company acquired 50% ownership interests
through AMB Investment Management's co-investment program. See "Business and
Operating Strategies -- AMB Investment Management."

(5) Represents the acquisition of an additional building. Such building is
considered a part of Presidents Drive and is not counted as a separate
property in determining the aggregate number of Properties for this
Prospectus.

(6) Represents land held for development.

3
<PAGE> 11

Quarterly Distributions. On March 6, 1998, the Board of Directors of the
Company, in its capacity as general partner of the Operating Partnership,
declared a distribution of $0.3425 per partnership unit, payable April 3, 1998
to partners of record as of March 18, 1998. In addition, the Company's Board of
Directors declared a distribution of $0.3425 per share of the Company's common
stock, par value $.01 per share (the "Common Stock"), payable April 3, 1998 to
stockholders of record as of March 18, 1998.

Revolving Credit Agreement. The Operating Partnership is presently
negotiating with Morgan Guaranty Trust Company of New York, as agent ("MGT"), on
behalf of the lenders under the Operating Partnership's $500 million unsecured
revolving credit facility (the "Credit Facility"), to increase the aggregate
availability thereunder. No assurance can be given that any such agreement will
be reached.

Alliance with Trammell Crow Company. The Company has formed a strategic
alliance with Trammell Crow Company to develop and manage industrial properties
in targeted distribution markets nationwide. The alliance will focus on
multi-tenant freight forwarding facilities adjacent to major airports and
industrial submarkets of targeted metropolitan areas such as Chicago, Seattle
and Northern New Jersey.

RISK FACTORS

An investment in the Notes involves various material risks. Prospective
investors should carefully consider the following risk factors, in addition to
the other information set forth in this Prospectus, before making an investment
decision regarding the Notes offered hereby. Each of these matters could have
adverse consequences to the Operating Partnership or the Company. Such risks
include, among others:

- the need to renew leases or re-lease space upon lease expirations and to
pay renovation and re-leasing costs in connection therewith, the effect
of economic and other conditions on property cash flows and values, the
ability of tenants to make lease payments, the ability of a property to
generate revenue sufficient to meet operating expenses (including future
debt service), and the illiquidity of real estate investments which
could have an adverse effect on the Operating Partnership's and the
Company's financial condition, results of operations and cash flow and,
consequently, their ability to service debt, including the Notes;

- the ability of the Board of Directors to change the Company's growth and
investment strategy and its financing, distribution and operating
policies without a vote of the Company's stockholders and, with respect
to certain matters, the Noteholders;

- the possible failure of investments to perform in accordance with the
Company's expectations, inaccuracy of estimates of costs of improvements
to bring an acquired property up to standards, competition for
attractive investment opportunities and other general risks associated
with any real estate investment which could have an adverse effect on
the Operating Partnership's and the Company's financial condition,
results of operations and cash flow and, consequently, their ability to
service debt, including the Notes;

- although the Notes will be direct, senior obligations of the Operating
Partnership, the Notes will be effectively subordinated to the mortgages
and other secured indebtedness of the Operating Partnership and all
outstanding liabilities of the Operating Partnership's subsidiaries. In
addition, the Guarantees will be subordinated to all of the mortgages
and other secured indebtedness of each Guarantor, and all of the
outstanding liabilities of its respective subsidiaries; on a pro forma
basis giving effect to the Offering and the application of the net
proceeds therefrom, the total indebtedness of the Operating Partnership
and its subsidiaries as of December 31, 1997 would have been
approximately $934.3 million, of which $584.3 million would have been
secured. As of December 31, 1997, the Company had no outstanding
indebtedness (excluding the Company's guaranty of the Credit Facility)
other than indebtedness of the Operating Partnership and its
subsidiaries. Subject to certain limitations, the Operating Partnership,
the Company and their subsidiaries may incur additional indebtedness,
including, but not limited to, mortgage loans, borrowings under the
Credit Facility and other secured indebtedness;

4
<PAGE> 12

- the possibility that uninsured losses or losses in excess of insured
limits relating to certain occurrences, including fire, rental loss and
seismic activity which could have an adverse effect on the Operating
Partnership's and the Company's financial condition, results of
operations and cash flow and, consequently, their ability to service
debt, including the Notes;

- in connection with certain of the Company's partnerships and joint
ventures, the possibility that a partner or co-venturer may (i) become
bankrupt while the Company and any other remaining partners or joint
venturers remain liable for the liabilities of such partnerships or
joint ventures, (ii) have economic interests inconsistent with those of
the Company or (iii) cause the sale or refinancing of its interest at a
disadvantageous time or on disadvantageous terms, which could adversely
affect the return realized by the Company on such investments;

- the inability to refinance outstanding indebtedness upon maturity or, in
the case of the REPS, upon exercise of the Mandatory Put, or refinance
such indebtedness on favorable terms, the risks of rising interest rates
in connection with the Operating Partnership's unsecured line of credit
and other variable-rate borrowings and the ability of the Company to
incur more debt without Noteholder approval, thereby increasing its debt
service obligations, which could adversely affect the Company's cash
flow and consequently its ability to satisfy its obligation under the
Guaranty; and

- the potential liability of the Company and the Operating Partnership for
environmental matters and the costs of compliance with certain
government regulations which could have an adverse effect on the
Company's and the Operating Partnership's financial condition, results
of operations and cash flow and, consequently, their ability to service
debt, including the Notes.

5
<PAGE> 13

THE OFFERING

Securities Offered......... $ aggregate principal amount of %
Notes due 2008, $ aggregate principal
amount of % Notes due 2018 and $
aggregate principal amount of % Reset Put
Securities due 2015.

Maturity................... , 2008 with respect to
the 2008 Notes, , 2018
with respect to the 2018 Notes and ,
2015 with respect to the REPS. For persons holding
the REPS (or an interest therein) on
, 2005 (the "Coupon Reset Date") the
effect of the operation of the Call Option and the
Mandatory Put will be that such holders will be
entitled to receive, and will be required to
accept, 100% of the principal amount of such REPS
(plus accrued interest) on the Coupon Reset Date.

Interest Payment Dates..... Interest on the Notes will be payable semiannually
on each and ,
commencing , 1998.

Ranking.................... The Notes will be senior unsecured obligations of
the Operating Partnership and will rank equally
with the Operating Partnership's other unsecured
and unsubordinated indebtedness. However, the Notes
are effectively subordinated to mortgages and other
secured indebtedness of the Operating Partnership.
See "Risk Factors -- Ranking of the Notes."

Guarantees................. The Notes will be unconditionally guaranteed (the
"Guarantees") on an unsecured basis by the
Guarantors (as defined below). The obligations of
each Guarantor under its Guaranty will rank pari
passu with all of its unsecured and unsubordinated
indebtedness, will be effectively subordinated to
all of its mortgages and other secured indebtedness
and all outstanding liabilities of its
subsidiaries. In addition, the Guarantees will be
effectively subordinated to all of the mortgages
and other secured indebtedness of the Guarantors.
See "Risk Factors -- Ranking of the Notes."

Guarantors................. AMB Property Corporation, AMB Property II, L.P. and
Long Gate LLC.

Optional Redemption of the
2008 Notes and the 2018
Notes.................... The 2008 Notes and the 2018 Notes are redeemable at
any time at the option of the Operating
Partnership, in whole or in part, at a redemption
price equal to the greater of (i) 100% of the
principal amount of the 2008 Notes and the 2018
Notes being redeemed and (ii) the sum of the
present values of the remaining scheduled payments
of principal and interest thereon (exclusive of
interest accrued to such redemption date)
discounted to such redemption date on a semiannual
basis (assuming a 360-day year consisting of twelve
30-day months) at the Treasury Rate (as defined)
plus basis points, plus, in either
case, accrued and unpaid interest on the principal
amount being redeemed to such redemption date. See
"Description of Notes -- Redemption of the 2008
Notes and the 2018 Notes at the Option of the
Operating Partnership."

6
<PAGE> 14

Call Option................ The REPS may be called by the Callholder prior to
maturity, as described under "Description of
Notes -- Call Option and Mandatory Put with Respect
to the REPS."

Mandatory Put.............. The REPS are subject to repayment by the Operating
Partnership prior to maturity if the Callholder
elects not to purchase the REPS pursuant to the
Call Option as described under "Description of
Notes -- Call Option and Mandatory Put with Respect
to the REPS."

Callholder................. Morgan Stanley & Co. International Limited.

Use of Proceeds............ The net proceeds to the Operating Partnership from
the sale of the Notes offered hereby will be used
to repay approximately $ million of
borrowings outstanding under the Credit Facility
incurred to fund property acquisitions and for
general purposes.

Covenants.................. The Indenture will restrict, among other things,
the Operating Partnership's ability to incur
additional indebtedness and to merge or consolidate
with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of substantially
all of the assets of the Operating Partnership. See
"Description of Notes -- Certain Covenants."

7
<PAGE> 15

ORGANIZATION

The Company, the Operating Partnership and their subsidiaries were
organized in a manner to facilitate the Formation Transactions and the IPO. The
Company is the sole general partner of the Operating Partnership. The other
holders of Units in the Operating Partnership are limited partners. The
following diagram illustrates the structure of the Company, the Operating
Partnership and their subsidiaries:

[Organizational Structure Chart showing the ownership of (i) the Company, (ii)
the Operating Partnership which is 97.1% owned by the Company, as sole general
partner, and 2.9% owned by certain limited partners, (iii) AMB Property Holding
Corporation, of which 100% of the common stock is owned by the Company, (iv)
AMB Investment Management, of which 100% of the nonvoting preferred stock is
owned by the Operating Partnership, (v) certain limited partnerships and
limited liability Companies, including AMB Property II, L.P. and Long Gate LLC,
which are 99% owned by the Company and 1% owned by AMB Property Holding
Corporation, and (vi) the Properties which are owned directly or indirectly by
the Operating Partnership as set forth in footnote 2 to the chart.]

- ---------------
(1) AMB Investment Management conducts its business through the Investment
Management Partnership, of which it is the sole general partner and owns the
entire capital interest. The executive officers own a profits interest in
the Investment Management Partnership relating to the allocation of a
portion of the incentive fees with respect to assets managed by AMB prior to
the IPO.

(2) Includes AMB Property II, L.P. and Long Gate LLC.

(3) For local law purposes, Properties in certain states are owned through
limited partnerships and limited liability companies owned 99% by the
Operating Partnership and 1% by AMB Property Holding Corporation. The
ownership of such Properties through such entities does not materially
affect the Company's overall ownership of the interests in the Properties.

The principal executive offices of the Operating Partnership and the
Guarantors are located at 505 Montgomery Street, San Francisco, California
94111, and their telephone number is (415) 394-9000. The Company also maintains
a regional office in Boston, Massachusetts.

BUSINESS AND OPERATING STRATEGIES

The Company focuses its investment activities in industrial hub
distribution markets and retail trade areas throughout the U.S. where
opportunities exist to acquire and develop additional properties on an
advantageous basis. The Company believes that the industrial property sector is
well-positioned to benefit from strong market fundamentals and growth in
international trade, and further believes that the retail

8
<PAGE> 16

property sector will benefit from limited new construction in "in-fill"
locations and from projected growth in personal income and retail sales levels
(in-fill locations are those typified by significant population densities and
low availability of land resulting in limited opportunities for new construction
of competitive properties). The Company seeks to capitalize on these current
conditions in the industrial and retail property sectors by implementing the
following business and operating strategies:

- Financing Strategy. The Company intends to operate with a Debt-to-Total
Market Capitalization Ratio generally of less than 45% and plans to
continue to structure its balance sheet in order to obtain and maintain
an investment grade debt rating. Upon consummation of the Offering, the
Company's Debt-to-Total Market Capitalization Ratio as of December 31,
1997 on a pro forma basis would have been approximately 29.4% (23.6% on
an historical basis).

- National Property Company. The Company believes that its national
strategy enables it to increase or decrease investments in certain
regions to take advantage of the relative strengths and attractive
investment opportunities in different real estate markets. Through its
presence in markets throughout the U.S., the Company has developed
expertise in leasing, expense management, tenant retention strategies
and property design and configuration.

- Two Complementary Property Types. Management believes that its dual
property strategy provides significant opportunities to allocate capital
and organizational resources and offers the Company an optimal
combination of growth, strong current income and stability through
market cycles.

- Select Market Focus. The Company focuses on acquiring, redeveloping and
operating properties in in-fill locations. As the strength of these
markets continues to grow and the demand for well-located properties
increases, the Company believes that it will benefit from the resulting
upward pressure on rents.

- Research-Driven Market Selection. The Company's decisions regarding the
deployment of capital are experience- and research-driven, with
investments based on thorough qualitative and quantitative research and
analysis of local markets. The Company employs a dedicated research
department using proprietary analyses, databases and systems.

- Property Management. The Company actively manages the Properties through
its experienced staff of regional managers, each of whom has broad
responsibilities for the Properties they manage. The Company typically
outsources property management to a select group of third-party local
managers with whom the Company has established strong relationships.
Management believes that industrial and retail property types do not
typically require on-site property managers and that by utilizing third-
party property managers, the Company is better able to service its
customers and more efficiently manage its costs.

- Disciplined Investment Process. The Company has established a
disciplined approach to the investment decision-making process through
operating divisions that are subject to the overall policy direction of
its Investment Committee. The Company has also established efficient and
effective proprietary systems and procedures to manage and track a high
volume of acquisition proposals and transactions.

- Renovation, Expansion and Development. Management believes that
value-added renovation and expansion of properties and development of
well-located, high-quality industrial properties and community shopping
centers should continue to provide the Company with attractive
opportunities for increased cash flow and a higher risk-adjusted rate of
return than may be obtained from the purchase of stabilized properties.

9
<PAGE> 17

SUMMARY FINANCIAL AND OTHER DATA

The following table sets forth summary financial and other data on an
historical basis for the Operating Partnership for the period from November 26,
1997 to December 31, 1997 and for the Properties contributed to the Company in
connection with the Formation Transactions (the "AMB Contributed Properties")
for the years ended December 31, 1993, 1994, 1995, 1996 and the period from
January 1, 1997 to November 25, 1997, and on an as adjusted basis for the
Operating Partnership for the year ended December 31, 1997 (giving effect to the
completion of the Formation Transactions, the IPO and certain property
acquisitions and dispositions in 1997). Additionally, the table sets forth
summary financial and other data for the Operating Partnership for the year
ended December 31, 1997 on a pro forma basis (giving effect to the Formation
Transactions, the IPO, certain property acquisitions and dispositions in 1997,
the property acquisitions in 1998 and the Offering and the application of the
net proceeds therefrom, as if such transactions had occurred on January 1,
1997). The historical financial information contained in the tables should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Consolidated Financial Statements and
accompanying Notes thereto and the financial schedules included elsewhere in
this Prospectus.

In the opinion of management, the as adjusted and pro forma condensed
financial information provides for all adjustments necessary to reflect the
adjustments and transactions described above. The as adjusted and pro forma
information is unaudited and is not necessarily indicative of the results that
would have occurred if the transactions and adjustments reflected therein had
been consummated in the period or on the date presented, or on any particular
date in the future, nor does it purport to represent the financial position,
results of operations or changes in cash flows for future periods.

10
<PAGE> 18

OPERATING PARTNERSHIP AND AMB CONTRIBUTED PROPERTIES
SUMMARY FINANCIAL AND OTHER DATA
(IN THOUSANDS EXCEPT UNIT DATA, PERCENTAGES AND NUMBER OF PROPERTIES)

<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------
OPERATING PARTNERSHIP
-------------------------------------
HISTORICAL AS ADJUSTED PRO FORMA
AMB CONTRIBUTED PROPERTIES(1) (2) (3) (4)
-------------------------------------------------------- ---------- ----------- ----------
1993 1994 1995 1996 1997 1997 1997 1997
-------- -------- ---------- ---------- -------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenues................. $ 24,398 $ 51,682 $ 108,249 $ 167,953 $208,608 $ 27,110 $ 284,674 $ 319,169
Income from operations before
minority interests........... 6,871 13,753 32,519 54,865 58,068 9,291 103,903 106,558
Net income..................... 6,871 13,194 32,531 54,400 57,184 9,174 102,606 102,514
Net income per unit(5)......... $ 0.10 $ 1.16 $ 1.15
Distributions per unit......... 0.13 1.37 1.37
OTHER DATA:
EBITDA(6)...................... $ 195,218 $ 221,081
Funds from Operations(7)....... 147,409 152,077
Cash flows provided by(used
in):
Operating activities......... 131,621 136,289
Investing activities......... (607,768) (785,607)
Financing activities......... 553,199 556,908
Ratio of earnings to fixed
charges(8)................... 3.1x 2.5x
Book debt service coverage
ratio(9)..................... 4.3x 3.5x
Cash debt service coverage
ratio(10).................... 3.8x 3.2x
BALANCE SHEET DATA:
Investments in real estate at
cost......................... $323,230 $666,672 $1,018,681 $1,616,091 $2,442,999 $2,733,814
Total assets................... 326,586 721,131 1,117,181 1,622,559 2,506,255 2,781,423
Secured debt(11)............... 100,496 201,959 254,067 522,634 535,652 584,252
Unsecured notes................ -- -- -- -- -- 350,000
Unsecured credit facility...... -- -- -- 25,500 150,000 --
Partner's capital.............. 208,043 490,111 837,199 1,027,601 1,717,398 1,744,798
PROPERTY DATA:
INDUSTRIAL PROPERTIES
Total rentable square footage
of properties at end of
period....................... 5,638 13,364 21,598 29,609 37,329 43,800
Number of properties at
end of period................ 12 28 44 60 95 116
Occupancy rate at end of
period....................... 97.4% 96.9% 97.3% 97.2% 95.7% 96.1%
RETAIL PROPERTIES
Total rentable square footage
of properties at end of
period....................... 1,074 2,422 3,299 5,282 6,216 6,786
Number of properties at
end of period................ 9 14 19 30 33 37
Occupancy rate at end of
period....................... 96.5% 93.7% 92.4% 92.4% 96.1% 95.4%
</TABLE>

- ---------------
(1) Represents the AMB Contributed Properties historical combined financial and
other data for the years ended December 31, 1993, 1994, 1995 and 1996 and
the period from January 1, 1997 through November 25, 1997.

(2) For the period from November 26, 1997 to December 31, 1997.

(3) As adjusted financial and other data have been prepared as if the Formation
Transactions, the IPO and certain property acquisitions and dispositions in
1997 had occurred on January 1, 1997.

(4) Pro forma financial and other data have been prepared as if the Formation
Transactions, the IPO, certain property acquisitions and dispositions in
1997, the property acquisitions in 1998 and the Offering had occurred on
January 1, 1997.

(5) Historical, as adjusted and pro forma net income per unit for 1997 equals
the historical, as adjusted and pro forma net income divided by 88,416,676,
88,416,676 and 89,523,122 units, respectively.

(6) EBITDA is computed as income from operations before disposal of properties
and minority interests plus interest expense, income taxes, depreciation
and amortization. Management believes that in addition to cash flows and
net income, EBITDA is a useful financial performance measure for assessing
the operating performance of an equity REIT because, together with net
income and cash flows, EBITDA provides investors with an additional basis
to evaluate the ability of a REIT to incur and service debt and to fund
acquisitions and other capital expenditures.

11
<PAGE> 19

(7) FFO represents net income (loss) before minority interests and
extraordinary items, adjusted for depreciation on real property and
amortization of tenant improvement costs and lease commissions, gains
(losses) from the disposal of properties and FFO attributable to minority
interests in consolidated joint ventures whose interests are not
convertible into shares of Common Stock. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the White
Paper.

(8) The ratio of earnings to fixed charges is computed as income from
operations before minority interests plus fixed charges (excluding
capitalized interest) divided by fixed charges. Fixed charges consist of
interest costs (including amortization of debt premiums and financing
costs), whether capitalized or expensed, and the interest component of
rental expense.

(9) The book debt service coverage ratio is calculated as EBITDA divided by
book interest expense (including amortization of debt premiums and
financing costs).

(10) The cash debt service coverage ratio is calculated as EBITDA divided by
cash interest costs. Cash interest costs consist of book interest expense
(excluding amortization of debt premiums and financing costs) plus
capitalized interest.

(11) Secured debt as of December 31, 1997 includes unamortized debt premiums of
approximately $18,286. See Notes to Consolidated Financial Statements.

12
<PAGE> 20

RISK FACTORS

An investment in the Notes involves various material risks. Prospective
investors should carefully consider the following risk factors in connection
with an investment in the Notes offered hereby.

GENERAL REAL ESTATE RISKS

UNCONTROLLABLE FACTORS AFFECTING PERFORMANCE AND VALUE

Real property investments are subject to varying degrees of risk. The
yields available from equity investments in real estate depend on the amount of
income earned and capital appreciation generated by the related properties as
well as the expenses incurred in connection therewith. If the Properties do not
generate income sufficient to meet operating expenses, including debt service
and capital expenditures, the ability to make payments of principal of and
interest on the Notes could be adversely affected. Income from, and the value
of, the Properties may be adversely affected by the general economic climate,
local conditions such as oversupply of industrial or retail space or a reduction
in demand for industrial or retail space in the area, the attractiveness of the
Properties to potential tenants, competition from other industrial and retail
properties, and the ability of the Company to provide adequate maintenance and
insurance and increased operating costs (including insurance premiums, utilities
and real estate taxes). In addition, revenues from properties and real estate
values are also affected by such factors as the cost of compliance with
regulations and the potential for liability under applicable laws, including
changes in tax laws, interest rate levels and the availability of financing. The
Company's income would be adversely affected if a significant number of tenants
were unable to pay rent or if industrial or retail and other space could not be
rented on favorable terms. Certain significant expenditures associated with an
investment in real estate (such as mortgage payments, real estate taxes and
maintenance costs) generally do not decline when circumstances cause a reduction
in income from the investment.

CONCENTRATION OF PROPERTIES IN CALIFORNIA

As of December 31, 1997, the Properties located in California accounted for
approximately 28.0% of aggregate square footage and approximately 34.7% of
aggregate Annualized Base Rent. The Company's revenue from, and the value of its
Properties in, California may be affected by a number of factors, including the
local economic climate (which may be adversely impacted by business layoffs or
downsizing, industry slowdowns, changing demographics and other factors) and
local real estate conditions (such as oversupply of or reduced demand for
commercial properties). Therefore, the Company's performance and its ability to
make payments of principal of and interest on the Notes will likely be
dependent, in part, on economic conditions in California. Such Properties are
also subject to possible loss from seismic activity. See "-- Uninsured Losses
from Seismic Activity."

CONCENTRATION OF PROPERTIES IN INDUSTRIAL AND RETAIL SECTORS

The Properties are and are likely to continue to be concentrated
predominantly in the industrial and retail commercial real estate sectors, which
as of December 31, 1997 represent 85.7% and 14.3%, respectively, of the
Properties' aggregate rentable square footage. Such concentration may expose the
Company to the risk of downturns in these sectors to a greater extent than if
its portfolio also included other property types.

ILLIQUIDITY OF REAL ESTATE INVESTMENTS

Because real estate investments are relatively illiquid, the Company's
ability to vary its portfolio promptly in response to economic or other
conditions will be limited. The limitations in the Code and related regulations
on a REIT holding property for sale may affect the Company's ability to sell
properties without adversely affecting the Company's ability to make payments of
principal of and interest on the Notes. Any of the foregoing factors or events
will impede the ability of the Company to respond to adverse changes in the
performance of its investments and could have an adverse effect on the Company's
financial condition and results of operations and its ability to make payments
of principal of and interest on the Notes.

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DEBT FINANCING

DEBT FINANCING AND EXISTING DEBT MATURITIES

The Company will be subject to risks normally associated with debt
financing, including the risk that the Company's cash flow will be insufficient
to make required payments of principal of and interest on the Notes, the risk
that existing indebtedness on the Properties (which in all cases will not have
been fully amortized at maturity) will not be able to be refinanced or that the
terms of such refinancing will not be as favorable as the terms of existing
indebtedness. See "Business and Properties -- Debt Financing." If principal
payments due at maturity cannot be refinanced, extended or paid with proceeds of
other capital transactions, such as new equity capital, the Company expects that
its cash flow will not be sufficient in all years to make payments of principal
of and interest on the Notes and to repay all such maturing debt. Furthermore,
if prevailing interest rates or other factors at the time of refinancing (such
as the reluctance of lenders to make commercial real estate loans) resulted in
higher interest rates upon refinancing, the interest expense relating to such
refinanced indebtedness would increase, which would adversely affect the
Company's cash flow and the Company's ability to make payments of principal of
and interest on the Notes. If a Property or Properties are mortgaged to secure
payment of indebtedness and the Company is unable to meet mortgage payments, the
Property could be foreclosed upon or otherwise transferred to the mortgagee with
a consequent loss of income and asset value to the Company.

IMPACT OF RISING INTEREST RATES AND VARIABLE RATE DEBT

As of December 31, 1997, the Operating Partnership had $150 million
outstanding under its $500 million Credit Facility, and is currently negotiating
with MGT to increase the total amount available. The Operating Partnership may
incur other variable rate indebtedness in the future. Increases in interest
rates on such indebtedness could increase the Company's interest expense, which
would adversely affect the Company's cash flow and its ability to make payments
of principal of and interest on the Notes. Accordingly, the Company may in the
future engage in other transactions to further limit its exposure to rising
interest rates as appropriate and cost effective. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

NO LIMITATIONS ON INDEBTEDNESS

The Company operates with a policy of incurring debt, either directly or
through the Operating Partnership, only if upon such incurrence the Company's
Debt-to-Total Market Capitalization Ratio would be approximately 45% or less.
Notwithstanding the foregoing policy, the organizational documents of the
Company and the Operating Partnership do not contain any limitation on the
amount of indebtedness that may be incurred. Accordingly, the Board of Directors
could alter or eliminate this policy and would do so, for example, if it were
necessary for the Company to continue to qualify as a REIT. If this policy were
changed, the Company could become more highly leveraged, resulting in an
increase in debt service that could adversely affect the Company's FFO and,
consequently, the amount of cash available for payments of principal of and
interest on the Notes and could increase the risk of default on the Company's
indebtedness.

POSSIBLE IMPACT OF DEFAULTS ON CROSS-COLLATERALIZED AND CROSS-DEFAULTED DEBT

As of December 31, 1997, the Company had 12 non-recourse secured loans
which are cross-collateralized by five pools consisting of 19 Properties. As of
December 31, 1997, there was $211.7 million outstanding on such loans.
Accordingly, if an event of default were to occur on any such loan, the Company
would be required to repay the aggregate of all indebtedness on any such loan,
together with applicable prepayment charges, in order to avoid foreclosure on
all such Properties within the applicable pool. Foreclosure on such Properties,
or the Company's inability to refinance any such loan on terms as favorable as
existing terms, would negatively impact the Company's financial condition and
results of operations. In addition, the Operating Partnership's Credit Facility
contains defaults in the event that other material indebtedness of the Company
(including its non-recourse secured and joint venture debt) is in default. Such
cross-default provision may require the Company to repay or restructure the
Credit Facility in addition to any mortgage or other debt which is in default,
which could have an adverse effect on the Company's financial condition and
liquidity.

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RENEWAL OF LEASES AND RELETTING OF SPACE

The Company will be subject to the risks that leases may not be renewed,
space may not be relet or the terms of renewal or reletting (including the cost
of required renovations) may be less favorable than current lease terms. Leases
on a total of approximately 47.0% of the leased square footage as of December
31, 1997 in the Properties will expire on or prior to December 31, 2000, with
leases on 14.7% of the leased square footage in the Properties expiring during
the year ending December 31, 1998. In addition, numerous properties compete with
the Company's Properties in attracting tenants to lease space, particularly with
respect to retail properties. The number of competitive commercial properties in
a particular area could have a material adverse effect on the Company's ability
to lease space in its Properties or newly-acquired properties and on the rents
charged. If the Company were unable to promptly relet or renew the leases for
all or a substantial portion of this space, if the rental rates upon such
renewal or reletting were significantly lower than expected or if its reserves
for these purposes proved inadequate, the Company's cash flow and ability to
make payments of principal of and interest on the Notes could be adversely
affected. See "Business and Properties -- Industrial Properties -- Industrial
Property Lease Expirations -- Portfolio Total" and "-- Retail
Properties -- Retail Property Lease Expirations -- Portfolio Total."

UNINSURED LOSS

The Company carries comprehensive liability, fire, extended coverage and
rental loss insurance covering all of its properties, with policy specifications
and insured limits which the Company believes are adequate and appropriate under
the circumstances given relative risk of loss, the cost of such coverage and
industry practice. There are, however, certain types and magnitudes of losses
that are not generally insured because it is not economically feasible to insure
against such losses, such as losses due to riots or acts of war, or may be
insured subject to certain limitations including large deductibles or
co-payments, such as losses due to floods or seismic activity. See "-- Uninsured
Losses from Seismic Activity." Should an uninsured loss or a loss in excess of
insured limits occur with respect to one or more of its properties, the Company
could lose its capital invested in such properties, as well as the anticipated
future revenue from such properties and, in the case of debt which is with
recourse to the Company, the Company would remain obligated for any mortgage
debt or other financial obligations related to such properties.

UNINSURED LOSSES FROM SEISMIC ACTIVITY

A number of both the Industrial and Retail Properties are located in areas
that are known to be subject to earthquake activity, including in California
where, as of December 31, 1997, 27 Industrial Properties aggregating 10.4
million rentable square feet representing 23.8% of the Properties based on
aggregate square footage, and 11 Retail Properties, aggregating 1.8 million
rentable square feet representing 4.2% of the Properties based on aggregate
square footage, are located. The Company carries replacement cost earthquake
insurance on all of its Properties located in areas historically subject to
seismic activity, subject to coverage limitations and deductibles which the
Company believes are commercially reasonable. Such insurance coverage also
applies to the properties managed by AMB Investment Management, with a single
aggregate policy limit and deductible applicable to such properties and the
Company's properties. Through an annual analysis prepared by outside
consultants, the Company evaluates its earthquake insurance coverage in light of
current industry practice and determines the appropriate amount of earthquake
insurance to carry. No assurance can be given, however, that material losses in
excess of insurance proceeds will not occur or that such insurance will continue
to be available at commercially reasonable rates.

IMPACT ON CONTROL OVER AND LIABILITIES WITH RESPECT TO PROPERTIES OWNED
THROUGH PARTNERSHIPS AND JOINT VENTURES

The Company has ownership interests in four industrial and four retail
joint ventures, limited liability companies or partnerships. The Company may
make investments through such ventures in the future and presently plans to do
so with clients of AMB Investment Management, with respect to certain investment
opportunities, who may share certain approval rights over major decisions. Under
the agreements governing the joint ventures, the Company and the joint venture
participant may be required to make additional capital contributions, and
subject to certain limitations, the joint ventures may incur additional
indebtedness. Such
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<PAGE> 23

additional indebtedness would effectively be senior to the Notes. Partnership or
joint venture investments may, under certain circumstances, involve risks such
as the possibility that the Company's partners or co-venturers might become
bankrupt (in which event the Company and any other remaining general partners or
co-venturers would generally remain liable for the liabilities of such
partnership or joint venture), that such partners or co-venturers might at any
time have economic or other business interests or goals which are inconsistent
with the business interests or goals of the Company, or that such partners or
co-venturers may be in a position to take action contrary to the instructions or
the requests of the Company or contrary to the Company's policies or objectives,
including the Company's policy with respect to maintaining its qualification as
a REIT. In addition, agreements governing joint ventures and partnerships often
contain restrictions on the transfer of a joint venturer's or partner's interest
or "buy-sell" or similar provisions which may result in a purchase or sale of
such an interest at a disadvantageous time or on disadvantageous terms. The
Company will, however, seek to maintain sufficient control of such partnerships
or joint ventures to permit the Company's business objectives to be achieved.
There is no limitation under the organizational documents of either the
Operating Partnership or the Company as to the amount of available funds that
may be invested in partnerships or joint ventures. The occurrence of one or more
of the events described above could have an adverse effect on the Company's
financial condition and results of operations, and its ability to make payments
of principal of and interest on the Notes.

POSSIBLE INABILITY TO CONSUMMATE ACQUISITIONS ON ADVANTAGEOUS TERMS

The Company intends to continue to acquire industrial and retail
properties. Acquisitions of industrial and retail properties entail risks that
investments will fail to perform in accordance with expectations. Estimates of
the costs of improvements to bring an acquired property up to standards
established for the market position intended for that property may prove
inaccurate. In addition, there are general investment risks associated with any
new real estate investment. Further, the Company expects that there will be
significant competition for attractive investment opportunities from other major
real estate investors with significant capital including both publicly traded
REITs and private institutional investment funds. The Company anticipates that
future acquisitions will be financed through a combination of borrowings under
the Credit Facility, other forms of secured or unsecured financing, proceeds
from equity or debt offerings by the Company or the Operating Partnership. No
assurance can be given that the Company will be able to acquire additional
properties. In addition, no assurance can be given that any such acquisitions
will be financed on terms favorable to the Company, or that such additional
properties, if any, including the Pending Acquisition Properties, will conform
with management's expectations or investment criteria. Any one of the foregoing
events could have an adverse effect on the Company's financial condition and
results of operations, and its ability to make payments of principal of and
interest on the Notes.

POSSIBLE INABILITY TO COMPLETE RENOVATION AND DEVELOPMENT ON ADVANTAGEOUS
TERMS

The real estate development business, including the renovation and
rehabilitation of existing properties, involves significant risks in addition to
those involved in the ownership and operation of established industrial
buildings and community shopping centers, including the risks that financing may
not be available on favorable terms for development projects and construction
may not be completed on schedule or within budget, resulting in increased debt
service expense and construction costs and delays in leasing such properties and
generating cash flow. Substantial renovation and new development activities are
also subject to risks relating to the inability to obtain, or delays in
obtaining, all necessary zoning, land-use, building, occupancy, and other
required governmental permits and authorizations. Once completed, such new or
renovated properties may perform below anticipated levels, producing cash flow
below budgeted amounts. The occurrence of one or more of the foregoing in
connection with the Company's renovation and development activities could have
an adverse effect on the Company's financial condition and results of
operations, and its ability to make payments of principal of and interest on the
Notes. In addition, substantial renovation as well as new development
activities, regardless of whether or not they are ultimately successful,
typically require a substantial portion of management's time and attention which
could take management's time away from the day-to-day operations of the Company.
The Company anticipates that future acquisitions will be financed through a
combination of borrowings under the Credit Facility, other forms of secured or
unsecured financing and proceeds from equity or debt offerings by the Company or
the Operating Partnership. If such activities are
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<PAGE> 24

financed through construction loans, there is a risk that, upon completion of
construction, permanent financing may not be available or may be available only
on disadvantageous terms which could have an adverse effect on the Company's
financial condition and results of operations, and its ability to make payments
of principal of and interest on the Notes.

RANKING OF THE NOTES

The Notes will be direct, senior unsecured obligations of the Operating
Partnership and will rank equally with all of the other unsecured and
unsubordinated indebtedness of the Operating Partnership from time to time
outstanding. However, the Notes are effectively subordinated to mortgages and
other secured indebtedness of the Operating Partnership, which encumber certain
assets of the Operating Partnership, and to all of the indebtedness of its
subsidiaries (approximately $584.3 million as of December 31, 1997 on a pro
forma basis). In addition, the Guarantees will be effectively subordinated to
all of the mortgages and other secured indebtedness of the respective
Guarantors, and all of the outstanding liabilities of the Company's
subsidiaries. As of December 31, 1997, on a pro forma basis giving effect to the
Offering and the application of the proceeds therefrom, the total outstanding
indebtedness of the Operating Partnership and its subsidiaries would have been
approximately $934.3 million, of which $584.3 million was secured. As of
December 31, 1997, the Company had no outstanding indebtedness other than that
of the Operating Partnership and its subsidiaries. Subject to certain
limitations, each of the Operating Partnership and the Company may incur
additional indebtedness. Although the Company's Board of Directors has adopted a
policy of limiting the Company's Debt-to-Total Market Capitalization Ratio to
approximately 45%, neither the Operating Partnership's nor the Company's
organizational documents limit the amount of indebtedness that each may incur.
See "-- No Limitations on Indebtedness," "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources," "Description of Notes -- Certain Covenants -- Aggregate Debt Test,"
"-- Debt Service Test" and "-- Secured Debt Test."

The obligation of any Guarantor under its guarantee of the Notes may be
subject to review under state or federal transfer laws in the event of a
Guarantor's bankruptcy or other financial difficulty. Under those laws, in a
lawsuit by an unpaid creditor or representative of creditors of a Guarantor,
such as a trustee in bankruptcy, if a court were to find that when the Guarantor
entered into its guarantee, it (a) received less than fair consideration or
reasonably equivalent value therefor, and (b) either (i) was insolvent, (ii) was
rendered insolvent, (iii) was engaged in a business or transaction for which its
remaining unencumbered assets constituted unreasonably small capital, or (iv)
intended to incur or believed that it would incur debts beyond its ability to
pay as such debts matured, the court could void such Guarantor's guarantee and
the Guarantor's obligations thereunder, and direct the return of any amounts
paid thereunder to the Guarantor or to a fund for the benefit of its creditors.
Moreover, regardless of the factors identified in the foregoing clauses (i)
through (iv), a court could void a Guarantor's guarantee and direct such
repayment if it found that such guarantee was entered into with actual intent to
hinder, delay or defraud the Guarantor's creditors. To the extent that a
Guarantor's obligation under its guarantee of the Notes exceeds the actual
benefit that it receives from the issuance of the Notes, such Guarantor may be
deemed not to have received fair consideration or reasonably equivalent value
for its guarantee. The measure of insolvency for purposes of the foregoing will
vary depending on the law of the jurisdiction being applied. Generally, however,
an entity would be considered insolvent if the sum of its debts (including
contingent or unliquidated debts) is greater than all of its property at a fair
valuation or if the present fair salable value of its assets is less than the
amount that will be required to pay its probable liability on its existing debts
as they become absolute and matured.

CONTINGENT OR UNKNOWN LIABILITIES

The AMB Predecessors have been in existence for varying lengths of time up
to 14 years. In the Formation Transactions, the Company acquired the assets of
certain entities previously managed by or affiliated with the AMB Predecessor
entities including CIF, VAF, AMB and WPF, and certain assets of the Individual
Account Investors, subject to all of the potential existing liabilities of such
predecessor entities. There can be no assurances that there are no current
liabilities and will not be any future liabilities arising from prior activities
that are unknown and therefore not disclosed in this Prospectus. Such
liabilities have been

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<PAGE> 25

assumed by the Company as the surviving entity in the various merger and
contribution transactions that comprise the Formation Transactions or as general
partner of the Operating Partnership. Existing liabilities for indebtedness
generally were taken into account (directly or indirectly) in connection with
the allocation of the shares of Common Stock and/or Units in the Formation
Transactions, but no other liabilities were taken into account for such
purposes. The Company does not have recourse against CIF, VAF, AMB or WPF or any
of their respective stockholders or partners or against the Individual Account
Investors with respect to any unknown liabilities except to the extent provided
by the indemnity escrow entered into in connection with the Formation
Transactions. Unknown liabilities 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 Formation Transactions
(that had not been asserted prior to the Formation Transactions), accrued but
unpaid liabilities incurred in the ordinary course of business, and claims for
indemnification by the officers and directors of CIF, VAF and AMB and others
indemnified by such entities, including clients of AMB. Certain tenants may
claim that the Formation Transactions give rise to a right to purchase such
premises occupied by such tenants. The Company does not believe any such claims
would be material. See "-- Government Regulations -- Environmental Matters"
below as to the possibility of undisclosed environmental conditions potentially
affecting the value of the Properties. The existence of undisclosed material
liabilities which are not covered by the indemnity escrow could have an adverse
effect on the Company's financial condition and results of operations, and its
ability to make payments of principal of and interest on the Notes.

GOVERNMENT REGULATIONS

Many laws and governmental regulations are applicable to the Properties and
changes in these laws and regulations, or their interpretation by agencies and
the courts, occur frequently.

COSTS OF COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT

Under the Americans with Disabilities Act of 1990 (the "ADA"), all places
of public accommodation are required to meet certain Federal requirements
related to access and use by disabled persons. Compliance with the ADA might
require removal of structural barriers to handicapped access in certain public
areas where such removal is "readily achievable." Noncompliance with the ADA
could result in the imposition of fines or an award of damages to private
litigants. The impact of application of the ADA to the Properties, including the
extent and timing of required renovations, is uncertain. If required changes
involve a greater amount of expenditures than the Company currently anticipates
or if the changes must be made on a more accelerated schedule than the Company
currently anticipates, the Company's ability to make payments of principal of
and interest on the Notes could be adversely affected.

ENVIRONMENTAL MATTERS

Under Federal, state and local laws and regulations relating to the
protection of the environment ("Environmental Laws"), a current or previous
owner or operator of real estate may be liable for contamination resulting from
the presence or discharge of hazardous or toxic substances or petroleum products
at such property, and may be required to investigate and clean up such
contamination at such property or such contamination which has migrated from
such property. Such laws typically impose liability and clean-up responsibility
without regard to whether the owner or operator knew of or caused the presence
of the contaminants, and the liability under such laws has been interpreted to
be joint and several unless the harm is divisible and there is a reasonable
basis for allocation of responsibility. In addition, the owner or operator of a
site may be subject to claims by third parties based on personal injury,
property damage and/or other costs, including investigation and clean-up costs,
resulting from environmental contamination present at or emanating from a site.

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

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<PAGE> 26

with these requirements and may allow third parties to seek recovery from owners
or operators for personal injury associated with exposure to asbestos fibers.
Some of the Properties may contain ACBM.

Some of the Properties are leased or have been leased, in part, to owners
and operators of dry cleaners that operate on-site dry cleaning plants, to
owners and operators of gas stations or to owners or operators of other
businesses that use, store or otherwise handle petroleum products or other
hazardous or toxic substances. Some of these Properties contain, or may have
contained, underground storage tanks for the storage of petroleum products and
other hazardous or toxic substances. These operations create a potential for the
release of petroleum products or other hazardous or toxic substances. Some of
the Properties are adjacent to or near other properties that have contained or
currently contain underground storage tanks used to store petroleum products or
other hazardous or toxic substances. In addition, certain of the Properties are
on, or are adjacent to or near other properties upon which others, including
former owners or tenants of the Properties, have engaged or may in the future
engage in activities that may release petroleum products or other hazardous or
toxic substances.

All of the Properties were subject to a Phase I or similar environmental
assessments by independent environmental consultants at the time of acquisition
or shortly after acquisition. Phase I assessments are intended to discover and
evaluate information regarding the environmental condition of the surveyed
property and surrounding properties. Phase I assessments generally include an
historical review, a public records review, an investigation of the surveyed
site and surrounding properties, and preparation and issuance of a written
report, but do not include soil sampling or subsurface investigations and
typically do not include an asbestos survey. Some of the Company's environmental
assessments of the Properties do not contain a comprehensive review of the past
uses of the Properties and/or the surrounding properties.

None of the Company's environmental assessments of the Properties has
revealed any environmental liability that the Company believes would have a
material adverse effect on the Company's financial condition or results of
operations taken as a whole, nor is the Company aware of any such material
environmental liability. Nonetheless, it is possible that the Company's
assessments do not reveal all environmental liabilities or that there are
material environmental liabilities of which the Company is unaware. In addition,
only certain of such assessments were updated for purposes of the IPO, and
approximately 50% of the Properties have environmental assessments which are
more than two years old. Moreover, there can be no assurance that (i) future
laws, ordinances or regulations will not impose any material environmental
liability or (ii) the current environmental condition of the Properties will not
be affected by tenants, by the condition of land or operations in the vicinity
of the Properties (such as releases from underground storage tanks), or by third
parties unrelated to the Company. If the costs of compliance with the various
environmental laws and regulations, now existing or hereafter adopted, exceed
the Company's budgets for such items, the Company's ability to make payments of
principal of and interest on the Notes could be adversely affected.

OTHER REGULATIONS

The Properties are also subject to various Federal, state and local
regulatory requirements such as state and local fire and life safety
requirements. Failure to comply with these requirements could result in the
imposition of fines by governmental authorities or awards of damages to private
litigants. The Company believes that the Properties are currently in substantial
compliance with all such regulatory requirements. However, there can be no
assurance that these requirements will not be changed or that new requirements
will not be imposed which would require significant unanticipated expenditures
by the Company, which expenditures could have an adverse effect on the Company's
financial condition and results of operations and its ability to make payments
of principal of and interest on the Notes.

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THE COMPANY AND THE OPERATING PARTNERSHIP

GENERAL

AMB Property, L.P. was organized in November 1997 and commenced operations
in connection with the completion of the IPO and the consummation of the
Formation Transactions in November 1997. AMB Property Corporation is one of the
largest publicly-traded real estate companies in the United States. The Company
owns 153 Properties, comprised of 116 Industrial Properties and 37 Retail
Properties located in 28 markets throughout the United States. The Industrial
Properties (comprising 412 buildings), principally warehouse distribution
properties, encompass approximately 43.8 million rentable square feet and, as of
December 31, 1997, were 96.1% leased to over 1,000 tenants. The Retail
Properties, principally grocer-anchored community shopping centers, encompass
approximately 6.8 million rentable square feet and, as of the same date, were
95.4% leased to over 900 tenants. See "Business and Properties."

The Company is engaged in the business of acquiring and operating
industrial properties and community shopping centers in target markets
nationwide. The Company is led by Mr. Moghadam, its Chief Executive Officer and
one of the three founders of the Company. Messrs. Abbey and Burke, the other two
founders, also play active roles in the Company's operations as the Chairman of
its Investment Committee and the Chairman of its Board of Directors,
respectively. The Company's nine executive officers have an average of 23 years
of experience in the real estate industry and have worked together for an
average of nine years building the AMB real estate business. The Company employs
122 individuals, 98 of whom are located in its San Francisco headquarters and 24
in its Boston office. The Company operates as a self-administered and self-
managed real estate company and expects that it has qualified and that it will
continue to qualify as a REIT for federal and state income tax purposes
beginning with the year ended December 31, 1997.

RECENT DEVELOPMENTS

Acquisitions. Since December 31, 1997, the Company has acquired 21
Industrial Properties and four Retail Properties, representing an aggregate of
7.0 million rentable square feet for an aggregate purchase price of $288.4
million. The Company is generally in various stages of negotiations for a number
of acquisitions, which may include acquisitions of individual properties, large
multi-property portfolios and other real estate companies. Such acquisitions, if
consummated, may be material individually or in the aggregate. Sources of
capital for acquisitions may include undistributed cash flow, borrowings under
the Credit Facility, issuances of debt or equity securities of the Operating
Partnership or the Company and assumption of debt related to the assets being
acquired.

Quarterly Distributions. On March 6, 1998, the Board of Directors of the
Company, in its capacity as general partner of the Operating Partnership,
declared a distribution of $0.3425 per partnership unit, payable April 3, 1998
to partners of record on March 18, 1998. In addition, the Company's Board of
Directors declared a distribution of $0.3425 per share of the Common Stock,
payable April 3, 1998 to stockholders of record on March 18, 1998.

Revolving Credit Agreement. The Operating Partnership is presently
negotiating with MGT, on behalf of the lenders under the Credit Facility, to
increase the aggregate availability under the facility. No assurance can be
given that any such agreement will be reached.

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Each of the Company, the Operating Partnership and AMB Property II, L.P.
were formed in connection with the Formation Transactions in November, 1997.
Long Gate LLC was formed on July 18, 1995 and acquired by the Company in
connection with the Formation Transactions. The principal executive offices of
the Company, the Operating Partnership, AMB Property II, L.P. and Long Gate LLC
are located at 505 Montgomery Street, San Francisco, California 94111, and their
telephone number is (415) 394-9000. The Company also maintains a regional office
in Boston, Massachusetts.

BUSINESS AND OPERATING STRATEGIES

The Company focuses its investment activities in industrial hub
distribution markets and retail trade areas throughout the U.S. where management
believes opportunities exist to acquire and develop additional properties on an
advantageous basis. The Company's operations are conducted through its 122
employees, 98 of whom are located in its San Francisco headquarters and 24 of
whom are located in its Boston office. The Company is a full-service real estate
company with in-house expertise in acquisitions, development and redevelopment,
asset management and leasing, finance and accounting and market research. The
Company has long-standing relationships with most of the real estate management
firms across the country which provide local property management and leasing
services to the Company on a fee basis. See "-- Property Management."

NATIONAL PROPERTY COMPANY

The Company owns 153 Properties located in 28 markets throughout the U.S.
The Company believes that its national strategy enables it to (i) increase or
decrease investments in certain regions to take advantage of the relative
strengths in different real estate markets; (ii) retain and accommodate tenants
as they consolidate or expand, particularly in its Industrial Properties; and
(iii) build brand awareness as well as customer loyalty through the delivery of
consistent service and quality product. Through its presence in markets
throughout the U.S., the Company has also developed operating expertise in
leasing, expense management, tenant retention strategies and property design and
configuration.

TWO COMPLEMENTARY PROPERTY TYPES

Management believes its strategy of owning and operating both industrial
properties and community shopping centers offers the Company an optimal
combination of growth opportunities, strong current income and increased
stability through market cycles. The Company has developed the expertise,
infrastructure and management information systems to acquire, reposition,
develop and operate these two property types. Management believes that its dual
property strategy enables the Company to allocate capital and organizational
resources between property types according to changing market conditions and its
investment strategy.

SELECT MARKET FOCUS

The Company intends to continue its strategy of investing in industrial hub
distribution markets and retail trade areas across the country to capitalize on
changes in the relative economic strength of these regions. The Company focuses
on acquiring, redeveloping and operating properties in in-fill locations which
are characterized by limited new construction opportunities. As the strength of
these markets continues to grow and the demand for well-located properties
increases, the Company believes that it will benefit from an upward pressure on
rents resulting from the increased demand combined with the relative lack of new
available space.

The Company intends to continue to focus its industrial property investment
activities in six hub markets which dominate national warehouse distribution
activities: Atlanta, Chicago, Dallas/Fort Worth, Los Angeles, Northern New
Jersey and the San Francisco Bay Area. Among the nation's 53 major industrial
markets tracked by CB Commercial/Torto Wheaton Research, these six markets
accounted for approximately (i) 36% of the warehouse property inventory as of
June 30, 1997 and (ii) for the three-year period ended June 30, 1997, an average
of 34% of industrial property net absorption. In addition, such hub markets
contain approximately 63% of the Industrial Properties based on aggregate square
footage. The Company also invests in selected regional distribution markets
including Boston, Houston, Miami, Minneapolis, San Diego, Seattle and
Baltimore/Washington, D.C. The Company focuses on these established industrial
markets because
21
<PAGE> 29

management believes they offer large and broadly diversified tenant bases which
provide greater demand for properties over market cycles than secondary markets.
In-fill locations within these markets also typically have significant barriers
to new construction, including geographic or regulatory supply constraints, and
benefit from access to large labor supplies and well-developed transportation
networks. See "Business and Properties -- Industrial Properties -- Overview of
Major Target Markets."

PROPERTY MANAGEMENT

The Company actively manages its properties through its experienced staff
of 16 regional managers, each of whom specializes in the management of
industrial properties or community shopping centers in designated markets.
Regional, market and property-type focus provides regional managers with
extensive knowledge of real estate trends and supply and demand activity in
their markets as well as an effective network of local contacts who provide
sources for market data, leads for new tenants and property acquisitions, and
opportunities to enhance the value of the Properties. The Company typically
outsources property management to a select group of third-party local managers
with whom the Company has developed strong relationships.

The Company's regional managers have broad responsibilities that include
implementing an annual business plan for each property, formulating leasing
strategies, establishing leasing terms and conditions, negotiating leases,
approving and monitoring leases and capital expenditures, planning and
implementing renovation, expansion and development, establishing annual
operating and capital budgets and effecting dispositions. The Company's regional
managers utilize local leasing agents to identify prospective tenants and
document lease transactions. Third-party local property service providers are
engaged to oversee custodial property matters such as rent collection, tenant
requests, maintenance and repair, and supervision of cleaning and security
services. The Company monitors the performance of its properties on a daily
basis through the use of the Company's proprietary asset information system.
This management tool enables the Company not only to monitor the operating
performance of a property (and the local property manager), but also to review
and communicate strategic initiatives to the local property manager on a
real-time basis and to compare the property's performance to on-line budgets and
objectives. The Company also monitors the tenant service performance of its
service providers in order to ensure high quality and uniform service to its
tenants.

Management believes that its approach to property management and its
relationships with third-party property management companies enable the Company
to more effectively manage fixed operating costs associated with a national
portfolio. By employing third-party local property managers which management
believes to be the best in their respective market, the Company can enter and
exit markets efficiently without the administrative burden of retaining a large
staff. Since the Company is the customer, rather than the competitor, of
third-party management firms, these firms are also a source of new acquisition
opportunities in the respective markets, thus providing the Company with greater
access to transaction flow. Management believes this approach also gives the
Company a competitive advantage in capitalizing on the increasing trend among
corporations to outsource their real estate service requirements to property
management companies.

From January 1, 1995 through December 31, 1997, the Company's weighted
average tenant retention rate of the Properties owned by the Company upon
consummation of the IPO was approximately 72.3% for the Industrial Properties
and approximately 82.8% for the Retail Properties, based on aggregate square
footage. See "Business and Properties -- Historical Lease Renewals and Retention
Rates." Management believes that these tenant retention rates reflect the
success of the Company's operating and tenant service-driven property management
strategy.

DISCIPLINED INVESTMENT PROCESS

During its 14-year history prior to the completion of the Formation
Transactions and consummation of the IPO, AMB established a disciplined approach
to the investment process through operating divisions that are subject to the
overall policy direction of management's investment committee (the "Investment
Committee"). The stages in the investment process are highly integrated, with
Investment Committee review at critical points in the process.

Approval of each investment is the responsibility of the Investment
Committee with sponsorship from both the acquisitions officer and regional
manager who will be responsible for managing the property. The
22
<PAGE> 30

initial investment recommendation is thoroughly discussed, and approval is
required in order to proceed to contract and full due diligence. The approach to
offer terms and transaction structure is determined as part of the initial
approval and is the responsibility of the acquisitions officer. The regional
manager is involved in providing and verifying underwriting assumptions and
developing the operating strategy. After the due diligence review and before
removing conditions to the contract, a final Investment Committee recommendation
is prepared by the acquisition and asset management team. The Investment
Committee conducts a complete review of the information developed during the due
diligence process and either rejects or gives final approval.

AMB also established proprietary systems and procedures to manage and track
a high volume of acquisition proposals, transactions and important market data.
This includes an on-line open issues database that provides the Company and the
Operating Partnership with current information on the status of each
transaction, highlighting the issues that must be addressed prior to closing,
and a database that includes and compiles data on all transaction proposals and
markets reviewed by the Company.

RENOVATION, EXPANSION AND DEVELOPMENT

The multidisciplinary background of the Company's employees provides it
with the skills and experience to capitalize on strategic renovation, expansion
and development opportunities. Several of the Company's officers have extensive
experience in real estate development, both at AMB and with national development
firms. The Company generally pursues development projects in joint ventures with
local developers. In this way, the Company leverages the development skill,
access to opportunities and capital of such developers, transferring a
significant amount of the development risk to them and eliminating the need and
expense of an in-house development staff. See "Strategies for Growth -- Growth
Through Renovation, Expansion and Development."

FINANCING STRATEGY

In order to maintain financial flexibility and facilitate the rapid
deployment of capital over market cycles, the Company intends to operate with a
Debt-to-Total Market Capitalization Ratio of less than 45%. Additionally, the
Company intends to continue to structure its balance sheet in order to obtain
and maintain an investment grade rating on its senior unsecured debt, although
no assurance can be given that such objective will be achieved. The Company also
intends to keep the majority of its assets unencumbered to help facilitate such
rating. Upon consummation of the Offering, the Company's Debt-to-Total Market
Capitalization Ratio as of December 31, 1997 on a pro forma basis would have
been approximately 29.4% (approximately 23.6% on an historical basis). See
"Policies with Respect to Certain Activities -- Financing Policies."

The Company anticipates that future acquisitions will be financed through a
combination of borrowings under the Credit Facility, other forms of secured or
unsecured financing and proceeds from equity or debt offerings by the Company or
the Operating Partnership. Additionally, the Company's co-investment program
will also serve as a source of capital, particularly when more traditional
sources of capital may not be available on attractive terms. See "-- AMB
Investment Management."

The Credit Facility bears interest at a rate equal to LIBOR plus 110 basis
points until the earlier of August 21, 1998 and the date the Company receives a
debt rating. Thereafter, borrowings under the Credit Facility will bear interest
at a rate equal to LIBOR plus 90 to 120 basis points, depending upon the
Company's then current debt rating. The Operating Partnership expects to
continue to use the Credit Facility for acquisitions and for general corporate
purposes. As of December 31, 1997, $150.0 million was outstanding under the
Credit Facility with $ million of availability. Of the $150.0 million
outstanding at December 31, 1997, substantially all of such borrowings were used
to finance property acquisitions. See "Management's Discussion of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and
"Business and Properties -- Debt Financing."

23
<PAGE> 31

AMB INVESTMENT MANAGEMENT

AMB Investment Management provides real estate investment management
services on a fee basis to certain clients of AMB, the Company's predecessor,
which did not participate in the Formation Transactions. The Company presently
intends to co-invest with clients of AMB Investment Management, to the extent
such clients newly commit investment capital, through partnerships, limited
liability companies and joint ventures. The Company uses a co-investment formula
with each client whereby the Company will own at least a 20% interest in all
ventures. As of December 31, 1997, the Company had not consummated any such co-
investments. See "Business and Properties -- Properties Held Through Joint
Ventures, Limited Liability Companies and Partnerships." AMB Investment
Management is owned by the Operating Partnership, which owns 100% of the
non-voting preferred stock (representing a 95% economic interest therein), and
certain officers of AMB Investment Management and the executive officers of the
Company, who collectively own 100% of the voting common stock (representing a 5%
economic interest therein).

24
<PAGE> 32

STRATEGIES FOR GROWTH

The Company intends to achieve its growth objectives of long-term
sustainable growth in FFO per share and maximization of long-term stockholder
value, principally by growth through (i) operations, resulting from improved
operating margins within the portfolio while maintaining above-average
occupancy, (ii) continued property acquisitions, including through the
co-investment program of AMB Investment Management and (iii) renovation,
expansion and development of selected properties.

GROWTH THROUGH OPERATIONS

As of December 31, 1997, the Industrial Properties owned as of such date
were 95.7% leased and the Retail Properties owned as of such date were 96.1%
leased. The Company will seek to improve operating margins by taking advantage
of the economies of owning, operating and growing a large-scale national
portfolio.

During 1997, the Company increased average rental rates on the Properties
owned as of December 31, 1997 by 12.0%, as compared to the expiring rent for
such space, on 393 leases entered into or renewed in 1997, representing 7.5
million rentable square feet or 17.2% of the aggregate rentable square footage
of the Properties. During 1998, leases encompassing an aggregate of 10.5 million
rentable square feet (representing 24.1% of the Company's aggregate rentable
square footage as of December 31, 1997) are subject to contractual rent
increases resulting in an average rent increase per rentable square foot of
$1.31, or 5.7%, for an aggregate increase of $3.5 million. Based on recent
experience and current market trends, management believes it will have an
opportunity to increase the average rental rate on Property leases expiring
during 1998 covering an aggregate of 6.1 million rentable square feet. The
Company will seek to reduce the potential volatility of the portfolio's FFO by
managing lease expirations so that they occur within individual properties and
across the entire portfolio in a staggered fashion, and by monitoring the credit
and mix of tenants, particularly those in the Retail Properties.

GROWTH THROUGH ACQUISITIONS

Since the IPO, the Company has acquired 53 properties comprising 12.5
million square feet. The Company believes its significant acquisition experience
and its extensive network of property acquisition sources will continue to
provide opportunities for external growth. Management believes that there is a
growing trend among large private institutional holders of real estate assets to
shift a portion of their direct investment in real estate assets to more liquid
securities such as common stock and units in publicly-traded REITs. The Company
has relationships with a number of the nation's leading pension funds and other
institutional investors, many of whom have large portfolios of industrial
properties and community shopping centers. Management believes that the
Company's relationship with third-party local property managers also will create
acquisition opportunities as such managers market properties on behalf of
unaffiliated sellers. The Company also will maintain relationships with
institutional owners of property portfolios managed by AMB Investment
Management. The Company believes that through these relationships it will have
opportunities to acquire portfolios in exchange for equity interests in the
Company, and will be well-positioned to facilitate such investors' shift from
private to public real estate ownership. See "Business and Operating
Strategies -- AMB Investment Management."

The Company's Operating Partnership structure also provides sellers the
opportunity to contribute properties to the Company (through the Operating
Partnership) on a tax-deferred basis in exchange for Units. The Company believes
that its ability to offer tax-deferred transactions to sellers will enhance its
attractiveness to local owners and developers seeking to transfer properties on
a tax-deferred basis.

GROWTH THROUGH RENOVATION, EXPANSION AND DEVELOPMENT

Management believes that renovation and expansion of value-added properties
and development of well-located, high quality industrial properties and
community shopping centers will continue to provide the Company with attractive
opportunities for increased cash flow and a higher risk-adjusted rate of return
than may be obtained from the purchase of fully leased, renovated properties.
Value-added properties are typically characterized as properties with available
space or near-term leasing exposure, properties which are well-
25
<PAGE> 33

located but require redevelopment or renovation, and occasionally undeveloped
land acquired in connection with another property that provides an opportunity
for development. Such properties require significant management attention and/or
capital investment to maximize their return.

USE OF PROCEEDS

The net proceeds from the Offering are expected to be approximately $
million, after deducting Underwriters' discounts and commissions and estimated
offering expenses of approximately $ million. The Operating Partnership
intends to use the net proceeds to repay approximately $ million of
borrowings outstanding under the Credit Facility, which was incurred to fund
property acquisitions, and for general purposes. Pending application of the net
proceeds, the Operating Partnership may invest such portion of the net proceeds
in interest-bearing accounts and short-term, interest-bearing securities which
are consistent with the Company's qualification for taxation as a REIT.

PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY

The Common Stock began trading on the New York Stock Exchange (the "NYSE")
on November 21, 1997 under the symbol "AMB." On April 1, 1998, the last reported
sales price per share of the Common Stock on the NYSE was $24.125. As of
February 27, 1998, there were approximately 160 holders of record of the Common
Stock (excluding beneficial owners whose shares are held in the name of Cede &
Co.). The following table sets forth the high and low closing sales prices per
share of the Common Stock reported on the NYSE for the period from November 21,
1997 to December 31, 1997 and the distributions paid by the Company with respect
to such period.

<TABLE>
<CAPTION>
YEAR HIGH LOW DISTRIBUTION
---- ---- --- ------------
<S> <C> <C> <C>
1997
Fourth Quarter (from November 21, 1997)............ $25 1/8 $22 1/4 $0.1340
1998
First Quarter...................................... $24 15/16 $23 3/8 $0.3425
Second Quarter (through April , 1998)............ --
</TABLE>

There is no market established for the trading of the Operating
Partnership's Units. As of December 31, 1997, there were 88,416,676 Units
outstanding, which were held by 18 holders of record. Subject to certain
conditions, holders of Units will have the right to require the Operating
Partnership to redeem part or all of their Units for cash, or the Company may
elect to exchange such Units for shares of Common Stock (on a one-for-one
basis). See "Description of Certain Provisions of the Partnership Agreement of
the Operating Partnerships -- Redemption/Exchange Rights."

On December 8, 1997, the Board of Directors of the Company, in its capacity
as sole general partner of the Operating Partnership, declared distributions of
$0.134 per Unit, payable December 29, 1997 to partners of record as of December
18, 1997. In addition, the Company's Board of Directors declared a pro rata
distribution of $0.134 per share of Common Stock, payable December 29, 1997 to
stockholders of record as of December 18, 1997. The distribution covered the
period from November 26, 1997 through December 31, 1997, and was based upon
$0.3425 per unit and per share of Common Stock, as applicable, for a full
quarter.

On March 6, 1998, the Board of Directors of the Company, in its capacity as
general partner of the Operating Partnership, declared a distribution of $0.3425
per Unit, payable April 3, 1998 to partners of record as of March 18, 1998. In
addition, the Company's Board of Directors declared a distribution of $0.3425
per share of the Common Stock, payable April 3, 1998 to stockholders of record
as of March 18, 1998.

26
<PAGE> 34

CAPITALIZATION

The following table sets forth the capitalization of the Operating
Partnership as of December 31, 1997 on an historical, a pre-Offering pro forma
and a pro forma basis. The pre-Offering pro forma information gives effect to
the property acquisitions occurring after December 31, 1997 and the pro forma
information gives effect to such acquisitions and the application of the net
proceeds from the Offering as described under the caption "Use of Proceeds." The
information set forth in the following table should be read in conjunction with
the historical consolidated financial statements and notes thereto, the
condensed consolidated pro forma financial information and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
PRE-OFFERING
HISTORICAL PRO FORMA PRO FORMA
---------- ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Debt:
Credit facility...................................... $ 150,000 $ 344,501 $ --
% Notes due 2005................................ -- --
% Notes due 2008................................ -- --
% REPS due 2015................................. -- --
Secured debt(1)...................................... 535,652 584,252 584,252
---------- ---------- ----------
Total debt................................... 685,652 928,753 934,252
Minority interests..................................... 15,784 52,760 52,760
Partners' capital:
General partner(2)................................... 1,668,030 1,668,030 1,668,030
Limited partner(2)................................... 49,368 76,768 76,768
---------- ---------- ----------
Total partners' capital...................... 1,717,398 1,744,798 1,744,798
---------- ---------- ----------
Total capitalization......................... $2,418,834 $2,726,311 $2,731,810
========== ========== ==========
</TABLE>

- ---------------
(1) Includes unamortized debt premiums of $18,286.

(2) Does not give effect to 4,237,750 Performance Units which may be issued
subject to certain performance criteria. See "Description of Certain
Provisions of the Partnership Agreement of the Operating
Partnership -- Performance Units."

27
<PAGE> 35

SELECTED FINANCIAL AND OTHER DATA

OPERATING PARTNERSHIP AND AMB CONTRIBUTED PROPERTIES

The following table sets forth selected financial and other data on an
historical basis for the Operating Partnership for the period from November 26,
1997 to December 31, 1997 and for the AMB Contributed Properties for the years
ended December 31, 1993, 1994, 1995 and 1996 and the period from January 1, 1997
to November 25, 1997, and on an as adjusted basis for the Operating Partnership
for the year ended December 31, 1997 (giving effect to the completion of the
Formation Transactions, the IPO and certain property acquisitions and
dispositions in 1997). Additionally, the table sets forth selected financial and
other data for the Operating Partnership for the year ended December 31, 1997 on
a pro forma basis (giving effect to the Formation Transactions, the IPO, certain
property acquisitions and dispositions in 1997, the 1998 property acquisitions
and the Offering and the application of the net proceeds therefrom, as if such
transactions had occurred on January 1, 1997). The historical financial
information contained in the tables should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Consolidated Financial Statements and accompanying Notes
thereto and the financial schedules included elsewhere in this Prospectus.

COMPANY AND PREDECESSOR

The following table sets forth selected financial and other data on an
historical basis for the Company and its Predecessor for the years ended
December 31, 1993, 1994, 1995, 1996 and 1997, and on an as adjusted basis for
the Company for the year ended December 31, 1997 (giving effect to the
completion of the Formation Transactions, the IPO and certain property
acquisitions and dispositions in 1997). Additionally, the table sets forth
selected financial and other data for the Company for the year ended December
31, 1997 on a pro forma basis (giving effect to the Formation Transactions, the
IPO, certain property acquisitions and dispositions in 1997, the property
acquisitions in 1998 and the Offering and the application of the net proceeds
therefrom, as if such transactions had occurred on January 1, 1997). The
historical financial information contained in the tables should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Consolidated Financial Statements and
accompanying Notes thereto and the financial schedules included elsewhere in
this Prospectus.

The historical results of the Company for 1997 include the results of
operations of the Company, including property operations for the period from
November 26, 1997 to December 31, 1997 and the results of the Company's
Predecessor, an investment manager, for the period from January 1, 1997 to
November 25, 1997.

28
<PAGE> 36

OPERATING PARTNERSHIP AND AMB CONTRIBUTED PROPERTIES
SELECTED FINANCIAL AND OTHER DATA
(IN THOUSANDS EXCEPT UNIT DATA, PERCENTAGES AND NUMBER OF PROPERTIES)

(2) For the period from November 26, 1997 to December 31, 1997.

(3) As adjusted financial and other data have been prepared as if the Formation
Transactions, the IPO and certain property acquisitions and dispositions in
1997 had occurred on January 1, 1997.

(5) Historical, as adjusted and pro forma net income per unit for 1997 equal
the historical, as adjusted and pro forma net income divided by 88,416,676,
88,416,676 and 89,523,122 units, respectively.

29
<PAGE> 37

(9) The book debt service coverage ratio is calculated as EBITDA divided by
book interest expense (including amortization of debt premiums and
financing costs).

(11) Secured debt as of December 31, 1997 includes unamortized debt premiums of
approximately $18,286. See Notes to Consolidated Financial Statements.

30
<PAGE> 38

COMPANY AND PREDECESSOR SELECTED FINANCIAL AND OTHER DATA
(IN THOUSANDS EXCEPT SHARE DATA, PERCENTAGES AND NUMBER OF PROPERTIES)

<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------
COMPANY
-------------------------------------
PREDECESSOR HISTORICAL AS ADJUSTED PRO FORMA
(1) (2) (3) (4)
------------------------------------ ---------- ----------- ----------
1993 1994 1995 1996 1997 1997 1997
------ ------- ------- ------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenues.................................... $7,155 $12,865 $16,865 $23,991 $ 56,062 $ 284,674 $ 319,169
Income from operations before minority
interests....................................... 798 2,925 3,296 7,140 18,885 103,903 106,558
Net income........................................ 798 2,925 3,262 7,003 18,228 99,508 98,337
Net income per share(5):
Basic........................................... $ 0.17 $ 0.59 $ 0.64 $ 1.38 $ 1.39 $ 1.16 $ 1.14
Diluted......................................... 0.17 0.59 0.64 1.38 1.38 1.15 1.14
Distributions per share:.......................... 0.13 1.37 1.37
OTHER DATA:
EBITDA(6)......................................... $ 195,218 $ 221,081
Funds from Operations(7).......................... 147,409 152,077
Cash flows provided by(used in):
Operating activities............................ 131,621 136,289
Investing activities............................ (607,768) (785,607)
Financing activities............................ 553,199 556,908
Ratio of earnings to fixed charges(8)............. 3.1x 2.5x
Book debt service coverage ratio(9)............... 4.3x 3.5x
Cash debt service coverage ratio(10).............. 3.8x 3.2x
BALANCE SHEET DATA:
Investments in real estate at cost................ $ -- $ -- $ -- $ -- $2,442,999 $2,733,814
Total assets...................................... 2,739 4,092 4,948 7,085 2,506,255 2,781,423
Secured debt(11).................................. -- -- -- -- 535,652 584,252
Unsecured notes................................... -- -- -- -- -- 350,000
Unsecured credit facility......................... -- -- -- -- 150,000 --
Stockholders' equity.............................. 2,480 3,848 4,241 6,300 1,668,030 1,668,030
</TABLE>

- ---------------
(1) Represents the Predecessor's historical financial and other data for the
years ended December 31, 1993, 1994, 1995 and 1996. The Predecessor
operated as an investment manager prior to November 26, 1997.

(2) Represents the Predecessor's historical financial and other data for the
period January 1, 1997 through November 25, 1997 and the Company's
historical and other data for the period from November 26, 1997 to December
31, 1997.

(3) As adjusted financial and other data have been prepared as if the Formation
Transactions, the IPO and certain property acquisitions and dispositions in
1997 had occurred on January 1, 1997.

(5) As adjusted and pro forma basic and diluted net income per share equals the
as adjusted and pro forma net income divided by 85,874,513 and 86,156,556
units, respectively.

(9) The book debt service coverage ratio is calculated as EBITDA divided by
book interest expense (including amortization of debt premiums and
financing costs).

(11) Secured debt as of December 31, 1997 includes unamortized debt premiums of
approximately $18,286. See Notes to Consolidated Financial Statements.

31
<PAGE> 39

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

The following discussion and analysis of the consolidated financial
condition and results of operations should be read in conjunction with the
"Notes to Consolidated Financial Statements" and "Selected Financial and Other
Data." 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. 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 the date hereof.

GENERAL

Because of the significant impact of the Formation Transactions and the IPO
on the Company's results of operations, the discussion below is presented as
follows: (i) results of the Company and its Predecessor for 1995, 1996 and 1997,
and (ii) results of the Properties for 1995, 1996 and 1997. Because the
Operating Partnership commenced its operations in connection with the
consummation of the IPO on November 26, 1997 and had no predecessor, the
discussion of the Properties for the comparative periods presented below is
provided in lieu of a discussion of the historical operations of the Operating
Partnership.

The historical results of the Company for 1997 include its results,
including property operations, for the period from November 26, 1997 to December
31, 1997 and the results of the Company's Predecessor, an investment manager,
for the period from January 1, 1997 to November 25, 1997, and the years ended
December 31, 1996 and 1995. As an investment manager, the Predecessor's revenues
consisted primarily of fees earned in connection with real estate management
services. Management's discussion and analysis of the Company and Predecessor
for the years ended December 31, 1995, 1996 and 1997 is limited to investment
management and other income and general and administrative expenses, and
excludes a discussion of rental revenues, operating expenses, interest expense
and depreciation and amortization because such analysis is not comparable or
meaningful given the differences in lines of business between the Company's and
the Predecessor's.

The historical results of the Properties for 1997 include the results
achieved by the Company for the period from November 26, 1997 (acquisition date)
to December 31, 1997 and the results achieved by the prior owners of the
Properties for the period from January 1, 1997 to November 25, 1997.

COMPANY AND PREDECESSOR RESULTS OF OPERATIONS

COMPANY AND PREDECESSOR -- YEARS ENDED DECEMBER 31, 1997 AND 1996

Investment management and other income. Investment management and other
income for the period from January 1, 1997 to November 25, 1997 was $29.0
million, which on an annualized basis represents a 34.1% increase over the year
ended December 31, 1996. The increase reflects the growth in the portfolio under
management. Investment management and other income for the period from November
26, 1997 to December 31, 1997 was $0.6 million.

General and administrative expenses. General and administrative expenses
for the period from January 1, 1997 to November 25, 1997 were $19.4 million,
which represents a 27.7% increase on an annualized basis over the year ended
December 31, 1996. The increase was attributable to an increase in staffing that
resulted from the growth in the portfolio under management.

PREDECESSOR -- YEARS ENDED DECEMBER 31, 1996 AND 1995

Investment management and other income. Investment management and other
income for the years ended December 31, 1996 and 1995 was $24.0 million and
$16.9 million, respectively, an increase of 42.0%. The increase from 1995 to
1996 was primarily due to management fees associated with a growing portfolio
and increased economies of scale from managing this larger portfolio.

32
<PAGE> 40

General and administrative expenses. General and administrative expenses
for the years ended December 31, 1996 and 1995 were $16.9 million and $13.6
million, respectively, reflecting the increase in size of the portfolio under
management.

PROPERTIES RESULTS OF OPERATIONS

The historical results of operations of the Properties for periods prior to
November 26, 1997 include Properties that were managed by the Predecessor and
exclude the results of four properties that were contributed to the Company in
the Formation Transactions that were not previously managed by the Predecessor.
In addition, the historical results of operations include the results of
Properties acquired after November 26, 1997, from the date of acquisition of
such Properties to December 31, 1997.

The historical property financial data presented herein show significant
increases in revenues and expenses principally attributable to the substantial
portfolio growth. As a result, the Company does not believe the year-to-year
financial data are comparable. Therefore, the analysis below shows (i) changes
resulting from Properties that were held during the entire period for both years
being compared (the "Core Portfolio") and (ii) changes attributable to
acquisition and development activity. For the comparison between the years ended
December 31, 1997 and 1996, the Core Portfolio consists of the 59 Properties
acquired prior to January 1, 1996, and for the comparison between the years
ended December 31, 1996 and 1995, the Core Portfolio consists of the 42
Properties acquired prior to January 1, 1995. The Company's future financial
condition and results of operations, including rental revenues, may be impacted
by the acquisition of additional properties. No assurance can be given that the
past trends of revenues, expenses or income of the Company will continue in the
future at their historical rates, and any variation therefrom may be material.

PROPERTIES -- YEARS ENDED DECEMBER 31, 1997 AND 1996

Rental revenues. Rental revenues, including tenant reimbursements and other
property related income, increased by $67.5 million, or 40.6%, for the year
ended December 31, 1997, to $233.9 million as compared to $166.4 million for the
year ended December 31, 1996. Approximately $8.8 million, or 13.0% of this
increase, was attributable to the Core Portfolio, with the remaining $58.7
million attributable to Properties acquired in 1996 and 1997. The 6.3% growth in
rental revenues in the Core Portfolio resulted primarily from the incremental
effect of rental rate increases and reimbursement of expenses. In 1997, the
Company increased average contractual or base rental rates on the Properties by
12% on 393 new and renewing leases totaling 7.5 million rentable square feet
(representing 17.2% of the Properties' aggregate rentable square footage).

Property operating expenses and real estate taxes. Property operating
expenses and real estate taxes increased by $25.6 million, or 46.3%, for the
year ended December 31, 1997, to $80.9 million as compared to $55.3 million for
the year ended December 31, 1996. Approximately $3.4 million of this increase
was attributable to the Core Portfolio, with the remaining $22.2 million
attributable to Properties acquired in 1997 and 1996. Core Portfolio real estate
taxes and insurance expense increased by approximately $1.4 million from 1996 to
1997. Core Portfolio other property operating expenses (excluding real estate
taxes and insurance) increased by $2.0 million from 1996 to 1997. The increases
in expenses are primarily due to increases in property tax assessment values and
incentive management fees expense.

Interest expense. Interest expense increased by $21.6 million, or 80.3%,
for the year ended December 31, 1997, to $48.5 million as compared to $26.9
million for the year ended December 31, 1996. Interest expense related to the
Core Portfolio increased by $11.6 million due to the placement of debt on
certain properties, while financing related to properties acquired in 1997 and
1996 added $10.0 million to interest expense.

Depreciation and amortization expense. Depreciation and amortization
expense increased by $8.2 million, or 28.7%, for the year ended December 31,
1997, to $36.8 million as compared to $28.6 million for the year ended December
31, 1996. The increase was attributable to substantial growth in the number of
properties owned by the Company. Depreciation and amortization includes
depreciation of capital and tenant improvements and amortization of leasing
commissions.

General, administrative and other expenses. General, administrative and
other expenses increased by $1.2 million or 150%, for the year ended December
31, 1997, to $2.0 million as compared to $0.8 million for

33
<PAGE> 41

the year ended December 31, 1996. The increase was attributable to the changes
in operations resulting primarily from the change in the character of the
Company's business from that of an investment manager prior to the IPO to a
self-administered and self-managed REIT thereafter.

Interest and other income. Interest and other income decreased by $0.1
million, or 7%, for the year ended December 31, 1997, to $1.4 million as
compared to $1.5 million for the year ended December 31, 1996. This decrease was
primarily due to lower average cash balances.

PROPERTIES -- YEARS ENDED DECEMBER 31, 1996 AND 1995

Rental revenues. Rental revenues, including tenant reimbursements and other
property related income, increased by $60.2 million, or 56.7%, for the year
ended December 31, 1996, to $166.4 million as compared to $106.2 million for the
year ended 1995. Approximately $7.5 million, or 12.5% of this increase, was
attributable to the Core Portfolio, with the remaining $52.7 million
attributable to Properties acquired in 1996 and 1995. The 8.6% growth in rental
income in the Core Portfolio resulted primarily from rental rate increases.

Property operating expenses and real estate taxes. Property operating
expenses and real estate taxes increased by $18.4 million, or 49.9%, for the
year ended December 31, 1996, to $55.3 million as compared to $36.9 million for
the year ended December 31, 1995. Approximately $1.6 million of this increase
was attributable to the Core Portfolio, with the remaining $16.8 million
attributable to Properties acquired in 1996 and 1995. The Core Portfolio had an
increase of approximately $1.0 million in real estate tax and insurance expense.
The other property operating expenses (excluding real estate taxes and
insurance) for the Core Portfolio increased by $0.6 million from 1995 to 1996.
The increases in expenses are primarily due to increases in property tax
assessment values and miscellaneous expenses.

Interest expense. Interest expense increased by $6.4 million, or 31.2%, for
the year ended December 31, 1996, to $26.9 million as compared to $20.5 million
for the year ended December 31, 1995. Interest expense related to the Core
Portfolio increased by $3.2 million, while financing related to Properties
acquired in 1996 and 1995 added $3.2 million to interest expense.

Depreciation and amortization expense. Depreciation and amortization
expense increased by $11.1 million, or 63.4%, for the year ended December 31,
1996, to $28.6 million as compared to $17.5 million for the year ended December
31, 1995. The increase was attributable to substantial growth in the number of
properties owned by the Company. Depreciation and amortization includes
depreciation of capital and tenant improvements and amortization of leasing
commissions.

General, administrative and other expenses. General, administrative and
other expenses remained unchanged at $0.8 million for the years ended December
31, 1996 and December 31, 1995. General, administrative and other expenses as a
percentage of total revenues was 0.5% for the year ended December 31, 1996 and
0.7% for the year ended December 31, 1995.

Interest and other income. Interest income decreased by $0.6 million, or
28.6%, for the year ended December 31, 1996, to $1.5 million as compared to $2.1
million for the year ended December 31, 1995. This decrease was primarily due to
lower average cash balances.

LIQUIDITY AND CAPITAL RESOURCES

The Company expects that its principal sources of working capital and
funding for acquisitions, development, expansion and renovation of the
Properties will include the Credit Facility, permanent secured debt financing,
proceeds from public and private unsecured debt offerings, proceeds from public
and private equity offerings (including the issuances of Units) and cash flows
provided by operations. Management believes that its sources of working capital
and its ability to access private and public debt and equity capital are
adequate to continue to meet liquidity requirements for the foreseeable future.

34
<PAGE> 42

Capital Resources

The Company has a $500 million Credit Facility with MGT and a syndicate of
12 other banks. The Credit Facility has a term of three years, and is subject to
a fee that accrues on the daily average undrawn funds, which varies between
0.15% to 0.25% based on the Company's credit rating. The Company is using the
Credit Facility principally for acquisitions and for general working capital
requirements. Borrowings under the Credit Facility bear interest at LIBOR plus
110 basis points until the earlier of August 21, 1998 and the date the Company
receives a debt rating. Thereafter, borrowings under the Credit Facility will
bear interest at a rate equal to LIBOR plus 90 to 120 basis points, depending on
the Company's then current debt rating. As of December 31, 1997, the outstanding
balance on the Credit Facility was $150 million and bore interest at LIBOR plus
1.10%, resulting in an interest rate on most recent borrowings of 7.10%. Monthly
debt service payments on the Credit Facility are interest only. The Credit
Facility matures in November 2000. See Notes to Consolidated Financial
Statements. The total amount available under the Credit Facility fluctuates
based upon the borrowing base, as defined in the agreement governing the Credit
Facility. The total amount currently available is approximately $ million.

In connection with the Formation Transactions, the Company assumed a
12-year non-recourse financing facility secured by six of the Properties (the
"Secured Facility"). As of December 31, 1997, $73.0 million was outstanding
under this facility. Payments of interest only are due monthly at a fixed annual
interest rate of 7.53% with principal due on December 12, 2008. Under the
Secured Facility, the Company may substitute collateral, subject to certain
requirements with respect to the property offered as replacement collateral.

In connection with the Formation Transactions, the Company also assumed
mortgage indebtedness associated with 42 of the Properties. The aggregate
principal amount of such mortgage indebtedness was $444.4 million as of December
31, 1997. The mortgage indebtedness bears interest at rates varying from 7.01%
to 10.38% per annum (with a weighted average of 7.87%) and final maturity dates
ranging from 1998 to 2008.

As of December 31, 1997, the Company's total outstanding debt was
approximately $685.7 million, including unamortized debt premiums of
approximately $18.3 million, which were recorded in connection with the
Formation Transactions. See Notes to Consolidated Financial Statements. The
total amount of debt principal to be paid in 1998 is approximately $19.4
million, including normal principal amortization of approximately $5.6 million.

In order to maintain financial flexibility and facilitate the rapid
deployment of capital over market cycles, the Company intends to operate with a
Debt-To-Total Market Capitalization ratio of less than 45%. Additionally, the
Company intends to structure its balance sheet in order to obtain and maintain
an investment grade rating on its senior unsecured debt. The Company intends to
keep the majority of its assets unencumbered to facilitate such rating. As of
December 31, 1997, the Company's Debt-To-Total Market Capitalization ratio was
approximately 23.6%.

Liquidity

As of December 31, 1997, the Company had approximately $39.9 million in
cash and cash equivalents and $150 million of outstanding borrowings drawn from
the Credit Facility. The Company intends to use cash from operations and
available borrowings under its Credit Facility to fund acquisitions and capital
expenditures and to provide for general working capital requirements.

On December 8, 1997, the Company declared a pro rata distribution of $0.134
per common share, payable December 29, 1997 to stockholders of record on
December 18, 1997. The pro rata distribution covered the period from November
26, 1997 through December 31, 1997, and was based upon $0.3425 per common share
for a full quarter. For Federal income tax purposes, 100% of the distribution
was reported to stockholders as ordinary income.

The anticipated size of the Company's distributions, using only cash from
operations, will not allow it to retire all of its debt as it comes due.
Therefore, the Company intends to repay maturing debt with net proceeds from
debt and/or equity financings. No assurance can be given, however, that future
financings will be available on terms favorable to the Company.

35
<PAGE> 43

Leasing Activity

During the year ending December 31, 1998, leases relating to approximately
5.7 million rentable square feet of the Industrial Properties, 13.1% of total
rentable square feet, and 0.4 million rentable square feet of the Retail
Properties, 1.0% of total rentable square feet, will expire. Although no
assurances can be given, the Company expects that it will be able to renew or
re-tenant the expiring square feet at then-prevailing market rates. In
connection with the renewal and re-tenanting of space, the Company will likely
incur tenant improvement and leasing costs. See "Properties -- Retail
Properties -- Recurring Tenant Improvements and Leasing Commissions."

Capital Commitments

In addition to recurring capital expenditures and costs to renew or
re-tenant space, the Company is currently in the process of renovating,
expanding or developing six projects at a total estimated cost of $89.9 million.
The Company presently expects to fund these expenditures with cash from
operations and borrowings under the Credit Facility. Other than these capital
items, the Company has no material capital commitments. During the period from
January 1, 1998 to March 31, 1998, the Company acquired 25 properties and three
additional buildings adjacent to current properties, aggregating 7.0 million
square feet for a total cost of approximately $288.4 million. The acquisitions
were funded through borrowings under the Credit Facility, cash, debt assumption
of approximately $48.6 million, co-investments of approximately $37.0 million
and the issuance of Units with a value of approximately $27.4 million.

INFLATION

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

YEAR 2000 COMPLIANCE

The Company's current financial systems adequately provide for a four-digit
year and management believes the year 2000 issue will not materially affect its
operations. Additionally, the Company currently does not expect that the year
2000 issue will materially affect its operations due to problems encountered by
its suppliers, customers and lenders.

FUNDS FROM OPERATIONS

Management believes that FFO, as defined by NAREIT, is an appropriate
measure of performance for an equity REIT. While FFO is a relevant and widely
used measure of operating performance of REITs, it does not represent cash flow
from operations or net income as defined by GAAP, and it should not be
considered as an alternative to those indicators in evaluating liquidity or
operating performance.

The following table reflects the calculation of the Company's FFO for the
year ended December 31, 1997 on an as adjusted basis (giving effect to the
completion of the Formation Transactions, the IPO and certain 1997 property
acquisitions and dispositions) and on a pro forma basis (giving effect to the
property acquisitions in 1998 and the Offering and the application of the net
proceeds therefrom, as if such transactions had occurred on January 1, 1997).
FFO is not presented for the Properties and the Company on an historical

36
<PAGE> 44

basis because it is not comparable or meaningful due to the significant
differences in capital structures between the Company and the prior owners of
the Properties.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1997
--------------------------
AS ADJUSTED PRO FORMA
----------- -----------
<S> <C> <C>
Income from operations before minority interests............ $ 103,903 $ 106,558
Depreciation and amortization............................... 45,886 51,339
Furniture, fixtures and equipment depreciation.............. (173) (173)
FFO attributable to minority interests(1)(2)................ (2,207) (5,647)
----------- -----------
FFO(1)...................................................... $ 147,409 $ 152,077
=========== ===========
Weighted average shares and units outstanding............... 88,416,676 89,523,122
Cash flows provided by (used in):
Operating activities................................... 131,621 136,289
Investing activities................................... (607,768) (785,607)
Financing activities................................... 553,199 556,908
</TABLE>

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

(2) Represents FFO attributable to minority interests in consolidated joint
ventures for the period presented, which has been computed as minority
interests' share of net income before disposal of properties plus minority
interests' share of real estate-related depreciation and amortization of the
consolidated joint ventures for such period. Such minority interests are not
convertible into shares of Common Stock.

SELECTED AS ADJUSTED PROPERTY FINANCIAL DATA

The following table provides selected as adjusted property financial data
on the Company's Industrial and Retail Properties for the year ended December
31, 1997 (giving effect to the completion of the Formation Transactions, the IPO
and certain property acquisitions and dispositions in 1997 as if such
transactions occurred on January 1, 1997).

<TABLE>
<CAPTION>
SELECTED AS ADJUSTED PROPERTY FINANCIAL
DATA FOR THE YEAR ENDED
DECEMBER 31, 1997
---------------------------------------
INDUSTRIAL RETAIL TOTAL
PROPERTIES PROPERTIES PROPERTIES
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Rental revenues............................................. $ 187,793 $ 94,872 $ 282,665
Property operating expenses................................. 51,150 30,328 81,478
Net operating income........................................ 136,643 64,544 201,187
</TABLE>

37
<PAGE> 45

BUSINESS AND PROPERTIES

As of December 31, 1997, the Company owned 128 properties aggregating 43.5
million rentable square feet and located in 26 markets nationwide. The following
table summarizes the diversification by region of the Industrial and Retail
Properties owned as of December 31, 1997:

INDUSTRIAL AND RETAIL PROPERTIES BY REGION
<TABLE>
<CAPTION>
INDUSTRIAL PROPERTIES RETAIL PROPERTIES TOTAL
-------------------------------------------- ------------------------------ ----------
NUMBER NUMBER RENTABLE NUMBER RENTABLE NUMBER
OF OF SQUARE % OF OF SQUARE % OF OF
REGION BUILDINGS PROPERTIES FEET TOTAL PROPERTIES FEET TOTAL PROPERTIES
------ ---------- ---------- ---------- ----- ---------- --------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Eastern................. 43 16 5,009,032 13.4% 3 1,184,211 19.1% 19
Midwestern.............. 86 23 10,733,755 28.8 4 710,522 11.4 27
Southern................ 91 24 9,490,183 25.4 10 1,703,523 27.4 34
Western................. 136 32 12,095,565 32.4 16 2,618,090 42.1 48
--- --- ---------- ----- -- --------- ----- ---
Total................... 356 95 37,328,535 100.0% 33 6,216,346 100.0% 128
=== === ========== ===== == ========= ===== ===

<CAPTION>
TOTAL
------------------
RENTABLE
SQUARE % OF
REGION FEET TOTAL
------ ---------- -----
<S> <C> <C>
Eastern................. 6,193,243 14.2%
Midwestern.............. 11,444,277 26.3
Southern................ 11,193,706 25.7
Western................. 14,713,655 33.8
---------- -----
Total................... 43,544,881 100.0%
========== =====
</TABLE>

INDUSTRIAL PROPERTIES

At December 31, 1997, the Company owned 95 Industrial Properties
(comprising 356 buildings) aggregating approximately 37.3 million rentable
square feet, located in 21 markets nationwide. The Industrial Properties
accounted for $152.2 million of Annualized Base Rent, or 68% of the Company's
Annualized Base Rent for the Properties as of December 31, 1997. The Industrial
Properties were 95.7% leased to over 900 tenants as of the same date, the
largest of which accounted for no more than 1.3% of Annualized Base Rent from
the Industrial Properties. The historical weighted average tenant retention rate
for the Industrial Properties for the period beginning January 1, 1995 through
December 31, 1997 was approximately 72.3%, based on 11.9 million rentable square
feet of expiring leases.

Property Characteristics. The Industrial Properties, which consist
primarily of warehouse distribution facilities suitable for single or multiple
tenants, are typically comprised of multiple buildings (an average of five) and
generally range between 300,000 and 600,000 rentable square feet, averaging
475,000 rentable square feet per Property. The following table identifies
characteristics of the Company's typical industrial buildings:

INDUSTRIAL BUILDING PROFILE

<TABLE>
<CAPTION>
TYPICAL BUILDING RANGE
---------------- -----
<S> <C> <C>
Rentable square feet................... 100,000 70,000 - 150,000
Clear height........................... 24 ft. 18 - 32 ft.
Building depth......................... 200 ft. 150 - 300 ft.
Truck court depth...................... 110 ft. 90 - 130 ft.
Loading................................ Dock & Grade Dock or Dock & Grade
Parking spaces per 1,000 square feet... 1.0 0.5 - 2.0
Square footage per tenant.............. 35,000 5,000 - 100,000
Office finish.......................... 8% 3% - 15%
Site coverage.......................... 40% 35% - 55%
</TABLE>

Lease Terms. The Industrial Properties are typically subject to lease on a
"triple net basis," defined as leases in which tenants pay their proportionate
share of real estate taxes, insurance and operating costs, or subject to leases
on a "modified gross basis," defined as leases in which tenants pay expenses
over certain threshold levels. Lease terms typically range from three to ten
years, with an average of five years, excluding renewal options. The majority of
the industrial leases do not include renewal options.

Overview of Major Target Markets. The Properties are concentrated in
national hub distribution markets such as Atlanta, Chicago, Dallas/Fort Worth,
Los Angeles, Northern New Jersey and the San Francisco Bay Area because
management believes their strategic location, transportation network and
infrastructure, and large consumer and manufacturing base support strong demand
for industrial space. The six national hub
38
<PAGE> 46

markets listed above are the nation's largest warehouse markets and, as of June
30, 1997, comprised 36% of the warehouse inventory of the 53 industrial markets
tracked by CB Commercial/Torto Wheaton Research. As of December 31, 1996, the
combined population of these markets was approximately 37.5 million, and the
amount of per capita warehouse space was 23% above the average for such 53
industrial markets. As set forth in the table below, these six markets contained
five of the ten busiest cargo airports and four of the ten busiest container
ports.

10 LARGEST WAREHOUSE MARKETS

SQ. FT.
MARKET (000S)(1)
- ------------------------------------

*NORTHERN NEW JERSEY.....................................................371,087
*LOS ANGELES.............................................................360,561
*CHICAGO.................................................................348,285
*ATLANTA.................................................................285,945
*DALLAS/FORT WORTH.......................................................265,769
*SAN FRANCISCO BAY AREA..................................................258,678
PHILADELPHIA............................................................191,625
GREATER MIAMI...........................................................188,824
St. Louis...............................................................156,666
HOUSTON.................................................................146,866
10 BUSIEST AIR CARGO MARKETS

ANNUAL
MARKET TONNAGE(2)
- ------------------------------------

MEMPHIS...............................................................2,035,133
*LOS ANGELES...........................................................1,708,682
MIAMI.................................................................1,612,364
New York..............................................................1,521,633
*CHICAGO...............................................................1,275,439
Louisville............................................................1,221,672
*NEWARK..................................................................955,799
*ATLANTA.................................................................781,233
*DALLAS/FORT WORTH.......................................................759,387
Dayton..................................................................741,048
10 BUSIEST PORTS BY CONTAINERIZED CARGO

ANNUAL
MARKET TONNAGE(3)
- ------------------------------------

*LONG BEACH/LOS ANGELES...............................................31,411,023
*NEW YORK/NEW JERSEY..................................................13,407,276
SEATTLE/TACOMA.......................................................11,941,371
Charlestown...........................................................6,858,062
*OAKLAND...............................................................6,767,463
HOUSTON...............................................................6,458,136
Hampton Roads.........................................................6,189,183
Savannah..............................................................5,505,551
MIAMI/PORT EVERGLADES.................................................5,356,102
New Orleans...........................................................5,009,960

AMB Markets are in bold. "*" denotes each of the six national hub markets as
characterized by AMB.
- ---------------
(1) Table derived from data, as of December 31, 1997, obtained from CB
Commercial/Torto Wheaton Research.

(2) Table derived from data, as of November 1997, published by the Airports
Council International.

(3) Table derived from data, as of December 31, 1996, obtained from the U.S.
Bureau of the Census -- United States Foreign Trade.

Within these metropolitan areas, the Industrial Properties are concentrated
in in-fill locations within established, relatively large submarkets which the
Company believes will provide a higher rate of occupancy and rent growth. These
in-fill locations are typically near major ports or airports, have good access
to freeways and rail lines, are proximate to a diverse labor pool, and have
limited land available for new construction. There is broad demand for
industrial space in these centrally located submarkets due to a diverse mix of
industries and types of industrial uses, including warehouse distribution, light
assembly and manufacturing. The Company generally avoids locations at the
periphery of metropolitan areas where there are fewer supply constraints.
Similarly, small metropolitan areas or cities without a heavy concentration of
warehouse activity typically have few, if any, supply-constrained locations.

39
<PAGE> 47

INDUSTRIAL PROPERTY SUMMARY

As of December 31, 1997, the 356 buildings comprising the Industrial
Properties were diversified across 21 markets nationwide. Only two of the
Industrial Properties represent individually more than 3.5% of the Annualized
Base Rent of the Industrial Properties as of such date. The average age of the
Industrial Properties is ten years (since the time the property was built or
substantially renovated), which the Company believes should result in lower
operating costs over the long term. Ownership of each Property is in fee simple
unless otherwise noted.
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
NUMBER RENTABLE
OF YEAR BUILT/ RENTABLE SQUARE LEASED SQUARE
REGION/MARKET/PROPERTY LOCATION BUILDINGS RENOVATED(1) SQUARE FEET FEET FEET
---------------------- ----------------- --------- ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
EASTERN
Baltimore/Washington, D.C.
Brightseat Road.............. Landover 1 1990 121,785 0.3% 121,785
Patuxent..................... Jessup 2 1981 147,383 0.4 147,383
Pennsy Drive................. Landover 1 1985R 359,477 1.0 83,000
Preston Court................ Jessup 1 1988 178,880 0.5 178,880
Santa Barbara Court.......... Elkridge 1 1978 166,820 0.4 166,820
Boston
Cabot Business Park.......... Mansfield 12 1970 1,071,517 2.9 891,739
Hampden Road................. Mansfield 1 1977 204,117 0.5 204,117
Cincinnati (5)
Dixie Highway................ Florence 2 1990 209,680 0.6 209,680
Empire Drive................. Florence 1 1989 199,440 0.5 199,440
Holton Drive................. Florence 1 1994 268,525 0.7 268,525
Production Drive............. Florence 1 1975 50,729 0.1 50,729
Northern New Jersey
Dock's Corner................ South Brunswick 1 1996 554,521 1.5 466,321
Dock's Corner II............. South Brunswick 1 1981 212,335 0.6 212,335
Two South Middlesex.......... Monroe 1 1995 218,088 0.6 218,088
Philadelphia
Mid-Atlantic Business West Deptford 13 1979R 779,594 2.1 746,224
Center.....................
Wilmington
Boulden...................... Wilmington 3 1986 266,141 0.7 266,141
--- ---------- ----- ----------
Eastern Region Total/Weighted
Average...................... 43 5,009,032 13.4% 4,431,207
--- ---------- ----- ----------

<CAPTION>
ANNUALIZED
PERCENTAGE BASE RENT PER
ANNUALIZED OF NUMBER LEASED
PERCENTAGE BASE RENT(2) ANNUALIZED OF SQUARE
REGION/MARKET/PROPERTY LEASED (000S) BASE RENT LEASES FOOT(3)
---------------------- ---------- ------------ ---------- ------ -------------
<S> <C> <C> <C> <C> <C>
EASTERN
Baltimore/Washington, D.C.
Brightseat Road.............. 100.0% $ 581 0.4% 2 $4.77
Patuxent..................... 100.0 647 0.4 8 4.39
Pennsy Drive................. 23.1 353 0.3 1 4.25
Preston Court................ 100.0 748 0.5 3 4.18
Santa Barbara Court.......... 100.0 617 0.4 2 3.70
Boston
Cabot Business Park.......... 83.2 4,959 3.3 17 5.56
Hampden Road................. 100.0 765 0.5 1 3.75
Cincinnati (5)
Dixie Highway................ 100.0 636 0.4 3 3.03
Empire Drive................. 100.0 622 0.4 3 3.12
Holton Drive................. 100.0 1,135 0.7 1 4.23
Production Drive............. 100.0 162 0.1 1 3.20
Northern New Jersey
Dock's Corner................ 84.1 1,819 1.2 2 3.90
Dock's Corner II............. 100.0 796 0.5 1 3.75
Two South Middlesex.......... 100.0 856 0.6 2 3.93
Philadelphia
Mid-Atlantic Business 95.7 2,476 1.6 25 3.32
Center.....................
Wilmington
Boulden...................... 100.0 1,039 0.7 5 3.91
------- ----- ---
Eastern Region Total/Weighted
Average...................... 88.5% $18,211 12.0% 77 $4.11
------- ----- ---
</TABLE>

40
<PAGE> 48
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
NUMBER RENTABLE
OF YEAR BUILT/ RENTABLE SQUARE LEASED SQUARE
REGION/MARKET/PROPERTY LOCATION BUILDINGS RENOVATED(1) SQUARE FEET FEET FEET
---------------------- ----------------- --------- ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
MIDWESTERN
Chicago
Belden Avenue................ Addison 3 1991 346,233 0.9% 346,233
Bensenville.................. Bensenville 13 1994R 2,137,370 5.7 2,073,752
Chicago Industrial........... Bensenville 2 1974 184,360 0.5 184,360
Crossroads Industrial........ Bollingbrook 1 1990 260,890 0.7 260,890
Elk Grove Village Elk Grove Village 10 1980 693,459 1.9 630,265
Industrial.................
Executive Drive.............. Addison 1 1987 75,020 0.2 66,770
Greenleaf.................... Elk Grove Village 1 1973 50,695 0.1 50,695
Itasca Industrial Itasca, Wood Dale 6 1996R 769,070 2.1 700,546
Portfolio..................
Lake Michigan Industrial Itasca, 2 1994 310,681 0.8 310,681
Portfolio(4)............... Bridgeview
Linder Skokie................ Skokie 1 1991R 484,370 1.3 292,055
Lisle Industrial............. Lisle 1 1985R 360,000 1.0 360,000
Melrose Park................. Melrose Park 1 1982 346,538 0.9 346,538
O'Hare Industrial Itasca, 15 1975 699,512 1.9 699,512
Portfolio.................. Naperville
Windsor Court................ Addison 1 1990 56,640 0.2 56,640
Columbus
Industrial Drive............. Columbus 1 1991 228,433 0.6 228,433
Janitrol..................... Columbus 1 1989 240,000 0.6 208,000
Minneapolis
Corporate Square............. Eagan 6 1992R 526,490 1.4 513,783
Minneapolis Distribution Minneapolis, 5 1997R 1,029,462 2.8 1,027,658
Portfolio.................. Edina
Minneapolis Industrial Plymouth 4 1985R 514,546 1.4 514,546
Portfolio IV...............
Minneapolis Industrial Brooklyn Center 6 1997 499,713 1.3 481,433
Portfolio V................
Penn James Bloomington 2 1974 215,606 0.6 215,606
Office/Warehouse...........
Shady Oak.................... Eden Prairie 1 1980R 104,203 0.3 104,243
Twin Cities.................. New Hope, Mendota 2 1980 600,464 1.6 600,464
--- ---------- ----- ----------
Midwestern Region Total/Weighted
Average........................ 86 10,733,755 28.8% 10,273,103
--- ---------- ----- ----------

<CAPTION>
ANNUALIZED
PERCENTAGE BASE RENT PER
ANNUALIZED OF NUMBER LEASED
PERCENTAGE BASE RENT(2) ANNUALIZED OF SQUARE
REGION/MARKET/PROPERTY LEASED (000S) BASE RENT LEASES FOOT(3)
---------------------- ---------- ------------ ---------- ------ -------------
<S> <C> <C> <C> <C> <C>
MIDWESTERN
Chicago
Belden Avenue................ 100.0% $ 1,880 1.2% 7 $5.43
Bensenville.................. 97.0 7,809 5.1 33 3.77
Chicago Industrial........... 100.0 649 0.4 4 3.52
Crossroads Industrial........ 100.0 1,043 0.7 4 4.00
Elk Grove Village 90.9 2,662 1.8 15 4.22
Industrial.................
Executive Drive.............. 89.0 485 0.3 5 7.26
Greenleaf.................... 100.0 259 0.2 1 5.10
Itasca Industrial 91.1 2,373 1.6 11 3.39
Portfolio..................
Lake Michigan Industrial 100.0 1,090 0.7 3 3.51
Portfolio(4)...............
Linder Skokie................ 60.3 807 0.6 6 2.76
Lisle Industrial............. 100.0 756 0.5 1 2.10
Melrose Park................. 100.0 1,057 0.7 1 3.05
O'Hare Industrial 100.0 3,136 2.1 16 4.48
Portfolio..................
Windsor Court................ 100.0 276 0.2 1 4.88
Columbus
Industrial Drive............. 100.0 678 0.4 1 2.97
Janitrol..................... 86.7 593 0.4 1 2.85
Minneapolis
Corporate Square............. 97.6 1,778 1.2 23 3.46
Minneapolis Distribution 99.8 3,823 2.5 28 3.72
Portfolio..................
Minneapolis Industrial 100.0 1,876 1.2 16 3.65
Portfolio IV...............
Minneapolis Industrial 96.3 1,526 1.0 16 3.17
Portfolio V................
Penn James 100.0 813 0.5 23 3.77
Office/Warehouse...........
Shady Oak.................... 100.0 377 0.2 3 3.61
Twin Cities.................. 100.0 1,931 1.3 8 3.22
------- ----- ---
Midwestern Region Total/Weighted
Average........................ 95.7% $37,677 24.8% 227 $3.67
------- ----- ---
</TABLE>

41
<PAGE> 49
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
NUMBER RENTABLE
OF YEAR BUILT/ RENTABLE SQUARE LEASED SQUARE
REGION/MARKET/PROPERTY LOCATION BUILDINGS RENOVATED(1) SQUARE FEET FEET FEET
---------------------- ----------------- --------- ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
SOUTHERN
Atlanta
Amwiler-Gwinnett Industrial Gwinnett County 9 1996 792,686 2.1% 781,593
Portfolio..................
Atlanta South................ Clayton County 4 1994 509,441 1.4 478,565
Norcross/Brookhollow Gwinnett County 4 1996 322,399 0.8 311,693
Portfolio..................
Southfield................... Gwinnett County 8 1990 780,623 2.1 738,770
Austin
Metric Center(4)............. Austin 6 1996 735,240 2.0 735,240
Dallas/Fort Worth
Dallas Industrial Dallas, Arlington 18 1986 1,066,098 2.9 1,062,646
Portfolio..................
N. Glenville Avenue.......... Richardson 1 1981 109,000 0.3 109,000
Lincoln Industrial Center.... Carrollton 1 1980 93,718 0.3 93,718
Lonestar..................... Dallas, Irving, 7 1993 911,375 2.4 911,375
Grand Prairie
McDaniel Drive............... Carrollton 1 1981 157,500 0.4 157,500
Pagemill & Dillworth......... Dallas 2 1981 217,782 0.6 190,510
Shiloh Road.................. Garland 1 1979 192,720 0.5 192,720
Valwood...................... Carrollton 2 1984 275,994 0.7 275,994
Valwood Parkway II........... Carrollton 2 1984 254,219 0.7 254,219
West Kiest................... Dallas 1 1981 248,698 0.7 248,698
West North Carrier........... Grand Prairie 1 1993R 248,736 0.7 248,736
Houston
Houston Industrial Houston 5 1986 464,696 1.2 434,227
Portfolio..................
Miami
Beacon Industrial Park....... Miami 8 1995 776,851 2.1 738,451
Blue Lagoon.................. Miami 2 1994 325,611 0.9 325,611
Brittania Business Park...... Riviera Beach 2 1988 258,578 0.7 207,450
Orlando
Chancellor(4)................ Orlando 1 1996R 201,600 0.5 201,600
Presidents Drive............. Orlando 1 1979 129,372 0.3 0
Presidents Drive II.......... Orlando 3 1984 302,400 0.8 302,400
Viscount..................... Orlando 1 1972 114,846 0.3 114,846
Southern Region Total/Weighted
Average........................ 91 9,490,183 25.4% 9,115,562
--- ---------- ----- ----------

McDaniel Drive............... 100.0 601 0.4 1 3.82
Pagemill & Dillworth......... 87.5 698 0.5 3 3.67
Shiloh Road.................. 100.0 723 0.5 1 3.75
Valwood...................... 100.0 850 0.6 7 3.08
Valwood Parkway II........... 100.0 888 0.6 5 3.49
West Kiest................... 100.0 601 0.4 1 2.41
West North Carrier........... 100.0 499 0.3 2 2.00
Houston
Houston Industrial 93.4 1,376 0.9 16 3.17
Portfolio..................
Miami
Beacon Industrial Park....... 95.1 4,896 3.2 19 6.63
Blue Lagoon.................. 100.0 2,284 1.5 14 7.01
Brittania Business Park...... 80.2 1,092 0.7 9 5.26
Orlando
Chancellor(4)................ 100.0 579 0.4 1 2.87
Presidents Drive............. 0.0 0 0.0 0 0.00
Presidents Drive II.......... 100.0 943 0.6 7 3.12
Viscount..................... 100.0 361 0.2 8 3.15
Southern Region Total/Weighted
Average........................ 96.1% $38,323 25.2% 295 $4.20
------- ----- ---
</TABLE>

42
<PAGE> 50
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
NUMBER RENTABLE
OF YEAR BUILT/ RENTABLE SQUARE LEASED SQUARE
REGION/MARKET/PROPERTY LOCATION BUILDINGS RENOVATED(1) SQUARE FEET FEET FEET
---------------------- ----------------- --------- ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
WESTERN
Los Angeles
Anaheim Industrial........... Anaheim 1 1980 161,500 0.4% 161,500
Artesia Industrial Compton 27 1984 2,496,465 6.7 2,376,465
Portfolio..................
Commerce..................... Fontana 1 1990 254,414 0.7 254,414
International Multifoods..... La Mirada 1 1995R 144,000 0.4 144,000
Jasmine Avenue............... Fontana 1 1990 410,428 1.1 410,428
L.A. County Industrial Carson, Norwalk 6 1980 818,191 2.2 818,191
Portfolio..................
Systematics.................. Walnut 1 1981 66,387 0.2 66,387
East Walnut Drive............ City of Industry 1 1990 85,871 0.2 85,871
Orange County
Northpointe Commerce......... Fullerton 2 1992 119,445 0.3 119,445
Stadium Business Park........ Anaheim 9 1995R 282,492 0.8 276,430
Sacramento
Hewlett Packard Roseville 1 1994 182,437 0.5 182,437
Distribution...............
San Diego
Activity Distribution San Diego 4 1991 252,318 0.7 252,318
Center.....................
San Francisco Bay Area
Acer Distribution Center..... San Jose 1 1974 196,643 0.5 196,643
Alvarado Business Center..... San Leandro 10 1986 694,598 1.9 662,578
Ardenwood Corporate Park..... Fremont 4 1986 295,657 0.8 295,657
Dowe Industrial.............. Union City 2 1985R 326,080 0.9 326,080
Fairway Drive San Leandro 2 1997D 175,324 0.5 175,324
Industrial(4)(6)...........
Laurelwood................... Santa Clara 2 1981 155,500 0.4 155,500
Milmont Page................. Fremont 3 1982 199,862 0.5 199,862
Moffett Business Center...... Sunnyvale 4 1994R 285,480 0.8 285,480
Moffett Park R&D Portfolio... Sunnyvale 14 1994R 462,245 1.2 453,845
Pacific Business Center...... Fremont 2 1991 375,912 1.0 375,912
Silicon Valley R&D San Jose, 5 1978 287,228 0.8 287,228
Portfolio..................
Sunnyvale,
Milpitas
South Bay Industrial......... Fremont 8 1990 1,011,781 2.7 1,011,781
Weigman Road................. Hayward 1 1990 148,559 0.4 148,559
Yosemite Drive............... Milpitas 1 1983 169,195 0.5 169,195
Zanker/Charcot Industrial.... San Jose 5 1993R 301,064 0.8 292,660
Seattle
Harvest Business Park........ Kent 3 1986 191,841 0.5 191,841
Kent Centre.................. Kent 4 1993 267,967 0.7 267,967
Kingsport Industrial Park.... Kent 7 1994R 951,056 2.5 950,456
Northwest Distribution Kent 2 1980 200,001 0.5 200,001
Center.....................
72nd Avenue.................. Kent 1 1988 125,624 0.3 125,624
--- ---------- ----- ----------
Western Region Total/Weighted
Average........................ 136 12,095,565 32.4 11,920,079
--- ---------- ----- ----------
TOTAL/WEIGHTED AVERAGE........... 356 37,328,535 100.0% 35,739,951
=== ========== ===== ==========

<CAPTION>
ANNUALIZED
PERCENTAGE BASE RENT PER
ANNUALIZED OF NUMBER LEASED
PERCENTAGE BASE RENT(2) ANNUALIZED OF SQUARE
REGION/MARKET/PROPERTY LEASED (000S) BASE RENT LEASES FOOT(3)
---------------------- ---------- ------------ ---------- ------ -------------
<S> <C> <C> <C> <C> <C>
WESTERN
Los Angeles
Anaheim Industrial........... 100.0% $ 577 0.4% 2 $3.57
Artesia Industrial 95.2 9,345 6.1 29 3.93
Portfolio..................
Commerce..................... 100.0 870 0.6 1 3.42
International Multifoods..... 100.0 720 0.5 1 5.00
Jasmine Avenue............... 100.0 1,231 0.8 1 3.00
L.A. County Industrial 100.0 3,797 2.5 11 4.64
Portfolio..................
Systematics.................. 100.0 451 0.3 1 6.80
East Walnut Drive............ 100.0 333 0.2 1 3.87
Orange County
Northpointe Commerce......... 100.0 801 0.5 2 6.70
Stadium Business Park........ 97.9 1,568 1.0 31 5.67
Sacramento
Hewlett Packard 100.0 630 0.4 1 3.45
Distribution...............
San Diego
Activity Distribution 100.0 1,364 0.9 15 5.41
Center.....................
San Francisco Bay Area
Acer Distribution Center..... 100.0 1,037 0.7 2 5.28
Alvarado Business Center..... 95.4 3,568 2.3 33 5.38
Ardenwood Corporate Park..... 100.0 2,292 1.5 9 7.75
Dowe Industrial.............. 100.0 1,132 0.7 4 3.47
Fairway Drive 100.0 797 0.5 2 4.54
Industrial(4)(6)...........
Laurelwood................... 100.0 711 0.5 2 4.57
Milmont Page................. 100.0 1,110 0.7 11 5.55
Moffett Business Center...... 100.0 2,187 1.4 5 7.66
Moffett Park R&D Portfolio... 98.2 4,829 3.2 33 10.64
Pacific Business Center...... 100.0 2,013 1.3 11 5.36
Silicon Valley R&D 100.0 2,217 1.5 9 7.72
Portfolio..................

South Bay Industrial......... 100.0 5,278 3.5 31 5.22
Weigman Road................. 100.0 580 0.4 2 3.91
Yosemite Drive............... 100.0 680 0.4 1 4.02
Zanker/Charcot Industrial.... 97.2 1,730 1.1 18 5.91
Seattle
Harvest Business Park........ 100.0 852 0.6 11 4.44
Kent Centre.................. 100.0 1,179 0.8 16 4.40
Kingsport Industrial Park.... 99.9 3,011 2.0 18 3.17
Northwest Distribution 100.0 606 0.4 2 3.03
Center.....................
72nd Avenue.................. 100.0 445 0.3 1 3.54
------- ----- ---
Western Region Total/Weighted
Average........................ 98.5 57,941 38.0 317 4.86
------- ----- ---
TOTAL/WEIGHTED AVERAGE........... 95.7% $152,152 100.0% 916 $4.26
======= ===== ===
</TABLE>

43
<PAGE> 51

- ---------------
(1) Industrial Properties denoted with an "R," "E" or "D" indicate the date of
most recent renovation, expansion or development, respectively. All other
dates reference the year such Property was developed.

(2) Annualized Base Rent means the monthly contractual amount under existing
leases at December 31, 1997, multiplied by 12. This amount excludes expense
reimbursements and rental abatements.

(3) Calculated as total Annualized Base Rent divided by rentable square feet
leased as of December 31, 1997.

(4) The Company holds interests in these Properties through a joint venture
interest in a limited partnership or limited liability company. See
"-- Properties Held Through Joint Ventures, Limited Liability Companies and
Partnerships."

(5) The Properties included in the Cincinnati Consolidated Metropolitan
Statistical Area are located in Florence, Kentucky, and, accordingly, are
reflected in the Eastern region.

(6) This Property is being redeveloped. All calculations are based on rentable
square feet existing as of December 31, 1997.

44
<PAGE> 52

INDUSTRIAL PROPERTY TENANT INFORMATION

Largest Industrial Property Tenants. The following table lists tenants with
Annualized Base Rent representing at least 0.5% of total Annualized Base Rent as
of December 31, 1997 of the Industrial Properties owned as of such date. Eleven
of such tenants lease space in more than one of the Industrial Properties.

<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE OF AGGREGATE
NUMBER AGGREGATE AGGREGATE ANNUALIZED ANNUALIZED
OF RENTABLE LEASED BASE RENT BASE
TENANT NAME(1) PROPERTIES SQUARE FEET SQUARE FEET(2) (000S) RENT(3)
-------------- ---------- ----------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
United States Postal Service........... 2 430,202 1.2% $ 1,969 1.3%
Air Express International USA, Inc..... 2 272,235 0.7 1,896 1.2
Dell USA............................... 1 290,400 0.8 1,724 1.1
Sage Enterprises Inc................... 2 199,877 0.5 1,448 1.0
Acer America........................... 2 241,643 0.7 1,318 0.9
Home Depot USA Inc..................... 2 374,813 1.0 1,316 0.9
Cosmair Inc............................ 1 303,843 0.8 1,291 0.8
Schmelbach-Lubeca AG................... 2 339,104 0.9 1,232 0.8
Avery Dennison Corporation............. 1 410,428 1.2 1,231 0.8
General Electric Company............... 4 310,215 0.9 1,217 0.8
Unisource Worldwide, Inc............... 4 279,167 0.8 1,178 0.8
Mylex Corporation...................... 1 133,182 0.4 1,165 0.8
Rolf C. Hagen (USA) Corp............... 1 204,151 0.6 1,133 0.7
Harmonic Lightwaves.................... 1 110,160 0.3 1,124 0.7
Ciba Vision Corporation................ 1 245,616 0.7 1,067 0.7
Dry Storage Corporation................ 1 346,538 1.0 1,057 0.7
Hexcel Corporation..................... 1 285,634 0.8 1,051 0.7
The Discovery Channel Store/Nature
Company.............................. 1 268,525 0.8 1,009 0.7
Mitsubishi Warehouse Corporation....... 1 253,584 0.7 1,004 0.7
Holman Distribution.................... 1 371,440 1.0 981 0.6
Superior Coffee & Foods................ 1 201,011 0.6 926 0.6
Advo Systems, Inc...................... 1 173,660 0.5 905 0.6
Emery Air Freight Corporation.......... 2 143,726 0.4 905 0.6
Pragmatech Inc......................... 1 102,157 0.3 873 0.6
Rollerblade, Inc....................... 1 278,840 0.8 872 0.6
K-Swiss................................ 1 254,414 0.7 870 0.6
Best Buy Company....................... 1 244,733 0.7 842 0.6
Logitech, Inc.......................... 1 95,632 0.3 827 0.6
Sears, Roebuck & Co.................... 2 169,653 0.5 821 0.5
Bridgestone/Firestone, Inc............. 1 296,800 0.8 819 0.5
Belkin Components...................... 1 219,028 0.6 815 0.5
Vidco International.................... 1 146,460 0.4 809 0.5
Fujitsu America........................ 1 147,000 0.4 776 0.5
AT&T................................... 2 360,001 1.0 768 0.5
HomeGoods Inc.......................... 1 204,117 0.6 765 0.5
--------- ---- ------- ----
Total/Weighted Average (Industrial
Properties).......................... 8,707,989 24.4% $38,004 25.0%
========= ==== ======= ====
Weighted Average (Total
Properties)(4)....................... 20.0% 17.0%
==== ====
</TABLE>

- ---------------
(1) Tenant(s) may be a subsidiary of or an entity affiliated with the named
tenant.

(2) Computed as Aggregate Rentable Square Feet divided by the Aggregate Leased
Square Feet of the Industrial Properties.

(3) Computed as Annualized Base Rent divided by the Aggregate Annualized Base
Rent of the Industrial Properties.

(4) Computed as Aggregate Rentable Square Feet of such tenants divided by
Aggregate Leased Square Feet of the Properties or Annualized Base Rent of
such tenants divided by Aggregate Annualized Base Rent of the Properties, as
applicable.

45
<PAGE> 53

INDUSTRIAL PROPERTY LEASE EXPIRATIONS

The following table summarizes the lease expirations for the Industrial
Properties for leases in place as of December 31, 1997, without giving effect to
the exercise of renewal options or termination rights, if any, at or prior to
the scheduled expirations.

<TABLE>
<CAPTION>
ANNUALIZED PERCENTAGE
PERCENTAGE ANNUALIZED BASE RENT OF
OF TOTAL BASE RENT OF OF EXPIRING ANNUALIZED
NUMBER RENTABLE SQUARE RENTABLE EXPIRING LEASES PER BASE RENT
OF LEASES FOOTAGE OF SQUARE LEASES SQUARE OF EXPIRING
YEAR OF LEASE EXPIRATION EXPIRING(1) EXPIRING LEASES(1) FOOTAGE (000S)(1)(2) FOOT(3) LEASES
------------------------ ----------- ------------------ ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1998.................... 203 5,698,130 15.3% $ 24,161 $4.24 14.8%
1999.................... 181 6,112,460 16.4 26,064 4.26 16.0
2000.................... 195 6,608,476 17.7 29,677 4.49 18.2
2001.................... 126 4,375,871 11.7 21,836 4.99 13.4
2002.................... 118 5,078,872 13.6 23,345 4.60 14.3
2003.................... 35 2,379,619 6.4 11,147 4.68 6.9
2004.................... 16 1,411,382 3.8 6,952 4.93 4.3
2005.................... 17 1,803,606 4.8 7,463 4.14 4.6
2006.................... 12 988,148 2.6 6,096 6.17 3.7
2007.................... 4 254,017 0.7 1,399 5.51 0.9
2008 and beyond......... 14 1,132,733 3.0 4,695 4.15 2.9
--- ---------- ---- -------- ------
Total/Weighted Average.... 921 35,843,314 96.0% $162,835 $4.54 100.0%
=== ========== ==== ======== ======
</TABLE>

- ---------------
(1) Includes five leases aggregating 103,363 square feet that were executed as
of December 31, 1997, but which commenced in 1998.

(2) Based on rent at expiration.

(3) Calculated as Annualized Base Rent divided by the square footage of expiring
leases.

46
<PAGE> 54

RETAIL PROPERTIES

At December 31, 1997, the Company owned 33 Retail Properties aggregating
approximately 6.2 million rentable square feet, 31 of which are grocer-anchored.
As of December 31, 1997, the Retail Properties were 96.1% leased to over 800
tenants, the largest of which accounted for approximately 4.0% of the Company's
Annualized Base Rent from its Retail Properties as of such date. The Retail
Properties have an average age of six years since built, expanded or renovated.
The Company's historical weighted average tenant retention rate for the Retail
Properties for the period beginning January 1, 1995 through December 31, 1997
was approximately 82.8%, based on 0.7 million rentable square feet of expiring
leases.

The Retail Properties generally are located in supply-constrained trade
areas of 15 major metropolitan areas. The Company's national operating strategy
for the community shopping center business is based on detailed research
regarding these target trade areas which typically have high population
densities and above-average income levels. The two graphs below compare the
population density and income levels surrounding the Company's retail centers to
the national averages.

1996 MEDIAN HOUSEHOLD INCOME
AMB CENTERS VS. U.S.(1)

<TABLE>
<S> <C>
$51,000(2) Within 3 miles of AMB Centers
$40,000(3) All MSAs
$35,000(4) Total U.S.
</TABLE>

(1) Weighted by number of households.

(2) Derived from information compiled by Claritas Inc. The Company has been
advised that the information comes from various government and industry
sources, but the Company has not independently verified the information.

(3) Derived from data obtained from Regional Financial Associates.

(4) Derived from data published by Regional Financial Associates.

1996 AVERAGE POPULATION WITHIN
THREE-MILE RADIUS OF SHOPPING CENTER(1)

<TABLE>
<S> <C>
AMB U.S. Shopping
Centers Centers
110,000 71,000(2)
</TABLE>

(1) Derived from information compiled by Claritas Inc. The Company has been
advised that the information comes from various government and industry
sources, but the Company has not independently verified the information.

(2) For all shopping centers greater than or equal to 50,000 square feet and
less than or equal to 400,000 square feet.

47
<PAGE> 55

AVERAGE 1996 GROCER ANCHOR SALES FOR
RETAIL PROPERTIES

AVERAGE GROCER
SALES/SF

AMB CENTERS(1)(2)................. $505
TOTAL U.S. ....................... $398(3)

(1) Includes sales per square foot for grocer anchors reporting a full year
of sales. Twenty-seven of 33 centers are represented above. Of the six
centers not represented, (i) two do not have grocer anchors, (ii) three
centers did not have a full year of sales due to one center being built
and two centers repositioned during 1996 and (iii) the grocer-anchor
store at one center is not owned by the Company and does not report
sales.

(2) All but five of the 27 centers included report on a calendar year
basis.

(3) Derived from data published in the Progressive Grocer Annual Report,
April 1997.

48
<PAGE> 56

Property Characteristics. The Retail Properties generally contain between
80,000 and 350,000 rentable square feet. On average, 67% of the rentable square
feet for each of the Retail Properties is leased to one or more Anchor Tenants
(defined as those retail tenants occupying more than 10,000 rentable square feet
and all grocery stores and drugstores). The following table identifies
characteristics of a typical Retail Property.

RETAIL PROPERTY PROFILE

<TABLE>
<CAPTION>
TYPICAL PROPERTY TYPICAL RANGE
---------------- -----------------
<S> <C> <C>
Rentable square feet......................... 190,000 80,000 - 350,000
Percentage leased by Anchor Tenants.......... 67% 60% - 85%
Number of tenants............................ 25 10 - 50
Parking spaces per 1,000 square feet......... 5.0 4.0 - 6.0
Square footage per Anchor Tenant............. 25,000 10,000 - 100,000
Average square footage per Non-Anchor
Tenant..................................... 1,500 750 - 5,000
</TABLE>

Lease Terms. The Retail Properties are typically leased on a triple net
basis, defined as leases in which tenants pay their proportionate share of real
estate taxes, insurance and operating costs. In addition, some leases, including
some Anchor Tenant leases, require tenants to pay percentage rents based on
gross retail sales above predetermined thresholds. Typical Anchor Tenant leases
also provide for payment of a percentage administrative fee in lieu of a
management fee (calculated as a percentage of common area maintenance) which
ranges between 5% and 15%. Lease terms typical for Anchor Tenants range from 10
to 20 years, with an average of 19 years, with renewal options for an additional
10 to 20 years at fixed rents. Tenant improvement allowances are standard and
the amounts vary by submarket. Typical Non-Anchor Tenants have lease terms
ranging between three and 10 years with an average of seven years and they
typically receive options for an additional five-year term at market rents.

49
<PAGE> 57

RETAIL PROPERTY SUMMARY

Anchor Tenants accounted for 68% of the aggregate square footage of the
Retail Properties as of December 31, 1997. Annualized Base Rent as of such date
for the Company's 25 largest tenants was approximately $27.9 million,
representing approximately 38.8% of Annualized Base Rent for all Retail
Properties. Annualized Base Rent for the remaining retail tenants was
approximately $44.1 million as of the same date, representing approximately
61.2% of the Annualized Base Rent for all Retail Properties. The following table
sets forth, on a property-by-property basis, the rentable square footage leased
to Anchor Tenants and Non-Anchor Tenants as of December 31, 1997. Ownership of
each Property is in fee simple unless otherwise noted.
<TABLE>
<CAPTION>
LEASED
LEASED NON-
ANCHOR ANCHOR
RENTABLE RENTABLE AVAILABLE TOTAL
YEAR BUILT/ SQUARE SQUARE RENTABLE RENTABLE
REGION/MARKET/PROPERTY LOCATION RENOVATED(1) FEET FEET SQUARE FEET SQUARE FEET
---------------------- ---------------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
EASTERN
Albany
Latham Farms.................... Albany 1993 522,694 77,733 2,071 602,498
Baltimore
Long Gate Shopping Center....... Ellicott City 1996 389,669 14,467 533 404,669
Hartford
Corbins Corner Shopping
Center........................ Hartford 1988R 116,960 58,067 2,017 177,044
--------- --------- --------- ---------
Eastern Region Total/Weighted Average............................... 1,029,323 150,267 4,621 1,184,211
MIDWESTERN
Chicago
Brentwood Commons............... Bensenville 1990R 52,000 49,251 878 102,129
Civic Center Plaza.............. Niles 1989 238,655 17,503 7,176 263,334
Riverview Plaza Shopping
Center........................ Chicago 1981 100,674 25,665 12,933 139,272
Minneapolis
Rockford Road Plaza............. Plymouth 1991 151,627 54,160 0 205,787
--------- --------- --------- ---------
Midwestern Region Total/Weighted Average............................ 542,956 146,579 20,987 710,522
SOUTHERN
Atlanta
Woodlawn Point Shopping
Center........................ Cobb County 1993 68,499 29,400 0 97,899

AVERAGE
ANNUALIZED NUMBER BASE RENT
PERCENTAGE BASE RENT OF PER SQUARE
REGION/MARKET/PROPERTY LEASED (000S)(2) LEASES FOOT(3) PRIMARY TENANTS(4)
---------------------- ---------- ---------- ------ ---------- ------------------
<S> <C> <C> <C> <C> <C>
EASTERN
Albany
Latham Farms.................... 99.7% $ 5,990 28 $ 9.98 Sam's Club
Wal-Mart
Baltimore
Long Gate Shopping Center....... 99.9 4,639 12 11.48 Kohl's
Target
Hartford
Corbins Corner Shopping
Center........................ 98.9 3,111 23 17.77 Filene's Basement
Toys 'R Us
------- -----
Eastern Region Total/Weighted Averag 99.6 13,740 63 11.65
MIDWESTERN
Chicago
Brentwood Commons............... 99.1 1,038 20 10.25 Dominick's
Civic Center Plaza.............. 97.3 2,471 13 9.65 Dominick's
Home Depot
Riverview Plaza Shopping
Center........................ 90.7 1,173 13 9.29 Dominick's
Toys 'R Us
Minneapolis
Rockford Road Plaza............. 100.0 2,203 30 10.70 PetsMart
Rainbow Foods
------- -----
Midwestern Region Total/Weighted Ave 97.0 6,885 76 9.99
SOUTHERN
Atlanta
Woodlawn Point Shopping
Center........................ 100.0 1,192 18 12.18 Publix
Zany Brainy
</TABLE>

50
<PAGE> 58
<TABLE>
<CAPTION>
LEASED
LEASED NON-
ANCHOR ANCHOR
RENTABLE RENTABLE AVAILABLE TOTAL
YEAR BUILT/ SQUARE SQUARE RENTABLE RENTABLE
REGION/MARKET/PROPERTY LOCATION RENOVATED(1) FEET FEET SQUARE FEET SQUARE FEET
---------------------- ---------------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Houston
Randall's Austin Parkway........ Sugarland 1993 90,650 21,025 0 111,675
Randall's Commons Memorial...... Houston 1993 75,689 31,002 3,504 110,195
Randall's Dairy Ashford......... Houston 1993 115,360 20,575 0 135,935
Randall's Woodway............... Houston 1993 65,108 24,184 20,252 109,544
Weslayan Plaza.................. Houston 1986R 216,870 120,546 18,834 356,250
Miami
Kendall Mall(5)................. Miami 1995R 194,550 91,653 13,302 299,505
Palm Aire(5)(6)................. Pompano Beach 1997R 33,100 21,240 44,463 98,803
The Plaza at Delray(5).......... Delray Beach 1996R 205,703 47,086 47,820 300,609
Shoppes at Lago Mar............. Miami 1995 42,323 30,253 10,532 83,108
--------- --------- --------- ---------
Southern Region Total/Weighted Average.............................. 1,107,852 436,964 158,707 1,703,523
WESTERN
Denver
Applewood Village Shopping
Center........................ Wheat Ridge 1994R 258,538 85,013 9,705 353,256
Arapahoe Village Shopping
Center........................ Boulder 1989R 85,379 73,707 0 159,086
Los Angeles
Granada Village................. Granada Hills 1996R 124,638 93,278 6,867 224,783
Manhattan Village Shopping
Center (5).................... Manhattan Beach 1992R 225,791 194,566 3,593 423,950
Twin Oaks Shopping Center....... Agoura Hills 1996R 58,475 43,924 0 102,399

AVERAGE
ANNUALIZED NUMBER BASE RENT
PERCENTAGE BASE RENT OF PER SQUARE
REGION/MARKET/PROPERTY LEASED (000S)(2) LEASES FOOT(3) PRIMARY TENANTS(4)
---------------------- ---------- ---------- ------ ---------- ------------------
<S> <C> <C> <C> <C> <C>
Houston
Randall's Austin Parkway........ 100.0% $ 1,093 12 $ 9.79 Randall's
Sears Hardware
Randall's Commons Memorial...... 96.8 941 15 8.82 Randall's
Walgreen's
Randall's Dairy Ashford......... 100.0 1,302 12 9.58 Randall's
PetsMart
Randall's Woodway............... 81.5 1,141 12 12.78 Randall's
Eckerd Drug
Weslayan Plaza.................. 94.7 3,811 47 11.29 Bering's Home Center
Randall's
Miami
Kendall Mall(5)................. 95.6 3,706 45 12.95 J.C. Penney Home
Store
Upton's
Palm Aire(5)(6)................. 55.0 393 14 7.23 Winn-Dixie
Eckerd Drug
The Plaza at Delray(5).......... 84.1 3,008 31 11.90 Home Place
Regal Cinema
Shoppes at Lago Mar............. 87.3 846 16 11.65 Publix
------- -----
Southern Region Total/Weighted Avera 90.7 17,433 222 11.29
WESTERN
Denver
Applewood Village Shopping
Center........................ 97.3 3,155 41 9.18 King Soopers
Wal-Mart
Arapahoe Village Shopping
Center........................ 100.0 1,837 25 11.55 Safeway
SoFro Fabrics
Los Angeles
Granada Village................. 96.9 2,919 38 13.39 Hughes Market
TJ Maxx
Manhattan Village Shopping
Center (5).................... 99.2 6,541 91 15.56 Macy's
Fry's Electronics
Twin Oaks Shopping Center....... 100.0 1,067 24 10.42 Ralphs
Rite Aid
</TABLE>

51
<PAGE> 59
<TABLE>
<CAPTION>
LEASED
LEASED NON-
ANCHOR ANCHOR
RENTABLE RENTABLE AVAILABLE TOTAL
YEAR BUILT/ SQUARE SQUARE RENTABLE RENTABLE
REGION/MARKET/PROPERTY LOCATION RENOVATED(1) FEET FEET SQUARE FEET SQUARE FEET
---------------------- ---------------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Reno
Southwest Pavilion.............. Reno 1997E 47,140 25,206 4,411 76,757
San Diego
La Jolla Village(7)............. La Jolla 1989R 67,238 97,493 556 165,287
Rancho San Diego Village S.C.... La Mesa 1994R 39,777 57,772 13,703 111,252
San Francisco Bay Area
Bayhill Shopping Center......... San Bruno 1997R 59,221 57,775 5,045 122,041
Lakeshore Plaza Shopping
Center........................ San Francisco 1993 38,836 80,375 3,650 122,861
Pleasant Hill Shopping Center... Pleasant Hill 1990R 210,614 23,063 0 233,677
Silverado Plaza Shopping
Center........................ Napa 1994R 58,328 25,753 942 85,023
Ygnacio Plaza................... Walnut Creek 1990R 52,118 53,018 4,293 109,429
Santa Barbara
Five Points Shopping Center..... Santa Barbara 1996 92,980 47,295 4,500 144,775
Seattle
Aurora Marketplace.............. Edmonds 1991 74,113 32,837 0 106,950
Eastgate Plaza.................. Bellevue 1995R 49,575 26,989 0 76,564
--------- --------- --------- ---------
Western Region Total/Weighted Average............................... 1,542,761 1,018,064 57,265 2,618,090
--------- --------- --------- ---------
Total/Weighted Average.............................................. 4,222,892 1,751,874 241,580 6,216,346
========= ========= ========= =========

AVERAGE
ANNUALIZED NUMBER BASE RENT
PERCENTAGE BASE RENT OF PER SQUARE
REGION/MARKET/PROPERTY LEASED (000S)(2) LEASES FOOT(3) PRIMARY TENANTS(4)
---------------------- ---------- ---------- ------ ---------- ------------------
<S> <C> <C> <C> <C> <C>
Reno
Southwest Pavilion.............. 94.3% $ 726 14 $10.03 Scolari's Market
San Diego
La Jolla Village(7)............. 99.7 3,047 38 18.50 Sav-on Drugs
Whole Foods Market
Rancho San Diego Village S.C.... 87.7 1,257 41 12.88 Safeway
San Francisco Bay Area
Bayhill Shopping Center......... 95.9 1,190 27 10.17 Longs Drugs
Mollie Stone's Markets
Lakeshore Plaza Shopping
Center........................ 97.0 3,147 32 26.40 Ross Stores
UCSF
Pleasant Hill Shopping Center... 100.0 2,350 12 10.06 Toys 'R Us
Target
Silverado Plaza Shopping
Center........................ 98.9 806 17 9.59 Nob Hill Foods
Payless
Ygnacio Plaza................... 96.1 1,405 25 13.36 Lucky
Rite Aid
Santa Barbara
Five Points Shopping Center..... 96.9 2,232 25 15.92 Lucky
Ross Stores
Seattle
Aurora Marketplace.............. 100.0 1,493 18 13.96 Drug Emporium
Safeway
Eastgate Plaza.................. 100.0 776 15 10.14 Payless Drugs
Albertson's
------- -----
Western Region Total/Weighted Averag 97.8 33,948 483 13.26
------- -----
Total/Weighted Average.............. 96.1% $72,006 844 $12.05
======= =====
</TABLE>

- ---------------
(1) Retail Properties denoted with an "R," "E" or "D" indicate the date of most
recent renovation, expansion or development, respectively. All other dates
reference the year such Property was developed.
(2) Annualized Base Rent means the monthly contractual amount under existing
leases at December 31, 1997, multiplied by 12. This amount excludes expense
reimbursements, rental abatements and percentage rents.
(3) Calculated as total Annualized Base Rent divided by rentable square feet
actually leased as of December 31, 1997.
(4) Primary tenants are defined as the two largest Anchor Tenants as measured by
rentable square footage.
(5) The Company holds interests in these Properties through a joint venture
interest in a limited partnership. See "-- Properties Held Though Joint
Ventures, Limited Liability Company's and Partnerships."
(6) This Property is being redeveloped. All calculations are based on rentable
square feet existing as of December 31, 1997.
(7) This Property includes 33 apartment units which were acquired as part of the
acquisition of the Property.

52
<PAGE> 60

RETAIL PROPERTY TENANT INFORMATION

Largest Retail Property Tenants. The Company's 25 largest Retail Property
tenants by Annualized Base Rent are set forth in the table below. These tenants
have an average of approximately 14 years remaining on their lease terms, which
the Company believes should provide a balance to the typically shorter remaining
lease terms of the Industrial Property tenants.

<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
AGGREGATE AGGREGATE
NUMBER AGGREGATE LEASED ANNUALIZED ANNUALIZED
OF RENTABLE SQUARE BASE RENT BASE
TENANT NAME(1) CENTERS SQUARE FEET FEET(2) (000S) RENT(3)
-------------- ------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Wal-Mart Stores, Inc. and Sam's Club...... 2 388,866 6.5% $ 2,891 4.0%
Randall's Food & Drugs, Inc............... 5 298,549 5.0 2,369 3.3
Safeway Stores, Inc....................... 4 187,334 3.1 1,860 2.6
Home Place................................ 2 109,104 1.8 1,450 2.0
Dominick's................................ 3 175,229 2.9 1,430 2.0
Target Stores Corporation................. 2 232,140 3.9 1,251 1.7
Blockbuster Video, Inc.................... 10 58,275 1.0 1,247 1.7
Toys 'R Us, Inc........................... 3 135,332 2.3 1,247 1.7
Home Quarters............................. 1 101,783 1.7 1,167 1.6
Publix.................................... 4 178,644 3.0 1,142 1.6
Gap, Inc.................................. 4 57,196 1.0 1,016 1.4
Home Depot................................ 1 116,095 1.9 1,015 1.4
Kohl's.................................... 1 86,889 1.4 949 1.3
J.C. Penney............................... 5 53,512 0.9 921 1.3
PetsMart, Inc............................. 4 102,100 1.7 875 1.2
Barnes & Noble Super Stores, Inc.......... 2 46,180 0.8 840 1.2
Super Shop and Save....................... 1 63,664 1.1 828 1.2
Dart...................................... 5 51,457 0.8 781 1.1
Ross Stores, Inc.......................... 2 56,911 1.0 769 1.1
TJX, Inc.................................. 4 117,200 2.0 762 1.1
Tandy Corporation......................... 14 53,762 0.9 697 1.0
Fry's Electronics......................... 1 46,200 0.8 677 0.9
Ralphs Grocery Company.................... 2 84,053 1.4 628 0.9
Bally's Total Fitness..................... 1 31,460 0.5 578 0.8
Gateway Foods............................. 1 65,608 1.1 535 0.7
--------- ---- ------- ----
Total/Weighted Average (Retail
Properties)........................ 2,897,543 48.5% $27,925 38.8%
========= ==== ======= ====
Weighted Average (Total
Properties)(4)..................... 6.7% 12.5%
==== ====
</TABLE>

- ---------------
(1) Tenant(s) may be a subsidiary of or an entity affiliated with the named
tenant.

(2) Computed as Aggregate Rentable Square Feet divided by the Aggregate Leased
Square Feet of the Retail Properties.

(3) Computed as Annual Base Rent divided by the Aggregate Annualized Base Rent
of the Retail Properties.

53
<PAGE> 61

RETAIL PROPERTY LEASE EXPIRATIONS

The following table sets forth a summary schedule of the Retail Property
lease expirations for leases in place as of December 31, 1997 without giving
effect to the exercise of renewal options or termination rights, if any, at or
prior to the scheduled expirations.

<TABLE>
<CAPTION>
ANNUALIZED PERCENTAGE OF ANNUALIZED
RENTABLE BASE RENT OF ANNUALIZED RENT OF
NUMBER OF SQUARE FOOTAGE PERCENTAGE OF EXPIRING BASE RENT OF EXPIRING
YEAR OF LEASE LEASES OF LEASES TOTAL RENTABLE LEASES(1)(2) EXPIRING LEASES PER
EXPIRATIONS EXPIRING(1) EXPIRING(1) SQUARE FOOTAGE (000S) LEASES SQUARE FOOT(3)
- ---------------------- ----------- -------------- -------------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1998.................. 134 436,544 7.0% $ 5,350 6.7% $12.26
1999.................. 117 378,979 6.1 5,427 6.8 14.32
2000.................. 110 422,775 6.8 5,487 6.9 12.98
2001.................. 103 403,393 6.5 6,022 7.6 14.93
2002.................. 119 373,594 6.0 6,985 8.8 18.70
2003.................. 39 232,725 3.7 3,354 4.2 14.41
2004.................. 31 205,520 3.3 3,100 3.9 15.09
2005.................. 36 142,907 2.3 3,358 4.2 23.50
2006.................. 46 295,923 4.8 5,540 7.0 18.72
2007.................. 30 394,022 6.3 4,575 5.8 11.61
2008 and beyond....... 93 2,719,591 43.8 30,281 38.1 11.13
--- --------- ---- ------- ----- ------
Total/Weighted
Average............. 858 6,005,973 96.6% $79,479 100.0% $13.23
=== ========= ==== ======= ===== ======
</TABLE>

- ---------------
(1) Includes 14 leases aggregating 31,207 square feet that were in-place as of
December 31, 1997, but which commenced in 1998.

(2) Based upon base rent at expiration.

(3) Calculated as Annualized Base Rent divided by the square footage of expiring
leases.

54
<PAGE> 62

HISTORICAL LEASE RENEWALS AND RETENTION RATES

The following table sets forth information relating to lease renewals,
retention rates, and rent increases on renewal and re-tenanted space for the
Properties for each of the periods presented.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
TOTAL/WEIGHTED
1995 1996 1997 AVERAGE
----- ----- ----- --------------
<S> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES:
Retention rate.................................... 67.9% 79.2% 69.5% 72.3%
Rental rate increases............................. 4.8% 4.7% 13.0%
RETAIL PROPERTIES:
Retention rate.................................... 63.5% 88.4% 87.8% 82.8%
Rental rate increases............................. 3.2% 5.4% 10.1%
TOTAL PROPERTIES:
Retention rate.................................... 67.7% 79.8% 70.3% 72.8%
Rental rate increases............................. 4.3% 5.0% 12.0%
</TABLE>

RECURRING BUILDING IMPROVEMENTS

The Company considers recurring building improvements to be expenditures
that (i) are incurred subsequent to the first three years of ownership of the
Property, during which the initial capital improvement plan is completed and
(ii) prevent deterioration or maintain the building in an efficient operating
condition. The table below summarizes recurring building improvements for the
years ended December 31, 1995, 1996 and 1997 for the Industrial Properties and
the Retail Properties. The amounts set forth below are not necessarily
indicative of future levels of building improvements.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
AVERAGE IMPROVEMENTS PER SQUARE FOOT:
Industrial Properties..................................... $0.01 $0.01 $0.05
Retail Properties......................................... $0.03 $0.04 $0.15
</TABLE>

RECURRING TENANT IMPROVEMENTS AND LEASING COMMISSIONS

The tables below summarize for Industrial Properties and Retail Properties,
separately, the recurring tenant improvements and leasing commissions for the
three years ended December 31, 1995, 1996 and 1997. The recurring tenant
improvements and leasing commissions represent costs incurred to lease space
after the initial lease term of the initial tenant, excluding costs incurred to
relocate tenants as part of a re-tenanting strategy. The tenant improvements and
leasing commissions set forth below are not necessarily indicative of future
tenant improvements and leasing commissions. No assurance can be given that any
of such Properties will be completed on schedule or within budgeted amounts. See
"Risk Factors -- General Real Estate Risks -- Possibility Inability to Complete
Renovation and Development on Advantageous Terms."

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
WEIGHTED
1995 1996 1997 AVERAGE
----- ----- ----- --------
<S> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES:
Expenditures per renewed square foot leased............... $0.91 $0.93 $1.05 $0.96
Expenditures per re-tenanted square foot leased........... 1.75 1.97 1.62 1.83
Aggregate weighted average per square foot leased......... 1.32 1.29 1.30 1.35
RETAIL PROPERTIES:
Expenditures per renewed square foot leased............... 5.53 4.72 4.25 4.71
Expenditures per re-tenanted square foot leased........... 5.37 6.53 7.92 7.10
Aggregate weighted average per square foot leased......... 5.46 5.61 6.41 5.98
</TABLE>

55
<PAGE> 63

OCCUPANCY AND BASE RENT

The table below sets forth weighted average occupancy rates and base rent
based on square feet leased of the Industrial Properties and the Retail
Properties as of December 31, 1995, 1996 and 1997.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
INDUSTRIAL PROPERTIES:
Occupancy rate at period end................... 97.3% 97.2% 95.7%
Average base rent per square foot(1)........... $ 3.43 $ 3.81 $ 4.26
RETAIL PROPERTIES:
Occupancy rate at period end................... 92.4% 92.4% 96.1%
Average base rent per square foot(1)........... $10.46 $11.32 $12.05
</TABLE>

- ---------------
(1) Average base rent per square foot represents the total contractual base
rental revenue for the period divided by the average square feet leased for
the period.

RENOVATION, EXPANSION AND DEVELOPMENT PROJECTS IN PROGRESS

The following table sets forth the Properties owned by the Company which
are currently undergoing renovation, expansion, or new development. No assurance
can be given that any of such Properties will be completed on schedule or with
budgeted amounts. See "Risk Factors -- General Real Estate Risks -- Possible
Inability to Complete Renovation and Development on Advantageous Terms."

<TABLE>
<CAPTION>
ACTIVITY
-----------------------------------------------------
INITIAL ESTIMATED ESTIMATED
ACQUISITION SQUARE FEET ESTIMATED TOTAL SQUARE FEET
PRICE AT STABILIZATION INVESTMENT AT
PROPERTY NAME (000S)(1) ACQUISITION TYPE(3) DATE(4) (000S)(5) COMPLETION
------------- ----------- ----------- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Industrial Properties:
Dock's Corner................. $21,000 554,521 Expansion Jul-99 $46,900 1,200,000
Fairway Drive Phase II........ 5,400 175,325 Development May-98 10,600 255,300
Fairway Drive Phase III....... 1,100 --(2) Development Sept-99 4,800 115,000
Mendota Heights............... 1,100 --(2) Development Dec-98 6,900 150,400
------- ------- ------- ---------
Subtotal...................... 28,600 729,846 69,200 1,720,700
Retail Properties:
Palm Aire..................... 3,100 143,987 Renovation Feb-99 11,500 144,300
Southwest Pavilion............ 8,600 76,757 Expansion Nov-98 9,100 80,800
------- ------- ------- ---------
Subtotal...................... 11,700 220,744 20,600 225,100
------- ------- ------- ---------
Total.................. $40,300 950,590 $89,800 1,945,800
======= ======= ======= =========
</TABLE>

- ---------------
(1) Purchase price plus acquisition costs.

(2) Represents unimproved land as of the date of acquisition.

(3) Renovation with respect to a Property means capital improvements which have
totaled 20% or more of the total cost of such Property within a 24-month
period or which have resulted in material improvement of physical condition.
Expansion with respect to a Property means construction resulting in an
increase in the rentable square footage of an existing structure or the
development of additional buildings on a property on which existing
buildings are located. Development with respect to a Property means new
construction on a previously undeveloped location.

(4) Estimated stabilization date means management's estimate of when capital
improvements for repositioning, development and redevelopment programs have
been completed and in effect for a sufficient period of time (but in no case
more than 12 months after shell completion) to achieve market occupancy of
at least 95%.

(5) Represents total estimated cost of renovation, expansion or development,
including initial acquisition costs. The estimates are based on the
Company's current planning estimates and forecasts and therefore subject to
change.

PROPERTIES HELD THROUGH JOINT VENTURES, LIMITED LIABILITY COMPANIES AND
PARTNERSHIPS

As of December 31, 1997, the Company held interests in eight joint
ventures, limited liability companies and partnerships (collectively, the "Joint
Ventures") with certain unaffiliated third parties (the "Joint

56
<PAGE> 64

Venture Participants"). Pursuant to the existing agreements with respect to each
Joint Venture, the Company holds a greater than 50% interest in seven of the
Joint Ventures and a 50% interest in the eighth Joint Venture, but in certain
cases such agreements provide that the Company is a limited partner or that the
Joint Venture Participant is principally responsible for day-to-day management
control of the Property (though in all such cases, the Company has approval
rights with respect to significant decisions involving the underlying
properties). Under the agreements governing the Joint Ventures, the Company and
the Joint Venture Participant may be required to make additional capital
contributions, and subject to certain limitations, the Joint Ventures may incur
additional debt. Such additional indebtedness would effectively be senior to the
Notes. See "Risk Factors -- Ranking of the Notes." Such agreements also impose
certain restrictions on the transfer of the interest in the Joint Venture by the
Company or the Joint Venture Participant, and provide certain rights to the
Company or the Joint Venture Participant to sell its interest to the Joint
Venture or to the other participant on terms specified in the agreement. All of
the Joint Ventures terminate in the year 2024 or later, but may end earlier if a
Joint Venture ceases to hold any interest in or have any obligations relating to
the property held by such Joint Venture. See "Risk Factors -- Impact on Control
Over and Liabilities with Respect to Properties Owned Through Partnerships and
Joint Ventures.

The following table sets forth certain information regarding the Joint
Ventures as of December 31, 1997:

<TABLE>
<CAPTION>
PERCENTAGE AND
FORM OF
BOOK VALUE OF COMPANY'S
GROSS BOOK CO-VENTURER'S COMPANY'S OWNERSHIP
PROPERTY VALUE(1) MORTGAGE DEBT INVESTMENT(2) INVESTMENT(3) INTEREST
-------- ---------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES:
Chancellor........... $ 6,390 $ (2,987) $ (604) $ 2,799 90% general partnership
interest
Fairway Drive........ 12,956 -- (314) 12,642 70% LLC interest
Nippon Express(4).... 5,079 -- (446) 4,633 50% limited partnership
interest
Metric Center........ 43,957 -- (5,457) 38,500 87.15% limited
partnership interest
-------- -------- -------- --------
Subtotal.......... 68,382 (2,987) (6,821) 58,574

RETAIL PROPERTIES:
Kendall Mall......... 35,703 (25,162) 438 10,979 50.0001% limited
partnership interest
Manhattan Village.... 83,287 -- (7,941) 75,346 90% LLC interest
Palm Aire............ 12,983 (4,505) (1,107) 7,371 50.0001% general
partnership interest
The Plaza at
Delray............ 35,021 (23,455) (353) 11,213 50.0001% limited
partnership interest
-------- -------- -------- --------
Subtotal.......... 166,994 (53,122) (8,963) 104,909
-------- -------- -------- --------
Total........ $235,376 $(56,109) $(15,784) $163,483
======== ======== ======== ========
</TABLE>

- ---------------
(1) Represents the book value of the Property owned by the respective joint
venture entity before accumulated depreciation.

(2) Represents the co-venturer's aggregate investment on a book value basis in
the respective joint venture property.

(3) Represents the Company's aggregate investment on a book value basis in the
respective joint venture property.

(4) Represents a building which is part of the Lake Michigan Industrial
Portfolio.

The Company accounts for all of the above investments on a consolidated
basis for financial reporting purposes because of its ability to exercise
control over significant aspects of the investment as well as its significant
economic interest in such investments. See Notes to the Consolidated Financial
Statements of the Company.

57
<PAGE> 65

DEBT FINANCING

The Company's financing policies and objectives are determined by the Board
of Directors and may be altered without the consent of the Company's
stockholders. The organizational documents of the Operating Partnership and the
Company do not limit the amount of indebtedness that either may incur. The
Company presently intends to limit the Debt-to-Total Market Capitalization Ratio
to approximately 45%. As of December 31, 1997, on a pro forma basis after giving
effect to the Offering and the application of the net proceeds therefrom as
described in "Use of Proceeds," the Company's Debt-to-Total Market
Capitalization Ratio as of December 31, 1997 on a pro forma basis would have
been approximately 29.4% (23.6% on an historical basis). The Company believes
that the Debt-to-Total Market Capitalization Ratio is a useful indicator of a
company's ability to incur indebtedness and has gained acceptance as an
indicator of leverage for real estate companies. The Company intends to utilize
one or more sources of capital for future acquisitions, including development
and capital improvements, which may include undistributed cash flow, borrowings
under the Credit Facility, issuance of debt or equity securities of either the
Operating Partnership or the Company, funds from its co-investment partners and
other bank and/or institutional borrowings. There can be no assurance, however,
that the Company will be able to obtain capital for any such acquisitions,
developments or improvements on terms favorable to the Company. See "Strategies
for Growth -- Growth Through Acquisition."

Unsecured Debt. The Operating Partnership is party to the Credit Facility
with aggregate availability of $500 million (subject to borrowing base
limitations). The Company intends to use the Credit Facility principally for
acquisitions and for working capital purposes. Borrowings under the Credit
Facility bear interest at a floating rate equal to LIBOR plus 110 basis points
until the earlier of August 21, 1998 and the date the Company receives a debt
rating. Thereafter, borrowings under the Credit Facility will bear interest at a
rate equal to LIBOR plus 90 to 120 basis points, depending upon the Company's
then current debt rating. As of December 31, 1997, $150 million was outstanding
under the Credit Facility, with $ million of availability. Of the $150
million outstanding as of December 31, 1997, substantially all of such
borrowings were used to finance property acquisitions. The Operating Partnership
is presently negotiating with MGT on behalf of the lenders under the Credit
Facility to increase the aggregate availability.

The Company's ability to borrow under the Credit Facility is subject to the
Company's ongoing compliance with a number of financial and other covenants. The
Credit Facility requires that: (i) the Company maintain a ratio of unencumbered
property value to unsecured indebtedness of at least 2 to 1; (ii) the
unencumbered properties generate sufficient net operating income to maintain a
debt service coverage ratio of at least 2 to 1; (iii) the Company maintain a
total indebtedness to total asset value ratio of not more than 0.5 to 1; (iv)
the ratio of net operating cash flow to debt service plus estimated capital
expenditures and preferred dividends be at least 2 to 1; and (v) certain other
customary covenants and performance requirements. The Credit Facility, except
under certain circumstances, limits the Company's ability to make distributions
to no more than 95% of its annual FFO.

Secured Debt. As of December 31, 1997, $73.0 million was outstanding under
the Secured Facility. Payments of interest only are due monthly at a fixed
annual interest rate of 7.53% with the principal due on December 12, 2008. The
Secured Facility, which is secured by six of the Properties, became an
obligation of the Company upon consummation of the Formation Transactions. Under
the Secured Facility, the Company may substitute collateral, subject to certain
requirements with respect to the property offered as replacement collateral. In
addition to the Secured Facility, 42 of the Properties secure mortgage
indebtedness. The aggregate principal amount of such mortgage indebtedness was
$444 million, $403 million and $254 million at December 31, 1997, 1996 and 1995,
respectively. The mortgage indebtedness bears interest at rates varying from
7.01% to 10.38% per annum (with a weighted average of 7.87%) with final maturity
dates ranging from 1998 to 2008. The mortgage indebtedness was assumed by the
Company, through the Operating Partnership, upon completion of the Formation
Transactions.

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<PAGE> 66

The following table sets forth scheduled principal payments of the
Company's secured debt (excluding construction debt of $4.5 million as of
December 31, 1997) for the Properties on an historical basis as of December 31,
1997 for each of the years beginning with the year ending December 31, 1998. All
of the Company's mortgage debt is fixed-rate and has generally been arranged by
the Company directly with lenders such as Principal Financial Group,
Northwestern Mutual Life, Prudential Insurance and Nationwide Insurance.

<TABLE>
<CAPTION>
WEIGHTED
SCHEDULED PRINCIPAL TOTAL AVERAGE
PRINCIPAL DUE AT PRINCIPAL YEAR-END
AMORTIZATION MATURITY PAYMENTS INTEREST RATE
------------ --------- --------- -------------
YEAR (IN THOUSANDS)
<S> <C> <C> <C> <C>
1998....................................... $ 6,314 $ 13,076 $ 19,390 7.88%
1999....................................... 6,099 3,567 9,666 7.86
2000....................................... 7,357 -- 7,357 7.85
2001....................................... 7,840 27,814 35,654 7.86
2002....................................... 7,792 36,175 43,967 7.85
2003....................................... 7,047 114,982 122,029 7.76
2004....................................... 5,149 36,085 41,234 7.65
2005....................................... 4,500 33,416 37,916 7.54
2006....................................... 2,893 103,922 106,815 7.60
2007....................................... 1,078 13,751 14,829 7.55
2008....................................... 1,004 73,000 74,004 --
------- -------- -------- ----
Total/Weighted Average.................. $57,073 $455,788 $512,861 7.82%
======= ======== ======== ====
</TABLE>

The following table sets forth scheduled maturities of the Company's
secured debt (excluding construction debt of $4.5 million as of December 31,
1997) on a property-by-property basis.

<TABLE>
<CAPTION>
NOTE BALANCE AT ANNUAL DEBT
INTEREST RATE AT DECEMBER 31, 1997 SERVICE
PROPERTY DECEMBER 31, 1997 (000S) (000S) MATURITY DATE
-------- ----------------- ----------------- ----------- -------------
<S> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES:
Harvest Business Park................ 10.38% $ 3,646 $ 438 04/01/99
Chancellor........................... 7.45 2,953 273 01/15/03
Blue Lagoon.......................... 7.15 11,851 1,032 02/01/03
Kingsport Industrial Park............ 7.81 17,531 1,582 08/01/03
Moffett Business Center.............. 7.20 12,807 1,123 12/15/03
Bensenville.......................... 8.53 20,067 2,034 08/01/04
Bensenville.......................... 8.53 6,707 678 08/01/04
Bensenville.......................... 8.35 2,711 267 08/01/04
Bensenville.......................... 8.35 7,086 691 08/01/04
Bensenville.......................... 8.35 5,125 499 08/01/04
South Bay Industrial(1).............. 8.31 19,461 1,843 04/05/05
Lonestar............................. 8.23 17,000 1,399 08/01/05
Activity Distribution Center......... 7.27 5,340 478 01/01/06
Stadium Business Park................ 7.27 4,855 434 01/01/06
Hewlett Packard Distribution......... 7.27 3,398 304 01/01/06
Minneapolis Industrial Portfolio
IV................................ 7.27 8,253 739 01/01/06
Amwiler-Gwinnett Industrial
Portfolio......................... 7.01 8,635 838 04/01/06
Pacific Business Center.............. 8.59 9,859 1,003 08/01/06
Chicago Industrial................... 8.59 3,255 331 08/01/06
Valwood.............................. 8.59 4,020 409 08/01/06
West North Carrier................... 8.59 3,255 331 08/01/06
</TABLE>

59
<PAGE> 67

<TABLE>
<CAPTION>
NOTE BALANCE AT ANNUAL DEBT
INTEREST RATE AT DECEMBER 31, 1997 SERVICE
PROPERTY DECEMBER 31, 1997 (000S) (000S) MATURITY DATE
-------- ----------------- ----------------- ----------- -------------
<S> <C> <C> <C> <C>
Artesia Industrial Portfolio......... 7.29 54,100 3,944 11/15/06
Amwiler-Gwinnett Industrial
Portfolio......................... 7.68 5,628 514 01/01/07
Mendota Heights...................... 8.50 668 57 06/18/07
Ardenwood Corporate Park............. 7.84 9,975 883 09/01/07
Minneapolis Industrial Portfolio V... 8.88 7,380 1,053 12/01/08
Secured Facility-Industrial(2)....... 7.53 47,450 3,573 12/12/08
-------- -------
Subtotal/Weighted Average
(rate/number of years).......... 7.81 303,016 26,750 8.1
RETAIL PROPERTIES:
Lakeshore Plaza Shopping Center...... 7.68 13,770 1,867 11/10/98
Woodlawn Shopping Center............. 8.50 4,640 474 01/01/01
Kendall Mall......................... 7.65 24,711 2,169 11/15/01
Silverado Plaza Shopping Center...... 9.02 4,883 534 04/10/02
Arapahoe Village Shopping Center..... 7.81 10,800 1,002 08/01/02
The Plaza at Delray.................. 7.78 22,951 1,983 09/01/02
Brentwood Commons.................... 8.74 5,095 502 06/01/03
Granada Village...................... 8.74 14,629 1,441 06/01/03
Ygnacio Plaza........................ 8.74 7,805 769 06/01/03
La Jolla Village..................... 8.74 17,957 1,768 06/01/03
Latham Farms......................... 7.88 37,587 3,665 12/01/03
Civic Center Plaza................... 7.27 13,612 1,216 02/01/06
Shoppes at Lago Mar.................. 7.50 5,855 532 04/01/06
Secured Facility-Retail(2)........... 7.53 25,550 1,924 12/12/08
Subtotal/Weighted Average
(rate/number of years).......... 7.96 209,845 19,846 5.8
-------- -------
Total/Weighted Average
(rate/number of years)....... 7.82% $512,861 $46,596 7.1
======== =======
</TABLE>

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

(1) Comprised of three loans with identical terms that are not
cross-collateralized.

(2) The Secured Facility is cross-collateralized with the following Industrial
and Retail Properties: L.A. County Industrial Portfolio, Southfield, Corbins
Corner Shopping Center, Elk Grove Village Industrial, Pleasant Hill Shopping
Center and Milmont Page.

Construction Debt. The Company also has a construction loan agreement in
the amount of $8 million to fund building improvements. The loan matures three
years from the date of the first loan draw, which occurred in July 1997.
Borrowings under the construction loan bear interest at LIBOR plus 275 basis
points, or the greater of the prime rate or the federal funds rate plus 0.5%, at
the borrower's option. The balance of the construction loan outstanding at
December 31, 1997 was $4.5 million.

INSURANCE

The Company and AMB Investment Management carry joint blanket coverage for
Properties owned by the Company (including the Operating Partnership) and
Properties managed by AMB Investment Management, with a single aggregate policy
limit and deductible. Management believes that its Properties are covered
adequately by commercial general liability insurance, including excess liability
coverage, and commercial "all risks" property insurance, including loss of rents
coverage, with commercially reasonable deductibles, limits and policy terms and
conditions customarily carried for similar properties. There are, however,
certain types of losses which may be uninsurable or not economically insurable,
such as losses due to loss of rents caused by

60
<PAGE> 68

strikes, nuclear events or acts of war. Should an uninsured loss occur, the
Company could lose both its invested capital in and anticipated profits from the
property.

The Company insures its properties for earthquake or earth movement. A
number of both the Industrial and Retail Properties are located in areas that
are known to be subject to earthquake activity. This is focused in California
where as of December 31, 1997, there are 27 Industrial Properties aggregating
10.4 million rentable square feet and 11 Retail Properties aggregating 1.8
million square feet. Through an annual analysis prepared by outside consultants,
the Company determines appropriate limits of earthquake coverage to secure.
Coverage is on a replacement cost basis, subject to the maximum limit purchased
which the Company believes is adequate and appropriate given both exposure and
cost considerations. Therefore, no assurance can be given that material losses
in excess of insurance proceeds will not occur in the future. See "Risk
Factors -- General Real Estate Risks -- Uninsured Losses from Seismic Activity."

The Company has insurance for loss in the event of damage to its properties
for earthquake activity, which consists of a sublimit of $10,000,000 per
occurrence for earthquake coverage provided as part of the "All Risk Property
Policy" with a primary insurer, with $90,000,000 per occurrence for losses in
excess of the $10,000,000 sublimit. The per occurrence deductible for this
coverage in California is 5% of the values applied separately to each building
subject to a minimum deductible of $100,000 (to the extent that such amount is
greater than 5% of the values at each location), and the deductible for
Properties outside of California is $25,000.

GOVERNMENT REGULATIONS

Many laws and governmental regulations are applicable to the Properties and
changes in these laws and regulations, or their interpretation by agencies and
the courts, occur frequently.

Costs of Compliance with Americans with Disabilities Act. Under the ADA,
all places of public accommodation are required to meet certain federal
requirements related to access and use by disabled persons. Compliance with the
ADA might require removal of structural barriers to handicapped access in
certain public areas where such removal is "readily achievable." Noncompliance
with the ADA could result in the imposition of fines or an award of damages to
private litigants.

Environmental Matters. Under Environmental Laws, a current or previous
owner or operator of real estate may be liable for contamination resulting from
the presence or discharge of hazardous or toxic substances or petroleum products
at such property, and may be required to investigate and clean-up such
contamination at such property or such contamination which has migrated from
such property. Such laws typically impose liability and clean-up responsibility
without regard to whether the owner or operator knew of or caused the presence
of the contaminants, and the liability under such laws has been interpreted to
be joint and several unless the harm is divisible and there is a reasonable
basis for allocation of responsibility. In addition, the owner or operator of a
site may be subject to claims by third parties based on personal injury,
property damage and/or other costs, including investigation and clean-up costs,
resulting from environmental contamination present at or emanating from a site.

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

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<PAGE> 69

release of petroleum products or other hazardous or toxic substances. Some of
the Properties are adjacent to or near other properties that have contained or
currently contain underground storage tanks used to store petroleum products or
other hazardous or toxic substances. In addition, certain of the Properties are
on or are adjacent to or near other properties upon which others, including
former owners or tenants of the Properties, have engaged or may in the future
engage in activities that may release petroleum products or other hazardous or
toxic substances.

All of the Properties were subject to a Phase I or similar environmental
assessments by independent environmental consultants at the time of acquisition
or shortly after acquisition. Phase I assessments are intended to discover and
evaluate information regarding the environmental condition of, the surveyed
property and surrounding properties. Phase I assessments generally include an
historical review, a public records review, an investigation of the surveyed
site and surrounding properties, and preparation and issuance of a written
report, but do not include soil sampling or subsurface investigations and
typically do not include an asbestos survey. Some of the Company's environmental
assessments of the Properties do not contain a comprehensive review of the past
uses of the Properties and/or the surrounding properties.

None of the Company's environmental assessments of the Properties has
revealed any environmental liability that the Company believes would have a
material adverse effect on the Operating Partnership's or the Company's
financial condition or results of operations taken as a whole, nor is the
Company aware of any such material environmental liability. Nonetheless, it is
possible that the Company's assessments do not reveal all environmental
liabilities or that there are material environmental liabilities of which the
Company is unaware. In addition, approximately 50% of the Properties have
environmental assessments which are more than two years old. Moreover, there can
be no assurance that (i) future laws, ordinances or regulations will not impose
any material environmental liability or (ii) the current environmental condition
of the Properties will not be affected by tenants, by the condition of land or
operations in the vicinity of the Properties (such as releases from underground
storage tanks), or by third parties unrelated to the Company. If the costs of
compliance with the various environmental laws and regulations, now existing or
hereafter adopted, exceed the Company's budgets for such items, the Company's
ability to make payments of principal of and interest on the Notes could be
adversely affected.

Other Regulations. The Properties are also subject to various Federal,
state and local regulatory requirements such as state and local fire and life
safety requirements. Failure to comply with these requirements could result in
the imposition of fines by governmental authorities or awards of damages to
private litigants. The Company believes that the Properties are currently in
substantial compliance with all such regulatory requirements. However, there can
be no assurance that these requirements will not be changed or that new
requirements will not be imposed which would require significant unanticipated
expenditures by the Company, which expenditure could have an adverse effect on
the Company's results of operations and financial condition.

Risk of Property Tax Reassessment. Certain local real property tax
assessors may seek to reassess certain of the Properties as a result of the
Formation Transactions and the transfer of interests that occurred in connection
therewith. In jurisdictions such as California, where Proposition 13 limits the
assessor's ability to reassess real property so long as there is no change in
ownership, the assessed value could increase by as much as the full value of any
appreciation that has occurred during the AMB Predecessors' period of ownership.
Where appropriate, the Company would contest vigorously any such reassessment.
Subject to market conditions, current leases may permit the Company to pass
through to tenants a portion of the effect of any increases in real estate taxes
resulting from any such reassessment.

Except as described in this Prospectus, there are no other laws or
regulations which have a material effect on the Company's operations, other than
typical state and local laws affecting the development and operation of real
property, such as zoning laws. See "Description of Certain Provisions of the
Partnership Agreement of the Operating Partnership."

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<PAGE> 70

MANAGEMENT AND EMPLOYEES

The Company conducts substantially all of its operations through the
Operating Partnership. AMB Investment Management independently conducts third
party portfolio management activities and related operations. The Company
generally has full, exclusive and complete responsibility and discretion in the
management and control of the Operating Partnership.

The Company (primarily through the Operating Partnership and AMB Investment
Management) employs 122 persons, 98 of whom are located at the Company's
headquarters in San Francisco and 24 of whom are located in the Company's Boston
office.

LEGAL PROCEEDINGS

Neither the Company nor any of the Properties is subject to any material
litigation nor, to the Company's knowledge, is any material litigation
threatened against any of them, other than routine litigation arising in the
ordinary course of business, which is generally expected to be covered by
liability insurance, or to have an immaterial effect on financial results.

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<PAGE> 71

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 Operating Partnership and the
Company. These policies and those set forth under "Certain Relationships and
Related Transactions -- Conflicts of Interest" have been determined by the Board
of Directors of the Company and may be amended or revised from time to time at
the discretion of the Board of Directors without notice to or a vote of the
stockholders of the Company or the limited partners of the Operating
Partnership, except that changes in certain policies with respect to conflicts
of interest must be consistent with legal requirements. Such legal requirements
include those arising from fiduciary principles under the Maryland General
Corporation Law ("MGCL"), including Section 2-419 thereof (which provides
procedures for approval of interested director transactions), and the Delaware
Revised Uniform Limited Partnership Act, and the judicial decisions under each
of such statutes.

INVESTMENT POLICIES

Investments in Real Estate or Interests in Real Estate. The Company
currently plans to continue to conduct all of its investment activities through
the Operating Partnership. The Company's investment objectives are to increase
FFO per share and the value of the Properties, and to acquire established
income-producing industrial properties and community shopping centers with FFO
growth potential. Additionally, where prudent and possible, the Company may
develop new properties and seek to renovate or reposition the existing
Properties and any newly-acquired properties. The Company's business is focused
on industrial properties and community shopping centers, but the Company may
invest in other types of properties which represent investment opportunities at
the discretion of management. In addition, the Company may invest in other
property types in connection with industrial and retail acquisition and
development opportunities. Where appropriate, and subject to REIT qualification
rules, the Operating Partnership may sell certain of the Properties.

The Company expects to pursue its investment objectives through the direct
and indirect ownership of properties and ownership interests in other entities.
The Company focuses on properties in those markets where the Company currently
has operations and in new markets selectively targeted by management. However,
future investments, including the activities described below, will not be
limited to any geographic area or to a specified percentage of the Company's
assets.

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

Investments in Real Estate Mortgages. While the Company emphasizes equity
real estate investments, it may, in its discretion, invest in mortgages, deeds
of trust and other similar interests. The Company does not intend to invest
significantly in mortgages or deeds of trust, but may acquire such interests 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. Subject to the gross income and asset tests
necessary for REIT qualification, the Company also may invest in securities of
entities engaged in real estate activities or securities of other issuers,
including for the purpose of exercising control over such entities. The Company
may acquire all or substantially all of the securities or assets of other REITs
or similar entities where such investments would be consistent with the
Company's investment policies. In any event, the Company does not intend that
its investments in securities will require it or the Operating Partnership to
register as an "investment company" under the Investment Company Act of 1940, as
amended.

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<PAGE> 72

FINANCING POLICIES

In addition to the limitations on indebtedness under the Credit Facility,
since the IPO, the Company has maintained and presently intends to continue to
maintain a Debt-to-Total Market Capitalization Ratio of approximately 45% or
less. This policy differs from conventional mortgage debt-to-equity ratios which
are asset-based ratios. The Company, however, may from time to time re-evaluate
this policy and decrease or increase such ratio in light of then current
economic conditions, relative costs to the Company of debt and equity capital,
market values of its properties, growth and acquisition opportunities and other
factors. There is no limit on the Debt-to-Total Market Capitalization Ratio
imposed by either the Articles of Incorporation or Bylaws or the Partnership
Agreement. To the extent the Board of Directors of the Company determines to
obtain additional capital, the Company may issue equity securities, or cause the
Operating Partnership to issue additional Units or debt securities, or retain
earnings (subject to provisions in the Code requiring distributions of taxable
income to maintain REIT status), or a combination of these methods. Pursuant to
the Partnership Agreement the net proceeds of all equity capital raised by the
Company will be contributed to the Operating Partnership in exchange for
additional general partner interests therein.

To the extent that the Board of Directors determines to obtain debt
financing in addition to the existing mortgage indebtedness, the Company intends
to do so generally through mortgages on its properties and the Credit Facility;
however, the Company may also issue or cause the Operating Partnership to issue
additional debt securities in the future, including debt which is pari passu
with the Notes. Such indebtedness may be recourse, non-recourse or
cross-collateralized and may contain cross-default provisions. The net proceeds
of any debt securities issued by the Company will be lent to the Operating
Partnership on substantially the same terms and conditions as are incurred by
the Company. The Operating Partnership and Company do not have policies 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. The Operating Partnership is currently negotiating for an increase
in the aggregate amount available under the Credit Facility, and may in the
future seek to extend, expand, reduce or renew the Credit Facility, or obtain
new credit facilities or lines of credit, subject to its general policy on debt
capitalization, for the purpose of making acquisitions or capital improvements
or providing working capital or meeting the taxable income distribution
requirements for REITs under the Code.

LENDING POLICIES

The Company may consider offering purchase money financing in connection
with the sale of Properties where the provision of such financing will increase
the value received by the Company for the property sold. The Operating
Partnership also may make loans to joint ventures in which it may participate in
the future. The Company may also make loans to the Operating Partnership, AMB
Investment Management, and joint ventures and other entities in which it or the
Operating Partnership have an equity interest.

CONFLICT OF INTEREST POLICIES

Officers and Directors of the Company. Without the unanimous approval of
the disinterested directors, the Company and its subsidiaries will not (i)
acquire from or sell to any director, officer or employee of the Company, or any
entity in which a director, officer or employee of the Company owns more than a
1% interest, or acquire from or sell to any affiliate of any of the foregoing,
any assets or other property, (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 in the opinion of the disinterested directors. For purposes of this
paragraph, "disinterested directors" means those Independent Directors who do
not have an interest in the transaction in question.

Policies Applicable to All Directors. Under Maryland law, each director is
obligated to offer to the Company any opportunity (with certain limited
exceptions) which comes to such director and which the Company could reasonably
be expected to have an interest in developing or acquiring. The Company has
adopted certain policies relating to such matters applicable to Independent
Directors actively engaged in

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<PAGE> 73

industrial and retail real estate which generally limit directly competitive
activities by such directors. In addition, under Maryland law, any contract or
other transaction between a corporation and any director or any other
corporation, firm or other entity in which the director is a director or has a
material financial interest may be void or voidable. However, the MGCL provides
that any such contract or transaction will not be void or voidable if (i) 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 stockholders or (ii) it is fair and reasonable to the corporation.

POLICIES WITH RESPECT TO OTHER ACTIVITIES

The Company may, but does not presently intend to, make investments other
than as previously described. The Company makes real property investments only
through the Company and the Operating Partnership, except to the extent
necessary to establish financing partnerships or similar vehicles established
substantially for the benefit of the Company or the Operating Partnership. The
Company has authority to offer its shares of Common Stock or other equity or
debt securities of the Operating Partnership in exchange for property and to
repurchase or otherwise reacquire its shares of Common Stock 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 for shares of Common Stock or
Preferred Stock in exchange for property. The Operating Partnership also may
make loans to joint ventures in which it may participate in the future. Neither
the Company nor the Operating Partnership will engage in trading, underwriting
or the agency distribution or sale of securities of other issuers.

POLICIES WITH RESPECT TO INVESTMENT ADVISORY SERVICES

Uninvested commitments of clients of AMB Investment Management existing
upon consummation of the IPO and any additional amounts committed by these
clients and any amounts committed by investors which become clients of AMB
Investment Management will be invested only in properties in which the Company
also invests, on a co-investment basis. See "Business and Operating
Strategies -- AMB Investment Management." AMB Investment Management may also
take over management of assets already owned by existing or new clients and
manage such assets on a separate account basis. To the extent that transactions
arise between the Company and a client of AMB Investment Management, it is
anticipated that AMB Investment Management generally will not exercise
decision-making authority on behalf of the client, and the client will act
through its own representatives. Similarly, it is expected that the terms of
co-investment arrangements between the Company and clients of AMB Investment
Management will be negotiated on an arm's-length basis at the time the
applicable investment management agreement is entered into, with any subsequent
modifications thereto to be likewise entered into on the basis of arm's-length
negotiations with the client or another representative designated thereby at the
time of such negotiation.

OTHER POLICIES

The Company operates in a manner that does not subject it to regulation
under the Investment Company Act of 1940. The Board of Directors has the
authority, without stockholder approval, to issue additional shares of Common
Stock or other securities and to repurchase or otherwise reacquire shares of
Common Stock or any other securities in the open market or otherwise and may
engage in such activities in the future. The Company may, under certain
circumstances, purchase shares of Common Stock in the open market, if such
purchases are approved by the Board of Directors. The Board of Directors has no
present intention of causing the Company to repurchase any of the shares of
Common Stock, and any such action would be taken only in conformity with
applicable Federal and state laws and the requirements for qualifying as a REIT
under the Code and the Treasury Regulations. The Company expects to issue shares
of Common Stock to holders of Units upon exercise of their exchange rights set
forth in the Partnership Agreement. The Company may in the future make loans to
joint ventures in which it participates in order to meet working capital needs.
The Company has not engaged in trading, underwriting or agency distribution or
sale of securities of other issuers other than the Operating Partnership, nor
has the Company invested in the securities of other issuers other

66
<PAGE> 74

than the Operating Partnership and AMB Investment Management for the purposes of
exercising control, and does not intend to do so.

At all times, the Company intends to make investments in such a manner as
to be consistent with the requirements of the Code for the Company to qualify as
a REIT unless, because of changing circumstances or changes in the Code (or in
Treasury Regulations), the Board of Directors determines that it is no longer in
the best interests of the Company to qualify as a REIT and such determination is
approved by the affirmative vote of holders owning at least two-thirds of the
shares of the Company's capital stock outstanding and entitled to vote thereon.

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<PAGE> 75

MANAGEMENT

The Company's Board of Directors is comprised currently of the nine
directors named below. Directors of the Company are elected on an annual basis.
The collective background and experience of the directors provide the Company
with advice and guidance in a number of areas, including corporate governance,
strategic planning, capital markets and property acquisition and management.

The Company believes that an independent Board of Directors, whose
interests are aligned with those of the stockholders, is essential to the
creation of long-term stockholder value. Therefore, six of nine of the Company's
directors are not employed by, or otherwise affiliated with, the Company
("Independent Directors"). To demonstrate the alignment of their interests with
those of stockholders, the Independent Directors waived cash retainers and
instead received options to purchase shares of Common Stock at the initial
public offering price.

The following table lists the executive officers and directors of the
Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
T. Robert Burke 55 Chairman of the Board of Directors
Hamid R. Moghadam 41 President, Chief Executive Officer and Director
Douglas D. Abbey 48 Chairman of the Investment Committee and Director
Daniel H. Case, III 40 Director
Robert H. Edelstein, Ph.D. 54 Director
Lynn M. Sedway 55 Director
Jeffrey L. Skelton, Ph.D. 48 Director
Thomas W. Tusher 56 Director
Caryl B. Welborn 47 Director
Luis A. Belmonte 57 Managing Director, Industrial Division
S. Davis Carniglia 47 Managing Director, Chief Financial Officer and General
Counsel
John H. Diserens 43 Managing Director, Retail Division
Bruce H. Freedman 49 Managing Director, Industrial Division
Jean Collier Hurley 58 Managing Director, Investor Relations and Corporate
Communications
Craig A. Severance 46 Managing Director, Acquisitions
</TABLE>

Set forth below are the biographies of such persons in the table above.

T. Robert Burke, one of the founders of AMB, is a Director of the Company
and has been the Chairman of the Board of AMB since 1994. He has 28 years of
experience in real estate and is a member of the Investment Committee. Mr. Burke
was on the board of directors of CIF and of VAF. He was formerly a senior real
estate partner with Morrison & Foerster LLP and, for two years, served as that
firm's Managing Partner for Operations. Mr. Burke graduated from Stanford
University and holds a J.D. degree from Stanford Law School. He is a member of
the Board of Directors of NAREIT, is on the Board of the Stanford Management
Company and is a Trustee of Stanford University. He is also a member of the
Urban Land Institute and is the former Chairman of the Board of Directors of the
Pension Real Estate Association.

Hamid R. Moghadam, one of the founders of AMB, is a Director of the Company
and is the President and Chief Executive Officer of the Company. Mr. Moghadam
has 17 years of experience in real estate acquisitions, dispositions, investment
analysis, finance and development, and is a member of the Investment Committee.
He was on the board of directors of CIF and of VAF. Mr. Moghadam holds
bachelor's and master's degrees in civil engineering and construction
management, respectively, from the Massachusetts Institute of Technology and an
M.B.A. degree from the Graduate School of Business at Stanford University. He is
a member of the board of directors of the National Realty Committee, a member of
the Young Presidents' Organization, has served on the Advisory Committee of the
Massachusetts Institute of Technology Center for Real Estate and is a Trustee of
the Bay Area Discovery Museum.

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<PAGE> 76

Douglas D. Abbey, one of the founders of AMB, is a Director of the Company
and is Chairman of the Investment Committee and is responsible for directing the
economic research used to determine the Company's investment strategy, as well
as the market research for property acquisitions. Mr. Abbey has 22 years of
experience in asset management, acquisitions and real estate research. He is a
graduate of Amherst College and has a master's degree in city planning from the
University of California at Berkeley. He is the chair of the Urban Land
Institute's Commercial Retail Council and Research Committee, serves on the
Policy Advisory Board for the Center for Real Estate and Urban Economics at the
University of California at Berkeley, is on the Editorial Board for the Journal
of Real Estate Investment Trusts and is a Trustee of Golden Gate University.

Daniel H. Case, III is a Director of the Company and is President and Chief
Executive Officer of the Hambrecht & Quist Group. After joining Hambrecht &
Quist in 1981, he co-founded the business which became Hambrecht & Quist
Guaranty Finance in 1983. Mr. Case was named co-director of mergers and
acquisitions of Corporate Finance in 1986, and became a managing director and
head of Investment Banking in December 1987. In October 1991, he was elected to
the board of directors of Hambrecht & Quist. In April 1992, he was elected
President and Co-Chief Executive Officer. He became Chief Executive Officer in
October 1994. Mr. Case also serves as a director of Rational Software
Corporation, Electronic Arts, the Securities Industry Association, and the Bay
Area Council. Mr. Case was named as one of the "100 Global Leaders for Tomorrow"
by the World Economics Forum and one of the "Top 50 Innovators in Technology" by
Time Magazine. He has a bachelor's degree in economics and public policy from
Princeton University and studied management at the University of Oxford as a
Rhodes Scholar.

Robert H. Edelstein, Ph.D. is a Director of the Company and was an
independent director of CIF. He has been a director of TIS Mortgage Investment
Company, a NYSE-listed mortgage REIT, since 1988, and has been the Chairholder
of Professorship of Real Estate Development and Co-Chairman of the Fisher Center
for Real Estate and Urban Economics at the Haas School of Business, University
of California at Berkeley since 1985. Prior to joining the faculty at Berkeley
in 1985, Dr. Edelstein was a Professor of Finance at The Wharton School and
Director of the Real Estate Center for 15 years. He is active in research and
consulting in urban real estate economics, real estate finance, real estate
property taxation, environmental economics, energy economics, public finance and
urban financial problems. Dr. Edelstein received his bachelor's, master's and
Ph.D. degrees in economics, with specialization fields in statistics and
econometrics, from Harvard University. He is President of The American Real
Estate and Urban Economics Association, an ex officio member of Lambda Alpha
(honorary real estate association), the Urban Land Institute and The Society for
Real Estate Finance.

Lynn M. Sedway is a Director of the Company and was an independent director
of CIF. She is principal and founder of the Sedway Group, a 19-year old real
estate economics firm headquartered in San Francisco. Ms. Sedway is recognized
throughout the real estate investment industry as an expert in urban and real
estate economics. She currently directs and has ultimate responsibility for the
activities of her firm, including market analysis, property valuation,
development and redevelopment analysis, acquisition and disposition strategies,
and public policy issues. Ms. Sedway received her bachelor's degree in economics
at the University of Michigan and an M.B.A. degree from the University of
California at Berkeley, Graduate School of Business, where she is also a guest
lecturer. She is a trustee of the Urban Land Institute, the Policy Advisory
Board of the Fisher Center for Real Estate and Urban Economics, and the San
Francisco Chamber of Commerce. Ms. Sedway is a member of The International
Council of Shopping Centers and the American Society of Real Estate Counselors.

Jeffrey L. Skelton, Ph.D. is a Director of the Company and was an
independent director of VAF. He is President and Chief Executive Officer of
Symphony Asset Management, the asset management subsidiary of BARRA, Inc., a
financial software company. Prior to joining BARRA, Inc. in 1994, he was with
Wells Fargo Nikko Investment Advisors from January 1991 to December 1993, where
he served in a variety of capacities, including Chief Research Officer, Vice
Chairman, Co-Chief Investment Officer and Chief Executive of Wells Fargo Nikko
Investment Advisors Limited in London. Dr. Skelton has a Ph.D. in Mathematical
Economics and Finance and an M.B.A. degree from the University of Chicago, and
was an Assistant Professor of Finance

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<PAGE> 77

at the University of California at Berkeley, Graduate School of Business. He is
a frequent speaker in professional forums and is the author of a number of works
published in academic and professional journals.

Thomas W. Tusher is a Director of the Company and was an independent
director of VAF. He was President and Chief Operating Officer of Levi Strauss &
Co. from 1984 through 1996. Previously, he was President of Levi Strauss
International from 1976 to 1984. Mr. Tusher began his career at Levi Strauss in
1969. He was a director of the publicly-held Levi Strauss & Co. from 1978 to
1985, and was named a director of the privately-controlled Levi Strauss & Co. in
1989. Prior to joining Levi Strauss & Co., Mr. Tusher was with Colgate Palmolive
from 1965 to 1969. Mr. Tusher has a bachelor's degree from the University of
California at Berkeley and an M.B.A. degree from the Graduate School of Business
at Stanford University. He is a director of Cakebread Cellars, Dash America and
Pearl Izumi. He is a former director of Great Western Financial Corporation and
the San Francisco Chamber of Commerce. He is also Chairman Emeritus and a member
of the advisory board of the Walter A. Haas School of Business at the University
of California at Berkeley.

Caryl B. Welborn is a Director of the Company and was an independent
director of VAF. She is a commercial real estate attorney in San Francisco, and
prior to starting her own firm in 1995, she was a partner with Morrison &
Foerster LLP for 13 years. Ms. Welborn has a bachelor's degree from Stanford
University and a J.D. degree from the Law School at the University of California
at Los Angeles. She is a program chair and frequent lecturer on real estate
issues nationally, and has published numerous articles in professional
publications. Ms. Welborn is an officer and board member of the American College
of Real Estate Lawyers. She has held leadership positions in the American Bar
Association's Real Property, Probate and Trust Section. In addition, Ms. Welborn
has acted as an American Bar Association advisor regarding revision of the
Uniform Partnership Act.

Luis A. Belmonte is a Managing Director of the Company and co-head of the
Industrial Division. He specializes in industrial property development and
redevelopment, and is a member of the Investment Committee. He joined AMB in
1990 and has over 29 years of experience in development, redevelopment, finance,
construction, and management of commercial and industrial projects. He was a
partner with Lincoln Property Company, where he built a portfolio of 18 million
square feet of buildings. Mr. Belmonte received his bachelor's degree from the
University of Santa Clara. He is a member of the Urban Land Institute, an
associate member of the Society of Industrial Realtors, former President of the
San Francisco chapter of NAIOP, The Association for Commercial Real Estate, and
serves as Chairman of the California Commercial Council.

S. Davis Carniglia is a Managing Director, Chief Financial Officer and
General Counsel of the Company and is the Vice Chairman of the Investment
Committee. He joined AMB in 1992 and has 22 years of experience in real estate
accounting, taxation, forecasting and financing. Mr. Carniglia was formerly a
tax and real estate consulting partner with KPMG/Peat Marwick, where he was
responsible for that firm's San Francisco Bay Area real estate practice, and was
an appraisal/valuation partner. Mr. Carniglia has a bachelor's degree in
economics from Pomona College and a J.D. degree from Hastings College of Law. He
is a Certified Public Accountant, and a member of the State Bar of California,
Financial Executives Institute, Urban Land Institute, NAREIT and Bay Area
Mortgage Association.

John H. Diserens is a Managing Director and head of the Retail Division of
the Company and is a member of the Investment Committee. He has over 20 years of
experience in asset and property management for institutional investors. In his
eight years at AMB, he has been responsible for the asset management of all
properties, including over 40 community shopping centers. Prior to joining AMB,
Mr. Diserens was a Vice President and a divisional manager with Property
Management Systems, one of the nation's largest asset and property management
firms, responsible for a diversified portfolio in excess of 10 million square
feet. Mr. Diserens holds a bachelor's degree in economics and accounting from
Macquarie University of Sydney, Australia, and has completed the Executive
Program at the Graduate School of Business of Stanford University. He is a
member of the International Council of Shopping Centers, Association of Foreign
Investors in U.S. Real Estate, National Association of Real Estate Investment
Managers ("NAREIM"), Institute of Real Estate Management, and is on the board of
NAREIM.

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Bruce H. Freedman is a Managing Director and co-head of the Industrial
Division of the Company and is a member of the Investment Committee. He joined
AMB in 1995 and has over 27 years of experience in real estate finance and
investment. Before joining the Company, he served as a Principal and President
of Allmerica Realty Advisors from 1993 to 1995 and as Principal for Aldrich,
Eastman & Waltch (AEW) from 1986 to 1992. At Allmerica, he was responsible for
business operation and management of a $250 million equity real estate
portfolio, and at AEW he managed a team of 20 people which invested, managed and
accounted for over $1 billion of institutional client assets. Mr. Freedman is a
cum laude graduate of Babson College. He is a member of the Urban Land
Institute, Real Estate Finance Association and NAREIM, and holds the CRE
designation from the American Society of Real Estate Counselors.

Jean Collier Hurley is a Managing Director responsible for Investor
Relations and Corporate Communications. Prior to joining AMB in 1990, Ms. Hurley
was a Vice President with Crocker National Bank where she provided financing for
major national and international corporations. Ms. Hurley holds a bachelor's
degree in business management and a master of science in marketing and design
from San Diego State University, and holds an M.B.A. degree in Finance from the
University of California at Berkeley, Graduate School of Business. Ms. Hurley
serves on the Editorial Board of the Pension Real Estate Association Quarterly,
and is a member of NAREIT and the National Investor Relations Institute.

Craig A. Severance is a Managing Director and a member of the Investment
Committee, and is responsible for property acquisitions and information
technology. He has managed the screening of all property submissions and has
developed the Company's proprietary property submissions database. Before
joining AMB in 1986, he was a Vice President with the investment real estate
group at Bank of America, where he represented domestic and foreign
institutional investors in major commercial property acquisitions. Mr. Severance
has a bachelor's degree in economics from Middlebury College, and holds an
M.B.A. degree from the Graduate School of Business at Stanford University. He is
a member of the International Council of Shopping Centers.

COMMITTEES OF THE BOARD OF DIRECTORS

Audit Committee. The Audit Committee consists of two Independent Directors,
Ms. Welborn, the Chairman, and Mr. Edelstein. The Audit Committee makes
recommendations concerning the engagement of independent public accountants,
review with the independent public accountants the plans and results of the
audit engagement, approves professional services provided by the independent
public accountants, reviews the independence of the independent public
accountants, considers the range of audit and non-audit fees and reviews the
adequacy of the Company's internal accounting controls.

Executive Committee. The Executive Committee consists of Mr. Case, the
Chairman, Messrs. Skelton, Moghadam and Burke and Ms. Sedway. The Executive
Committee has the authority within certain parameters to acquire, dispose of and
finance investments for the Company (including the issuance by the Operating
Partnership of additional Units or other equity interests) and approve the
execution of contracts and agreements, including those related to the borrowing
of money by the Company, and generally exercises all other powers of the Board
of Directors except as prohibited by law.

Compensation Committee. The Compensation Committee consists of three
Independent Directors, Mr. Tusher, the Chairman, Mr. Skelton and Ms. Sedway. The
Compensation Committee determines compensation for the Company's executive
officers, and reviews and makes recommendations concerning proposals by
management with respect to compensation, bonus, employment agreements and other
benefits and policies respecting such matters for the executive officers of the
Company.

The Board of Directors does not have a nominating committee; rather, the
entire Board of Directors performs the function of such a committee.

COMPENSATION OF THE BOARD OF DIRECTORS

In lieu of cash compensation, each Independent Director receives, upon
initial election to the Board of Directors and upon each election thereafter,
options to purchase Common Stock, at an exercise price equal to

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the fair market value at the date of grant (in the case of options granted upon
consummation of the IPO, at the price to the public in the IPO). All of such
options will vest immediately upon grant. The initial grant of such options upon
initial election will cover 20,000 shares of Common Stock, and each subsequent
grant will cover 15,000 shares of Common Stock for each Independent Director.
The initial grant for each Independent Director appointed to serve immediately
following the consummation of the IPO covered 26,250 shares of Common Stock
representing the grant to each Independent Director with respect to their
initial election to the Board of Directors (expected to occur in 1998) plus an
additional grant of options to purchase 6,250 shares of Common Stock with
respect to the period from the date of the IPO through the date of their initial
election, but such Independent Directors will not be granted options upon
re-election in 1998. In addition, Independent Directors are paid $1,250 for each
meeting in excess of six meetings of the Board of Directors attended during each
annual term and are reimbursed for reasonable expenses incurred to attend
director and committee meetings. Officers of the Company who are directors are
not paid any compensation in respect of their service as directors.

EXECUTIVE COMPENSATION

The following table sets forth the estimated annual base salaries and other
compensation paid for the period of November 26, 1997 through December 31, 1997
to the Chief Executive Officer and certain of the Company's other executive
officers who, on an annualized basis, have a total annual salary and bonus in
excess of $100,000 (collectively, the "Named Executive Officers"). The Company
has entered into employment agreements with each of its executive officers as
described below. See "Employment Agreements."

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------------
ANNUAL COMPENSATION SECURITIES
------------------------------------------- UNDERLYING
OTHER ANNUAL RESTRICTED OPTIONS
1997 SALARY 1997 COMPENSATION STOCK GRANTED IN STOCK BONUS
NAME AND PRINCIPAL POSITION ($)(1) BONUS($)(2) ($) AWARD(S)(2) 1997(#)(4) (#)(2)
--------------------------- -------------- ----------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
T. Robert Burke
Chairman of the Board.............. 16,645 0 2,800 0 225,000 0
Hamid R. Moghadam
President and Chief Executive
Officer............................ 40,362 0 (3) 0 500,000 0
Douglas D. Abbey
Chairman of Investment Committee... 21,389 0 2,800 0 250,000 0
S. Davis Carniglia
Chief Financial Officer and General
Counsel............................ 21,389 0 2,800 0 130,000 0
Craig A. Severance
Managing Director, Acquisitions.... 21,389 0 2,800 0 130,000 0
John H. Diserens
Managing Director, Retail
Division........................... 21,389 0 2,800 0 130,000 0
</TABLE>

- ---------------
(1) Represents the actual amount of compensation paid from November 26, 1997
through December 31, 1997.

(2) The amount of any such bonus has been determined by the Compensation
Committee of the Board of Directors. Pursuant to the executive's employment
agreement, at the executive's option such executive may receive restricted
shares of common stock, or options to purchase common stock, in lieu of any
cash bonus, the number of such shares or options to be determined as set
forth in such employee's employment agreement. See "-- Employment
Agreements."

(3) The aggregate amount of the perquisites and other personal benefits,
securities or property for Mr. Moghadam is less than the lesser of either
$50,000 or 10% of his total salary and bonus paid in 1997.

(4) Options to purchase an aggregate of 3,111,250 shares of Common Stock (net of
forfeitures) have been granted to directors, executive officers and other
employees of the Company as of December 31, 1997. Such options vest pro rata
in annual installments over a four-year period. An additional 2,638,750
shares of Common Stock are reserved for issuance under the Stock Incentive
Plan.

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OPTION GRANTS IN LAST FISCAL YEAR

The following table shows certain information relating to options to
purchase shares of Common Stock granted to the Named Executive Officers during
1997.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE VALUE
---------------------------------------------- AT ASSUMED ANNUAL RATES
PERCENT OF OF COMMON SHARE
NUMBER OF SHARES OF TOTAL OPTIONS PRICE APPRECIATION FOR
COMMON STOCK GRANTED TO OPTION TERM(2)(000S)
UNDERLYING OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -------------------------------
NAME GRANTED(#) FISCAL YEAR(3) PRICE PER SHARE DATE 5% 10%
---- ------------------- --------------- --------------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
T. Robert Burke...... 225,000 7.2% $21.00 11/25/07 $2,972 $ 7,531
Hamid R. Moghadam.... 500,000 16.0% 21.00 11/25/07 6,605 16,735
Douglas D. Abbey..... 250,000 8.0% 21.00 11/25/07 3,303 8,368
S. Davis Carniglia... 130,000 4.2% 21.00 11/25/07 1,717 4,351
Craig A. Severance... 130,000 4.2% 21.00 11/25/07 1,717 4,351
John H. Diserens..... 130,000 4.2% 21.00 11/25/07 1,717 4,351
</TABLE>

- ---------------
(1) All options granted in 1997 become exercisable in four equal installments
(rounded to the nearest whole share of Common Stock) beginning on the first
anniversary of the date of grant and have a term of not more than ten years.
The option exercise price is equal to the fair market value of the Common
Stock on the date of grant.

(2) In accordance with the rules of the SEC, these amounts are the hypothetical
gains or "option spreads" that would exist for the respective options based
on assumed rates or 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 Stock,
which would benefit all stockholders.

(3) The total number of shares of Common Stock underlying such options used in
such calculation are net of forfeitures.

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

The following table sets forth certain information concerning exercised and
unexercised options held by the Named Executive Officers at December 31, 1997.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997
SHARES ACQUIRED ON VALUE --------------------------- ------------------------------
NAME EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(1)
---- ------------------ ----------- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
T. Robert Burke....... N/A N/A 0 225,000 0 $ 928,125
Hamid R. Moghadam..... N/A N/A 0 500,000 0 2,062,500
Douglas D. Abbey...... N/A N/A 0 250,000 0 1,031,250
S. Davis Carniglia.... N/A N/A 0 130,000 0 536,250
Craig A. Severance.... N/A N/A 0 130,000 0 536,250
John H. Diserens...... N/A N/A 0 130,000 0 536,250
</TABLE>

- ---------------
(1) Based on a price per share of Common Stock of $25.125, the last reported
sales price per share on the New York Stock Exchange on December 31, 1997.

EMPLOYMENT AGREEMENTS

Each of the executive officers has entered into an employment agreement
with the Company pursuant to which each has agreed to devote their entire
business time to the Company. The employment agreements have an initial term of
one year (three years in the case of Mr. Moghadam) and are subject to automatic
one-year extensions following the expiration of the initial term. The employment
agreements provide for annual base compensation (in the amounts set forth in the
Executive Compensation table with respect to the Named Executive Officers
identified therein) with the amount of any bonus to be determined by the
Compensation Committee, based on certain performance targets, up to 150% of the
applicable annual base compensation in the case of Messrs. Burke, Abbey and
Moghadam, and 100% of the applicable annual base compensation in the case of
Messrs. Carniglia, Diserens and Severance. The executive officers have the right
to elect to receive restricted stock or stock options in lieu of their bonus.
The number of shares of restricted stock to be so issued will equal 125% of the
amount of the bonus, divided by the then current market price of the stock. The

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number of options to purchase shares of Common Stock so granted will be
determined based on 150% of the amount of the bonus and the current market price
of the Common Stock, using option-pricing methodology adopted by the
Compensation Committee. Such restricted stock and options to purchase Common
Stock will vest ratably over a three-year period. The employment agreements also
provide that the executive will receive certain insurance benefits and be able
to participate in the Company's employee benefit plans, including the Stock
Incentive Plan (as defined below), and that, in the event of the executive's
death, the executive's estate will receive certain compensation payments. The
executive also is entitled to receive severance during the term of the
employment agreement and for one year thereafter in the event of a termination
of the executive's employment resulting from a disability, by the Company
without "cause" or by the executive for "good reason." "Cause" means (i) gross
negligence or willful misconduct, (ii) an uncured breach of any of the
employee's material duties under the employment agreement, (iii) fraud or other
conduct against the material best interests of the Company or (iv) a conviction
of a felony if such conviction has a material adverse effect on the Company.
"Good reason" means (a) a substantial adverse change in the nature or scope of
the employee's responsibilities and authority under the employment agreement or
(b) an uncured breach by the Company of any of its material obligations under
the employment agreement. Severance benefits include base compensation at the
amounts provided in the employment agreement and bonus based on the most recent
amount paid, as well as certain continuing insurance and other benefits.

Such employment agreements also contain a non-competition agreement
pursuant to which each executive agrees that he or she will not engage in any
activities, directly or indirectly, in respect of commercial real estate, and
will not make any investment in respect of industrial or retail real estate,
other than through ownership of not more than 5% of the outstanding shares of a
public company engaged in such activities and through existing investments as
described under the caption "Certain Relationships and Related Transactions."
Such restrictions apply during the term of the employment agreements and for a
one-year period thereafter.

STOCK INCENTIVE PLAN

The Company's Stock Incentive Plan was adopted by the Board of Directors
and approved by the stockholders to enable executive officers, key employees and
directors of the Company, the Operating Partnership and AMB Investment
Management to participate in the ownership of the Company. The Stock Incentive
Plan is designed to attract and retain executive officers, other key employees
and directors of the Company, the Operating Partnership and AMB Investment
Management, and to provide incentives to such persons to maximize the Company's
performance and its cash flow available for distribution. The Stock Incentive
Plan covers an aggregate of 5,750,000 shares of Common Stock and will expire in
2007.

The Stock Incentive Plan provides that each executive officer and director
and certain key employees are eligible to receive awards (subject to certain
ownership limits, or such other limit as provided in the Charter or as otherwise
permitted by the Board) of a broad variety of stock-based compensation
alternatives such as non-qualified stock options, incentive stock options,
restricted stock and stock appreciation rights, and provides for the grant to
Independent Directors and directors of AMB Investment Management of
non-qualified stock options. Options to purchase 3,111,250 shares of Common
Stock have been granted and 2,638,750 additional shares of Common Stock have
been reserved for issuance under the Stock Incentive Plan.

401(k) PLAN

Effective November 26, 1997, the Company established its Section 401(k)
Savings/Retirement Plan (the "401(k) Plan") to cover eligible employees of the
Company and any designated affiliate. The 401(k) Plan permits eligible employees
of the Company to defer up to 10% of their annual compensation, subject to
certain limitations imposed by the Code. The employees' elective deferrals are
immediately vested and non-forfeitable upon contributions to the 401(k) Plan.
The Company currently makes matching contributions to the 401(k) Plan in an
amount equal to 50% of the first 3.5% of annual compensation deferred by each
employee; however, it has reserved the right to make greater matching
contributions or discretionary profit sharing contributions in the future.
Participants vest immediately in the matching contributions by the Company.
Discretionary contributions are subject to three-year vesting whereby 100% vests
after the third
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year. Employees of the Company are eligible to participate in the 401(k) Plan if
they meet certain requirements concerning minimum period of credited service.
The Company's contribution to the 401(k) Plan for the period ended December 31,
1997 was $144,971. The 401(k) Plan qualifies under Section 401 of the Code so
that contributions by employees to the 401(k) Plan, and income earned on plan
contributions, are not taxable to employees until withdrawn from the 401(k)
Plan.

LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY

The Company's officers and directors are indemnified under Maryland law,
its Articles of Incorporation and the Partnership Agreement against certain
liabilities. The Articles of Incorporation and Bylaws require the Company to
indemnify its directors and officers to the fullest extent permitted from time
to time by the MGCL.

INDEMNIFICATION AGREEMENTS

The Company has entered into indemnification agreements with each of its
executive officers and directors. The indemnification agreements require, among
other matters, that the Company indemnify its executive officers and directors
to the fullest extent permitted by law and reimburse the executive officers and
directors for all related expenses as incurred, subject to return if it is
subsequently determined that indemnification is not permitted. Under the
agreements, the Company must also indemnify and reimburse all expenses as
incurred by executive officers and directors seeking to enforce their rights
under the indemnification agreements and may cover executive officers and
directors under the Company's directors' and officers' liability insurance.
Although the form of indemnification agreement offers substantially the same
scope of coverage afforded by law, it provides greater assurance to directors
and executive officers that indemnification will be available, because, as a
contract, it cannot be modified unilaterally in the future by the Board of
Directors or the stockholders to eliminate the rights it provides.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has engaged in the following transactions and relationships
with certain of its executive officers, directors and persons who hold more than
5% of the outstanding shares of Common Stock.

FORMATION TRANSACTIONS

In connection with the Formation Transactions, CIF, VAF and the Company's
predecessor, AMB, effected a series of mergers pursuant to which such entities
merged into the Company with the institutional stockholders of CIF and VAF and
the Company's executive officers (the former stockholders of AMB), receiving an
aggregate of 4,746,624 shares of Common Stock, with a total value at the time of
the IPO of $99.7 million, and the right to receive in the Company's second year
of operation up to 4,241,803 limited partnership Units (the "Performance
Units"). The issuance of such Units is dependent upon the future trading price
of and dividends on the shares of Common Stock. See "Description of Certain
Provisions of the Partnership Agreement of the Operating
Partnership -- Performance Units." In addition, such executive officers received
the right to receive certain investment management fees earned by AMB Investment
Management, subject to certain limitations. During the year ended December 31,
1997, no payments were made to the Company's executive officers in respect of
the right to receive such investment management fees.

In addition, certain Individual Account Investors, former investment
management clients of AMB including Ameritech Pension Trust, City and County of
San Francisco Employees' Retirement System and Southern Company System Master
Retirement Trust, contributed certain real property interests to the Company. In
exchange for such contribution of properties, Ameritech Pension Trust, City and
County of San Francisco Employees' Retirement System and Southern Company System
Master Retirement Trust received 12,441,580 shares of Common Stock, 6,772,640
shares of Common Stock and 8,032,415 shares of Common Stock, respectively, with
a total value at the time of the IPO of $626.7 million. See "Principal
Stockholders."

In connection with consummation of the Formation Transactions, the Company
assumed the $4.0 million revolving credit facility of AMB, of which
approximately $1.1 million was outstanding upon completion of the Formation
Transactions, relieving three of the Company's executive officers, Messrs.
Abbey, Moghadam and Burke, of their respective obligations with respect to the
partial guaranty of such indebtedness. The proceeds of such indebtedness were
used by AMB to acquire certain assets historically used in AMB's operations from
AMB Investment, Inc. ("AMBI"), an entity owned equally by Messrs. Abbey,
Moghadam and Burke. The Company also assumed a $791,925 note payable of AMBI to
WPF as consideration for the transfer to the Company of AMBI's general partner
interest in WPF (which the Company believed had a value equal to or greater than
the face amount of such note at the time such note payable was assumed).

OTHER RELATED TRANSACTIONS

During 1990, 1991, 1994, 1995 and 1996, Craig A. Severance, John H.
Diserens, S. Davis Carniglia, Jean C. Hurley and Bruce H. Freedman issued notes
to AMB in consideration of the acquisition of shares of AMB common stock in the
principal amounts of $189,472, $243,866, $132,237, $342,806 and $307,071,
respectively. The notes bore interest at an annual rate of prime plus 1.0%. The
principal amount of the notes and accrued interest thereon were repaid in full
by all stockholders prior to the IPO.

In January 1993, AMBI, AMB, AMB Corporate Real Estate Advisors, Inc.
("AMBCREA"), AMB Development L.P., AMB Development, Inc. and AMB Institutional
Housing Partners entered into an agreement for the purpose of the parties
thereto to work together to accomplish separate business purposes while sharing
certain support and other resources. Under the Intercompany Agreement, each
party to the agreement (each, an "AMB Intercompany Party") is permitted to use
the term "AMB" as a part of its name. Each AMB Intercompany Party also agreed,
among other things, to do business in a specified aspect of real estate and
finance; to use its best efforts to refer business opportunities outside of its
own line of business to other AMB Intercompany Parties; to provide intercompany
loans; and to utilize personnel of another AMB Intercompany Party for a fee. In
addition, under the Intercompany Agreement, AMBI agreed to: (i) provide common
business services, resources and support, including employees, benefits,
services contracts and financial management and reporting to each AMB
Intercompany Party; (ii) purchase all fixed assets and rent
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<PAGE> 84

them to the AMB Intercompany Parties for a fee; (iii) act as lessee for office
space for each AMB Intercompany Party; (iv) employ all employees of each AMB
Intercompany Party, fix such employees' salaries, bonuses and benefits, and
charge such costs to the appropriate AMB Intercompany Party; and (v) pay for the
direct and indirect costs of operation of each AMB Intercompany Party and charge
each AMB Intercompany Party its allocated share. The total amount paid to AMBI
by AMB during the years ended December 31, 1994, 1995, 1996 and 1997 was
$9,940,762, $13,564,178, $16,842,615 and $18,159,000, respectively, which
equaled the expenses incurred by AMBI allocable to AMB for each such year.

As part of the Formation Transactions, the Company acquired AMBI's assets
(other than its leasehold interest for office space and certain office
equipment) and employed the employees utilized in its business, and all other
AMBI employees were transferred to AMBCREA. Accordingly, upon consummation of
the IPO, the Intercompany Agreement was modified so that it applies only to the
office space and certain office equipment leased by AMBI, which is used by the
Company, the Operating Partnership and AMB Investment Management, respectively,
for fees equal to an allocation of AMBI's cost thereof. AMBCREA, AMB
Institutional Housing Partners, AMB Development, Inc. and AMB Development L.P.
are continuing to use the name "AMB" pursuant to royalty-free license
arrangements with the Company. In addition, AMBCREA, which is in the process of
winding down operations, continues to use office space leased by AMBI for a fee
equal to its allocated cost, and the Company provides certain administrative
services to AMBCREA for arm's-length charges. It is presently anticipated that
AMBCREA will cease operations during the first six months of 1998. See
"-- Conflicts of Interest."

CONFLICTS OF INTEREST

The executive officers and directors of the Company may be subject to a
number of conflicts of interest. Such potential conflicts, and the Company's
proposed methods of dealing with them, are described below. See also "Policies
with Respect to Certain Activities -- Conflict of Interest Policies."

Stockholders of AMB who became executive officers of the Company upon
consumation of the IPO own interests in certain real estate-related businesses
and investments. Such interests include minority ownership of Institutional
Housing Partners, a residential housing finance company (through AMB
Institutional Housing Partners); and ownership of AMB Development, Inc. and AMB
Development L.P., developers which own property that management believes is not
suitable for ownership by the Company. Neither AMB Development, Inc. nor AMB
Development L.P. will initiate any new development projects, nor will they make
any further investments in industrial or retail properties other than those
under development at November 26, 1997. Such persons are also owners of AMBCREA
which is principally a real estate services company for corporate and
professional tenants of real estate. AMBCREA is in the process of winding down
its business, and it is anticipated that AMBCREA will cease operations during
the first six months of 1998. However, the continued involvement by the
Company's executive officers and directors could divert management's attention
from the day-to-day operations of the Company. Each of the executive officers
has entered into a non-competition agreement with the Company pursuant to which,
among other things, they agreed not to engage in any activities, directly or
indirectly, in respect of commercial real estate, and agreed not make any
investment in respect of industrial or retail real estate, other than through
ownership of not more than 5% of the outstanding shares of a public company
engaged in such activities or through the existing investments referred to
herein.

AMB Development L.P. owns interests in 11 retail development projects in
the U.S., each of which consists of a single free-standing Walgreens drugstore,
and, together with other entities controlled by nine of the executive officers,
a low income housing apartment building located in the San Francisco Bay Area.
In addition, Messrs. Abbey, Moghadam and Burke, each a founder, executive
officer and director of the Company, own less than 1% interests in two
partnerships which own office buildings in various markets; these interests have
negligible value. Luis A. Belmonte, an executive officer of the Company, owns
less than a 10% interest, representing an estimated value of $75,000, in a
limited partnership which owns an office building located in Oakland,
California.

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<PAGE> 85

In addition, several of the executive officers individually own: (i) less
than 1% interests in the stocks of certain publicly-traded REITs, including
mortgage REITs, and residential developers; (ii) certain interests in and rights
to developed and undeveloped real property located outside the United States;
(iii) interests in single-family homes and residential apartments in the San
Francisco Bay Area; (iv) certain passive interests, not believed to be material,
in real estate businesses in which such persons were previously employed; and
(v) certain other de minimis holdings in equity securities. Thomas W. Tusher, a
member of the Company's Board of Directors, is a limited partner in a
partnership in which Messrs. Abbey, Moghadam and Burke are general partners and
which owns a 75% interest in an office building. Mr. Tusher owns a 20% interest
in the partnership, valued at approximately $939,000. Messrs. Abbey, Moghadam
and Burke each have an approximately 26.7% interest in the partnership, each
valued at approximately $1,252,000.

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<PAGE> 86

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of shares of Common Stock as of December 31, 1997 by (i) each
director, (ii) each Named Executive Officer, (iii) all directors and executive
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 shares of Common Stock. Except
as indicated below, all of such shares of Common Stock are owned directly, and
the indicated person or entity has sole voting and investment power. As of
December 31, 1997, none of the Company's executive officers and directors or its
5% stockholders owned any Units of the Operating Partnership.

<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING SHARES
NUMBER OF SHARES OF OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) STOCK(2)
--------------------------------------- --------------------- ------------------
<S> <C> <C>
T. Robert Burke.................................. 877,289 1.0%
Hamid R. Moghadam................................ 1,396,477 1.6%
Douglas D. Abbey................................. 1,125,245 1.3%
S. Davis Carniglia............................... 224,377 *
Craig A. Severance............................... 327,964 *
John H. Diserens................................. 284,182 *
Daniel H. Case, III.............................. 0 0
Robert H. Edelstein, Ph.D........................ 952 *
Lynn M. Sedway................................... 3,152 *
Jeffrey L. Skelton, Ph.D......................... 952 *
Thomas W. Tusher................................. 25,952 *
Caryl B. Welborn................................. 7,952 *
Ameritech Pension Trust(3)....................... 12,441,580 14.5%
City and County of San Francisco Employees'
Retirement System(4)........................... 6,722,640 7.8%
Southern Company System Master Retirement
Trust(5)....................................... 8,032,415 9.4%
All directors and Named Executive Officers as a
group (12 persons)............................. 4,274,494 5.0%
</TABLE>

- ---------------
* Represents less than 1.0% of outstanding shares of Common Stock.

(1) Unless otherwise indicated, the address for each of the persons listed is
c/o AMB Property Corporation, 505 Montgomery Street, San Francisco,
California 94111.

(2) Excludes (i) options to purchase 1,522,500 shares of Common Stock granted to
Named Executive Officers and directors on November 26, 1997 and (ii)
3,781,459 Performance Units which are not exercisable or were not earned
within 60 days of the date of this Prospectus. See "Description of Certain
Provisions of the Partnership Agreement of the Operating
Partnership -- Performance Units."

(3) Reflects shares held by State Street Bank and Trust Company, as trustee, the
voting and investment power with respect to which are held by Ameritech
Pension Trust. The address of Ameritech Pension Trust for this purpose is
225 W. Randolph, HQ13A, Chicago, Illinois 60606, Attn.: Director-Real
Estate.

(4) The address of the City and County of San Francisco Employees' Retirement
System is 1155 Market Street, San Francisco, California 94103.

(5) The address of Southern Company System Master Retirement Trust is 64
Perimeter Center East, Atlanta, Georgia 06831.

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<PAGE> 87

DESCRIPTION OF NOTES

The Notes will be direct senior unsecured obligations of the Operating
Partnership unconditionally guaranteed on an unsecured basis by the Guarantors.
The 2008 Notes, the 2018 Notes and the REPS each constitute a separate series of
notes and will be issued under an indenture (the "Indenture") among the
Operating Partnership, the Guarantors and , as Trustee (the
"Trustee"). The Indenture, as amended or supplemented from time to time, will be
subject to and governed by the Trust Indenture Act of 1939, as amended (the
"TIA"). The statements made under this heading relating to the Notes and the
Indenture are summaries of certain anticipated provisions thereof, do not
purport to be complete and are qualified in their entirety by reference to the
forms of Indenture and the Notes, which have been or will be included or
incorporated by reference to exhibits to the Registration Statement of which
this Prospectus is a part and are or will be available as described above under
"Available Information."

Capitalized terms used herein and not defined shall have the meanings
assigned to them in the Indenture. As used in this "Description of Notes," all
references to the "Operating Partnership" shall mean AMB Property, L.P.,
excluding, unless otherwise expressly stated or the context shall otherwise
require, its subsidiaries.

GENERAL

The 2008 Notes will be limited in aggregate principal amount to
$ , the 2018 Notes will be limited in aggregate principal amount to
$ and the REPS will be limited in aggregate principal amount to
$ . The Notes will be unsecured and unsubordinated obligations of the
Operating Partnership and will rank on a parity in right of payment with all
other unsecured and unsubordinated indebtedness of the Operating Partnership
outstanding from time to time.

The Indenture will not contain any provision that would limit the ability
of the Operating Partnership to incur indebtedness or that will afford Holders
of Notes protection in a highly leveraged or similar action involving the
Operating Partnership or in the event of a change of control of the Operating
Partnership, including a change in control of the Company, except as hereinafter
set forth under the captions "Certain Covenants -- Aggregate Debt Test,"
"-- Maintenance of Total Unencumbered Assets," "-- Debt Service Test" and
"-- Secured Debt Test." However, certain restrictions on ownership and transfers
of the Company's Common Stock and the Company's other equity securities designed
to preserve its status as a REIT may act to prevent or hinder a change of
control.

Although the Operating Partnership owns a majority of its consolidated
assets itself, rather than through subsidiaries, a substantial portion of its
consolidated assets (amounting to approximately 27.3% of its total consolidated
assets at December 31, 1997) are held by AMB Property II, L.P., Long Gate LLC
and other subsidiaries. Accordingly, the cash flow of the Operating Partnership
and the consequent ability to service its debt, including the Notes, are
partially dependent on the earnings of such subsidiaries and the Notes will be
effectively subordinated to all existing and future indebtedness, guarantees and
other liabilities of such subsidiaries. On a pro forma basis as of December 31,
1997, after giving effect to the offering of the Notes made hereby and the
application of the estimated net proceeds therefrom as if such transactions had
occurred on that date, the Operating Partnership's subsidiaries (including AMB
Property II, L.P. and Long Gate LLC) would have had total long-term liabilities
(excluding intercompany liabilities) of approximately $92.9 million (consisting
entirely of mortgage and secured indebtedness). See "Business and
Properties -- Debt Financing -- Secured and Mortgage Debt."

The Notes will be effectively subordinated to any secured indebtedness of
the Operating Partnership and its subsidiaries to the extent of any collateral
pledged as security therefor. As of December 31, 1997, after giving effect to
the offering of the Notes made hereby and the application of the estimated net
proceeds therefrom as if such transaction had occurred on that date, the
Operating Partnership (excluding its subsidiaries) would have had unsecured
senior indebtedness (including the Notes) aggregating approximately $350.0
million and mortgage and other secured indebtedness aggregating approximately
$491.4 million. See "Use of Proceeds," "Risk Factors -- Ranking of the Notes"
and "-- Debt Financing" and "Capitalization." Although the covenants described
herein under the caption "-- Certain Covenants" will
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<PAGE> 88

impose certain limitations on the incurrence of additional indebtedness, the
Operating Partnership and its Subsidiaries will retain the ability to incur
substantial additional secured and unsecured indebtedness in the future.

DENOMINATIONS, MATURITY, INTEREST, REGISTRATION AND TRANSFER

2008 Notes and 2018 Notes

The 2008 Notes and the 2018 Notes will be issued only in fully registered
book-entry form without coupons, in denominations of $1,000 and integral
multiples thereof. The 2008 Notes will mature on , 2008 (the
"2008 Maturity Date") and the 2018 Notes will mature on , 2018
(the "2018 Maturity Date").

The 2008 Notes and the 2018 Notes may be redeemed, in whole or in part, at
the option of the Operating Partnership at any time. See "-- Redemption of the
2008 Notes and the 2018 Notes at the Option of the Operating Partnership." The
2008 Notes and the 2018 Notes are not subject to any sinking fund provisions.

Interest on the 2008 Notes will accrue at a rate of % per annum and
interest on the 2018 Notes will accrue at a rate of % per annum and, in
each case, will be payable semi-annually on and
commencing , 1998. Interest will accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from the date
of original issuance. Interest will be computed on the basis of a 360-day year
of twelve 30-day months. Principal of (and premium, if any) and interest on the
2008 Notes and the 2018 Notes will be payable at the office or agency maintained
by the Operating Partnership for such purpose within the City and State of New
York; or at the option of the Operating Partnership, payment of interest may be
made by check mailed to the address of the Person entitled thereto as it appears
in the Note Register or by transfer of funds to such Person at an account
maintained within the United States. (See Sections 301, 302, 305, 306, 307 and
1002 of the form of Indenture.)

The REPS

The REPS will be issued only in fully registered book-entry form without
coupons, in denominations of $1,000 and integral multiples thereof. The REPS
will mature on , 2015 (the "Final REPS Maturity Date" and
together with the 2008 Maturity Date and the 2018 Maturity Date, the "Maturity
Dates"). However, holders of the REPS will be entitled to receive 100% of the
principal amount thereof on the Coupon Reset Date (as defined below) from either
(i) the Callholder, if the Callholder purchases the REPS pursuant to the Call
Option, or (ii) the Operating Partnership, by exercise of the Mandatory Put (as
defined below) by the Trustee for and on behalf of the holders of the REPS, if
the Callholder does not purchase the REPS pursuant to the Call Option. See
"-- Call Option and Mandatory Put with Respect to the REPS" below.

For persons holding the REPS (or an interest therein) on the Coupon Reset
Date, the effect of the operation of the Call Option or the Mandatory Put will
be that such holders will be entitled to receive, and will be required to
accept, 100% of the principal amount of such REPS (plus accrued interest) on the
Coupon Reset Date in satisfaction of the Operating Partnership's obligations to
the holders of the REPS. Interest accrued to but excluding the Coupon Reset Date
will be paid by the Operating Partnership on such date to the holders of the
REPS on the most recent Record Date. The REPS may be redeemed only in connection
with a Call Option or a Mandatory Put. See "-- Call Option and Mandatory Put
with Respect to the REPS". The REPS are not subject to any sinking fund
provisions.

Interest on the REPS will accrue at the rate of % from and including
to but excluding , 2005 (the "Coupon Reset Date") and
will be payable semi-annually on and , commencing
, 1998. Interest will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. Principal of (and premium, if any) and interest on the
REPS will be payable at the office or agency maintained by the Operating
Partnership for such purpose within the City and State of New York; or at the
option of the Operating Partnership, payment of

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<PAGE> 89

interest may be made by check mailed to the address of the Person entitled
thereto as it appears in the Note Register or by transfer of funds to such
Person at an account maintained within the United States. (See Sections 301,
302, 305, 306, 307 and 1002 of the form of Indenture.)

If the Callholder (as defined below) elects to purchase the REPS pursuant
to the Call Option (as defined below), the Calculation Agent (as defined below)
will reset the interest rate for the REPS effective on the Coupon Reset Date,
pursuant to the Coupon Reset Process described below. In such circumstance, (i)
the REPS will be purchased by the Callholder at 100% of the principal amount
thereof on the Coupon Reset Date, on the terms and subject to the conditions
described herein (interest accrued to but excluding the Coupon Reset Date will
be paid by the Operating Partnership on such date to the holders of the REPS on
the most recent Record Date), and (ii) from and including the Coupon Reset Date,
the REPS will bear interest at the rate determined by the Calculation Agent in
accordance with the procedure set forth under "-- Coupon Reset Process if REPS
are Called" below. The Trustee will exercise the Mandatory Put without the
consent of, or notice to, the holders of the REPS.

Neither the Operating Partnership nor the Trustee will be required (i) to
issue, register the transfer of or exchange Notes if such Notes may be among
those selected for redemption during a period beginning at the opening of
business 15 days before selection of Notes to be redeemed and ending at the
close of business on the day of the mailing of the relevant notice of
redemption; or (ii) to register the transfer of or exchange any Note, or portion
thereof, called for redemption, except the unredeemed portion of any Note being
redeemed in part. (See Section 305 of the form of Indenture.)

GUARANTEES

The Operating Partnership's obligations under the Notes will be jointly and
severally guaranteed (each, a "Guarantee" and collectively, the "Guarantees") by
the Company, AMB Property II, L.P., Long Gate LLC and each other Subsidiary of
the Operating Partnership that guarantees the Operating Partnership's
obligations under any Credit Agreement (each a "Guarantor" and collectively, the
"Guarantors"). The obligations of each Guarantor under its Guarantee will be
limited to the maximum amount permitted under applicable federal or state law.
For the purposes hereof, "Credit Agreement" shall mean the Credit Facility or
any similar revolving credit agreement entered into from time to time by the
Operating Partnership.

The Indenture will provide that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving person) another
corporation, person or entity whether or not affiliated with such Guarantor
unless (i) the person formed by or surviving any such consolidation or merger
(if other than such Guarantor) shall be a corporation, partnership, limited
liability company or other legal entity organized and existing under the laws of
the United States of America, any state thereof or the District of Columbia and
shall expressly assume all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee under the Notes and the Indenture, (ii) immediately after giving effect
to such transaction, no Default or Event of Default would exist and (iii) an
officers' certificate and legal opinion concerning such conditions shall be
delivered to the Trustee.

REDEMPTION OF THE 2008 NOTES AND THE 2018 NOTES AT THE OPTION OF THE OPERATING
PARTNERSHIP

The 2008 Notes and the 2018 Notes will be redeemable, in whole or from time
to time in part, at the option of the Operating Partnership on any date (a
"Redemption Date"), at a redemption price equal to the greater of (i) 100% of
the principal amount of the 2008 Notes and the 2018 Notes to be redeemed and
(ii) the sum of the present values of the remaining scheduled payments of
principal and interest thereon (exclusive of interest accrued to such Redemption
Date) discounted to such Redemption Date on a semiannual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate plus
basis points, plus, in either case, accrued and unpaid interest
on the principal amount being redeemed to such Redemption Date; provided that
installments of interest on 2008 Notes and the 2018 Notes which are due and
payable on an Interest Payment Date falling on or prior to the relevant
Redemption Date shall be payable to the holders of such of the 2008 Notes and
the 2018 Notes registered as such at the close of business on the relevant
record date according to their terms and the provisions of the Indenture.

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<PAGE> 90

"Treasury Rate" means, with respect to any Redemption Date, (i) the yield,
under the heading which represents the average for the immediately preceding
week, appearing in the most recently published statistical release designated
"H.15(519)" or any successor publication which is published weekly by the Board
of Governors of the Federal Reserve System and which establishes yields on
actively traded United States Treasury securities adjusted to constant maturity
under the caption "Treasury Constant Maturities," for the maturity corresponding
to the Comparable Treasury Issue (if no maturity is within three months before
or after the applicable Maturity Date, yields for the two published maturities
most closely corresponding to the Comparable Treasury Issue shall be determined
and the Treasury Rate shall be interpolated or extrapolated from such yields on
a straight line basis, rounding to the nearest month) or (ii) if such release
(or any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date. The Treasury Rate shall be calculated on the third
business day preceding the Redemption Date.

"Comparable Treasury Issue" means the United States Treasury security
selected by the Independent Investment Banker as having a maturity comparable to
the remaining term of the 2008 Notes and the 2018 Notes to be redeemed that
would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of the 2008 Notes and the 2018 Notes.

"Independent Investment Banker" means Morgan Stanley & Co. Incorporated or,
if such firm is unwilling or unable to select the Comparable Treasury Issue, an
independent investment banking institution of national standing appointed by the
Trustee after consultation with the Operating Partnership.

"Comparable Treasury Price" means with respect to any Redemption Date (i)
the average of the two remaining Reference Treasury Dealer Quotations for such
Redemption Date, after excluding the highest and lowest such Reference Treasury
Dealer Quotations from the four selected, or (ii) if the Trustee obtains fewer
than four such Reference Treasury Dealer Quotations, the average of all such
quotations.

"Reference Treasury Dealer" means Morgan Stanley & Co. Incorporated,
Goldman, Sachs & Co., J.P. Morgan Securities Inc. and an additional Reference
Treasury Dealer appointed by the Trustee after consultation with the Operating
Partnership and their successors; provided, however, that if Morgan Stanley &
Co. Incorporated, Goldman, Sachs & Co., J.P. Morgan Securities Inc. or such
additional Reference Treasury Dealer and their successors shall cease to be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Operating Partnership will substitute therefor another Primary
Treasury Dealer.

"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
time, on the third business day preceding such Redemption Date.

Notice of any redemption by the Operating Partnership will be mailed at
least 30 days but not more than 60 days before any Redemption Date to each
holder of 2008 Notes and the 2018 Notes to be redeemed. If less than all the
2008 Notes and the 2018 Notes are to be redeemed at the option of the Operating
Partnership, the Trustee shall select, in such manner as it shall deem fair and
appropriate, the 2008 Notes and the 2018 Notes to be redeemed in whole or in
part.

Unless the Operating Partnership defaults in payment of the redemption
price, on and after any Redemption Date interest will cease to accrue on the
Notes or portions thereof called for redemption.

CALL OPTION AND MANDATORY PUT WITH RESPECT TO THE REPS

Call Option. Pursuant to the terms of the REPS, the Callholder, by giving
notice to the Trustee (the "Call Notice"), has the right to purchase the
aggregate principal amount of REPS, in whole but not in part
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<PAGE> 91

(the "Call Option"), on the Coupon Reset Date, at a price equal to 100% of the
principal amount thereof (the "Call Price") (interest accrued to but excluding
the Coupon Reset Date will be paid by the Operating Partnership on such date to
the holders of the REPS on the most recent Record Date). In order for the
Callholder to exercise the Call Option, the Call Notice is required to be given
to the Trustee, in writing, prior to 4:00 p.m., New York time, no later than 15
calendar days prior to the Coupon Reset Date for the REPS. The Call Notice may
be revoked by the Callholder at any time prior to 2:00 p.m., New York time, on
the Business Day prior to the Coupon Reset Date.

If the Callholder exercises its rights under the Call Option, unless
terminated in accordance with its terms, (i) not later than 2:00 p.m., New York
time, on the Business Day prior to the Coupon Reset Date, the Callholder will
deliver the Call Price in immediately available funds to the Trustee for payment
of the Call Price on the Coupon Reset Date, and (ii) the holders of REPS will be
required to deliver and will be deemed to have delivered the REPS to the
Callholder against payment therefor on the Coupon Reset Date through the
facilities of DTC. No holder of any REPS or any interest therein will have any
right or claim against the Callholder as a result of the Callholder's decision
whether or not to exercise the Call Option or performance or nonperformance of
its obligations with respect thereto.

The Call Option provides for certain circumstances under which such Call
Option may be terminated. If the Call Option terminates or if the Callholder
fails to pay the Call Price to the Trustee at or prior to the required time, the
Trustee shall exercise the Mandatory Put described below. The Trustee shall
notify the holders that it is exercising the Put Option as required by the terms
of the Indenture, as supplemented.

Immediately following the original issuance of the REPS, the Callholder
will be Morgan Stanley & Co. International Limited. Thereafter, the Callholder
may, from time to time, assign all of (but not less than all) its rights under
the Call Option to a substitute Callholder, in each case without notice to or
consent of the holders of the REPS. Under certain circumstances, the Operating
Partnership has the right or the obligation to reacquire the Call Option.

Mandatory Put. If the Call Option is not exercised or if the Call Option
otherwise terminates, the Trustee will be obligated to exercise the right of the
holders of the REPS to require the Operating Partnership to purchase the
aggregate principal amount of REPS in whole but not in part (the "Mandatory
Put"), on the Coupon Reset Date at a price equal to 100% of the principal amount
thereof (the "Put Price"), plus accrued but unpaid interest to but excluding
such Coupon Reset Date, in each case, to be paid by the Operating Partnership to
the holders on the Coupon Reset Date. If the Trustee exercises the Mandatory
Put, then the Operating Partnership shall deliver the Put Price in immediately
available funds to the Trustee by no later than 10:00 a.m., New York time, on
the Coupon Reset Date, and the holders of the REPS will be required to deliver
and will be deemed to have delivered the REPS to the Operating Partnership
against payment therefor on the Coupon Reset Date through the facilities of DTC.
By its purchase of REPS, each holder irrevocably agrees that the Trustee shall
exercise the Mandatory Put relating to such REPS for or on behalf of such REPS
as provided herein. No holder of any REPS or any interest therein has the right
to consent or object to the exercise of the Trustee's duties under the Mandatory
Put.

The transactions described above will be executed on the Coupon Reset Date
through DTC in accordance with the procedures of DTC, and the accounts of
participants will be debited and credited and the REPS delivered by book-entry
as necessary to effect the purchases and sales thereof. For further information
with respect to transfers and settlement through DTC, see "Global Notes."

Notice to Holders by Trustee. In anticipation of the exercise of the Call
Option or the Mandatory Put on the Coupon Reset Date, the Trustee will notify
the Holders of the REPS, not less than 30 days nor more than 60 days prior to
the Coupon Reset Date, that all REPS shall be delivered on the Coupon Reset Date
through the facilities of DTC against payment of the Call Price by the
Callholder under the Call Option or payment of the Put Price by the Operating
Partnership under the Mandatory Put. The Trustee will notify the holders of the
REPS once it is determined whether the Call Price or the Put Price shall be
delivered.

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COUPON RESET PROCESS IF REPS ARE CALLED

The following discussion describes the steps to be taken in order to
determine the interest rate to be paid on the REPS on and after the Coupon Reset
Date in the event the Call Option has been exercised with respect to the REPS.

Under the REPS and pursuant to a Calculation Agency Agreement, Morgan
Stanley & Co. Incorporated has been appointed the calculation agent for the REPS
(in such capacity as calculation agent, the "Calculation Agent"). If the
Callholder exercises the Call Option, then the following steps (the "Coupon
Reset Process") will be taken in order to determine the interest rate to be paid
on the REPS from and including such Coupon Reset Date to but excluding the Final
REPS Maturity Date. The Operating Partnership and the Calculation Agent will use
reasonable efforts to cause the actions contemplated below to be complete in as
timely a manner as possible.

(a) No later than five Business Days prior to the Coupon Reset Date,
the Operating Partnership will provide the Calculation Agent with (i) a
list (the "Dealer List"), containing the names and addresses of three
dealers, one of whom shall be Morgan Stanley & Co. Incorporated, from whom
the Operating Partnership desires the Calculation Agent to obtain Bids (as
defined below) for the purchase of the REPS and (ii) such other material as
may reasonably be requested by the Calculation Agent to facilitate a
successful Coupon Reset Process.

(b) Within one Business Day following receipt by the Calculation Agent
of the Dealer List, the Calculation Agent will provide to each dealer
("Dealer") on the Dealer List (i) a copy of this Prospectus, (ii) a copy of
the form of REPS and (iii) a written request that each Dealer submit a Bid
to the Calculation Agent by 12:00 noon, New York time, on the third
Business Day prior to the Coupon Reset Date (the "Bid Date"). The time on
the Bid Date upon which Bids will be requested may be changed by the
Calculation Agent to as late as 3:00 p.m., New York time. "Bid" means an
irrevocable written offer given by a Dealer for the purchase of all of the
REPS, settling on the Coupon Reset Date, and shall be quoted by such Dealer
as a stated yield to maturity on the REPS ("Yield to Maturity"). Each
Dealer shall also be provided with (i) the name of the Operating
Partnership, (ii) an estimate of the Purchase Price (which shall be stated
as a U.S. dollar amount and be calculated by the Calculation Agent in
accordance with paragraph (c) below), (iii) the principal amount and
maturity of the REPS and (iv) the method by which interest will be
calculated on the REPS.

(c) The purchase price to be paid by any Dealer for the REPS in
connection with the Coupon Reset Process after the exercise of the Call
Option (the "Purchase Price") shall be equal to (i) the principal amount of
the REPS, plus (ii) a premium (the "Notes Premium") which shall be equal to
the excess, if any, on the Coupon Reset Date of (A) the discounted present
value to the Coupon Reset Date of a bond with a maturity of 2015
which has an interest rate of %, semi-annual interest payments on each
and , commencing 2005, and a
principal amount equal to the principal amount of the REPS, and assuming a
discount rate equal to the Call Option Treasury Rate over (B) such
principal amount of REPS. The "Call Option Treasury Rate" means the per
annum rate equal to the offer side yield to maturity of the current
on-the-run 10-year United States Treasury Security per Telerate page 500,
or any successor page, at 11:00 a.m., New York time, on the Bid Date (or
such other time or date that may be agreed upon by the Operating
Partnership and the Calculation Agent) or, if such rate does not appear on
Telerate page 500, or any successor page, at such time, the rates on GovPX
End-of-Day Pricing at 3:00 p.m., New York time, on the Bid Date (or such
other transfer date that may be agreed upon by the Operating Partnership
and the Calculation Agent).

(d) The Calculation Agent will provide written notice to the Operating
Partnership by 12:30 p.m., New York time (or within 30 minutes of such
later time at which the last Bid is received by the Calculation Agent, but
in no event later than 3:30 p.m.), on the Bid Date, setting forth (i) the
names of each of the Dealers from whom the Calculation Agent received Bids
on the Bid Date, (ii) the Bid submitted by each such Dealer and (iii) the
Purchase Price as determined pursuant to paragraph (c) above. Except as
provided below, the Calculation Agent will thereafter select from the Bids
received the Bid with the lowest Yield to Maturity (the "Selected Bid");
provided, however, that (i) if the
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Calculation Agent has not received a timely Bid from a Dealer on or before
the Bid Date, the Selected Bid shall be the lowest of all Bids received by
such time, (ii) if any two or more of the lowest Bids submitted are
equivalent, the Operating Partnership shall in its sole discretion select
any of such equivalent Bids (and such selected Bid shall be the Selected
Bid) and (iii) Morgan Stanley & Co. Incorporated will have the right to
match the Bid with the lowest Yield to Maturity, in which case Morgan
Stanley & Co. Incorporated's Bid shall be the Selected Bid. The Calculation
Agent will set the Coupon Reset Rate equal to the interest rate that will
amortize the Notes Premium fully over the term of the REPS at the Yield to
Maturity indicated by the Selected Bid. The Calculation Agent will notify
the Dealer that submitted the Selected Bid by 4:00 p.m., New York time, on
the Bid Date.

(e) Immediately after calculating the Coupon Reset Rate for the REPS,
the Calculation Agent will provide written notice to the Operating
Partnership and the Trustee, setting forth the Coupon Reset Rate. At the
request of the holders of the REPS, the Calculation Agent will provide such
holders the Coupon Reset Rate. The Operating Partnership shall thereafter
establish the Coupon Reset Rate as the new interest rate on the REPS,
effective from and including the Coupon Reset Date by delivery to the
Trustee on or before the Coupon Reset Date of an officers' certificate.

(f) The Callholder will sell the REPS to the Dealer that made the
Selected Bid at the Purchase Price, such sale to be settled on the Coupon
Reset Date in immediately available funds.

If the Calculation Agent determines that (i) at any time prior to the sale
of the REPS on the Bid Date, an Event of Default has occurred and is continuing
under Sections 501 (1),(2),(3),(4) or (5) of the Indenture (in such event
termination is at the Callholder's option) or under Sections 501 (6) or (7) of
the Indenture (in such event, termination is automatic), (ii) a Market
Disruption Event (as defined below) has occurred and is continuing following the
exercise of the Call Option, (iii) the Callholder fails to deliver the Call
Notice to the Trustee prior to 4:00 p.m., New York time, on the fifteenth
calendar day prior to the Coupon Reset Date or revokes the Call Notice, (iv) the
Callholder fails to pay the Call Price by 2:00 p.m., New York time, on the
Business Day prior to the Coupon Reset Date, (v) a defeasance (as defined below)
or a covenant defeasance (as defined below) has occurred and (vi) two or more of
the Dealers have failed to provide Bids in a timely manner substantially as
provided above, such Call Option will be automatically revoked, and the Trustee
will exercise the Put Option on behalf of the holders. "Market Disruption Event"
shall mean any of the following if such events occur and are continuing on any
day from and including the date of the Call Notice to and including the Bid Date
in the judgment of the Calculation Agent: (i) a suspension or material
limitation in trading in securities generally on the NYSE or the establishment
of minimum prices on such exchange; (ii) a general moratorium on commercial
banking activities declared by either federal or New York State authorities;
(iii) any material adverse change in the existing financial, political or
economic conditions in the United States of America; (iv) an outbreak or
escalation of major hostilities involving the United States of America or the
declaration of a national emergency or war by the United States; or (v) any
material disruption of the U.S. government securities market, U.S. corporate
bond market or U.S. federal wire system; provided, in each case that in the
judgment of the Calculation Agent the effect of the foregoing makes it
impractical to conduct the Coupon Reset Process.

The Calculation Agency Agreement provides that the Calculation Agent may
resign at any time, such resignation to be effective ten Business Days after the
delivery to the Operating Partnership and the Trustee of notice of such
resignation. In such case, the Operating Partnership may appoint a successor
Calculation Agent for the REPS.

The Calculation Agent, in its individual capacity, may buy, sell, hold and
deal in the REPS and may exercise any vote or join in any action which any
holder of the REPS may be entitled to exercise or take as if it were not the
Calculation Agent. The Calculation Agent, in its individual capacity, may also
engage in any transaction with the Operating Partnership as if it were not the
Calculation Agent.

MERGER, CONSOLIDATION OR SALE

The Indenture will provide that the Operating Partnership will not, in any
transaction or series of related transactions, consolidate with, or sell, lease,
assign, transfer or otherwise convey all or substantially all of its
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assets to, or merge with or into, any other Person unless (i) either the
Operating Partnership shall be the continuing person, or the successor (if other
than the Operating Partnership) formed by or resulting from any such
consolidation or merger or which shall have received the transfer of such assets
shall be a corporation, partnership, limited liability company or other legal
entity organized and existing under the laws of the United States of America,
any state thereof or the District of Columbia and shall expressly assume, by
supplemental indenture delivered to the Trustee, the due and punctual payment of
the principal of (and premium, if any) and interest on all of the outstanding
Notes issued under the Indenture and the due and punctual performance and
observance of all of the other covenants and conditions contained in the Notes
and the Indenture; (ii) immediately after giving effect to such transaction and
treating any Debt (including Acquired Debt) which becomes an obligation of the
Operating Partnership or any of its Affiliates as a result thereof as having
been incurred by the Operating Partnership or such Affiliate at the time of such
transaction, no Event of Default under the Indenture, and no event which, after
notice or the lapse of time or both, would become such an Event of Default,
shall have occurred and be continuing; and (iii) an officers' certificate and
legal opinion concerning such conditions shall be delivered to the Trustee. If
the Operating Partnership is not the surviving legal entity, then, for purposes
of clause (ii) of the preceding sentence, the successor shall be deemed to be
the "Operating Partnership" referred to in such clause (ii). (See Sections 801
and 803 of the form of Indenture).

Upon any such merger, consolidation, sale, assignment, transfer, lease or
conveyance in which the Operating Partnership is not the continuing legal
entity, the successor entity formed by such consolidation or into which the
Operating Partnership is merged or to which such sale, assignment, transfer,
lease or other conveyance is made shall succeed to, and be substituted for, and
may exercise every right and power of, the Operating Partnership under the
Indenture with the same effect as if such successor entity had been named as the
Operating Partnership therein and thereafter the Operating Partnership shall be
released (except in the case of a lease) from its obligations under the
Indenture and the Notes.

CERTAIN COVENANTS

The Indenture will contain the following covenants:

Aggregate Debt Test. The Operating Partnership will not, and will not
permit any of its Subsidiaries to, incur any Debt (including, without
limitation, Acquired Debt) if, immediately after giving effect to the incurrence
of such Debt and the application of the proceeds therefrom on a pro forma basis,
the aggregate principal amount of all outstanding Debt of the Operating
Partnership and its Subsidiaries (determined on a consolidated basis in
accordance with generally accepted accounting principles) is greater than 60% of
the sum of (without duplication) (i) the Total Assets of the Operating
Partnership and its Subsidiaries as of the last day of the then most recently
ended fiscal quarter and (ii) the aggregate purchase price of any real estate
assets or mortgages receivable acquired, and the aggregate amount of any
securities offering proceeds received (to the extent such proceeds were not used
to acquire real estate assets or mortgages receivable or used to reduce Debt),
by the Operating Partnership or any of its Subsidiaries since the end of such
fiscal quarter, including the proceeds obtained from the incurrence of such
additional Debt, determined on a consolidated basis in accordance with generally
accepted accounting principles.

Debt Service Test. The Operating Partnership will not, and will not permit
any of its Subsidiaries to, incur any Debt (including, without limitation,
Acquired Debt) if the ratio of Consolidated Income Available for Debt Service to
the Annual Debt Service Charge for the period consisting of the four consecutive
fiscal quarters most recently ended prior to the date on which such additional
Debt is to be incurred shall have been less than 1.5:1 on a pro forma basis
after giving effect to the incurrence of such Debt and the application of the
proceeds therefrom, and calculated on the assumption that (i) such Debt and any
other Debt (including, without limitation, Acquired Debt) incurred by the
Operating Partnership or any of its Subsidiaries since the first day of such
four-quarter period had been incurred, and the application of the proceeds
therefrom (including to repay or retire other Debt) had occurred, on the first
day of such period, (ii) the repayment or retirement of any other Debt of the
Operating Partnership or any of its Subsidiaries since the first day of such
four-quarter period had occurred on the first day of such period (except that,
in making such computation, the amount of Debt under any revolving credit
facility, line of credit or similar facility shall be computed based upon the
average daily balance of such Debt during such period) and (iii) in the case of
any acquisition or
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disposition by the Operating Partnership or any of its Subsidiaries of any asset
or group of assets, in any such case with a fair market value (determined in
good faith by the Operating Partnership's General Partner's Board of Directors)
in excess of $1 million, since the first day of such four-quarter period,
whether by merger, stock purchase or sale or asset purchase or sale or
otherwise, such acquisition or disposition had occurred as of the first day of
such period with the appropriate adjustments with respect to such acquisition or
disposition being included in such pro forma calculation. If the Debt giving
rise to the need to make the foregoing calculation or any other Debt incurred
after the first day of the relevant four-quarter period bears interest at a
floating rate then, for purposes of calculating the Annual Debt Service Charge,
the interest rate on such Debt shall be computed on a pro forma basis by
applying the average daily rate which would have been in effect during the
entire such four-quarter period to the greater of the amount of such Debt
outstanding at the end of such period or the average amount of such Debt
outstanding during such period.

Secured Debt Test. The Operating Partnership will not, and will not permit
any of its Subsidiaries to, incur any Debt (including, without limitation,
Acquired Debt) secured by any Lien on any property or assets of the Operating
Partnership or any of its Subsidiaries, whether owned on the date of the
Indenture or thereafter acquired, if, immediately after giving effect to the
incurrence of such Debt and the application of the proceeds therefrom on a pro
forma basis, the aggregate principal amount (determined on a consolidated basis
in accordance with generally accepted accounting principles) of all outstanding
Debt of the Operating Partnership and its Subsidiaries which is secured by any
Lien on any property or assets of the Operating Partnership or any of its
Subsidiaries is greater than 40% of the sum of (without duplication) (i) the
Total Assets of the Operating Partnership and its Subsidiaries as of the last
day of the then most recently ended fiscal quarter and (ii) the aggregate
purchase price of any real estate assets or mortgages receivable acquired, and
the aggregate amount of any securities offering proceeds received (to the extent
such proceeds were not used to acquire real estate assets or mortgages
receivable or used to reduce Debt), by the Operating Partnership or any of its
Subsidiaries since the end of such fiscal quarter, including the proceeds
obtained from the incurrence of such additional Debt, determined on a
consolidated basis in accordance with generally accepted accounting principles.

For purposes of the foregoing provisions regarding the limitation on the
incurrence of Debt, Debt shall be deemed to be "incurred" by the Operating
Partnership or a Subsidiary whenever the Operating Partnership and its
Subsidiary shall create, assume, guarantee or otherwise become liable in respect
thereof.

Maintenance of Total Unencumbered Assets. The Operating Partnership will
not have at any time Total Unencumbered Assets of less than 150% of the
aggregate principal amount of all outstanding Unsecured Debt of the Operating
Partnership and its Subsidiaries, determined on a consolidated basis in
accordance with generally accepted accounting principles.

Existence. Except as permitted under the provisions of the Indenture
described under the caption in "-- Merger, Consolidation or Sale" the Operating
Partnership will do or cause to be done all things necessary to preserve and
keep in full force and effect its existence as a Delaware limited partnership,
rights (charter and statutory) and franchises; provided, however, that the
Operating Partnership will not be required to preserve any right or franchise if
its General Partner's Board of Directors determines that the preservation
thereof is no longer desirable in the conduct of its business and that the loss
thereof is not disadvantageous in any material respect to the Holders of the
Notes outstanding under the Indenture.

Maintenance of Properties. The Operating Partnership will cause all of its
properties used or useful in the conduct of its business or the business of any
Subsidiaries to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Operating Partnership may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.

Insurance. The Indenture will require the Operating Partnership to, and to
cause each of its Subsidiaries to, keep in force upon all of its properties and
operations policies of insurance carried with responsible companies in such
amounts and covering all such risks as shall be customary in the industry in
accordance with prevailing market conditions and availability.
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Payment of Taxes and Other Claims. The Operating Partnership will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon the income, profits or property of the
Operating Partnership or any Subsidiary, and (ii) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Operating Partnership or any Subsidiary, provided, however, that
the Operating Partnership will not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.

Additional Guarantees. The Indenture will provide that (i) the Operating
Partnership will not permit any of its Subsidiaries that is not a Guarantor to
guarantee or secure through the granting of Liens, the payment of any Debt of
the Operating Partnership or any Guarantor and (ii) the Operating Partnership
will not and will not permit any of its Subsidiaries to pledge any intercompany
notes representing obligations of any of its Subsidiaries, to secure the payment
of any debt of the Operating Partnership or any Guarantor, in each case unless
such Subsidiary, the Operating Partnership and the Trustee execute and deliver a
supplemental indenture evidencing such Subsidiary's Guarantee (providing for the
unconditional Guarantee by such Subsidiary, on a senior basis, of the Notes).

Provision of Financial Information. The Operating Partnership will file
with the Trustee copies of annual reports, quarterly reports and other documents
(the "Financial Reports") which the Operating Partnership files with the
Commission or would be required to file with the Commission pursuant to Section
13 or 15(d) of the Exchange Act if the Operating Partnership were subject to
such Sections; provided, however, that if the Operating Partnership is not
subject to such Sections, it may in lieu of filing Financial Reports of the
Operating partnership with the Trustee, file Financial Reports of the Company if
they would be materially the same as those that would have been filed by the
Operating Partnership with the Commission pursuant to Sections 13 or 15(d) of
the Exchange Act.

DEFINITIONS

As used herein,

"Acquired Debt" means Debt of a Person (i) existing at the time such Person
is merged or consolidated with or into, or becomes a Subsidiary of, the
Operating Partnership or (ii) assumed by the Operating Partnership or any of its
Subsidiaries in connection with the acquisition of assets from such Person.
Acquired Debt shall be deemed to be incurred on the date the acquired Person is
merged or consolidated with or into, or becomes a Subsidiary of, the Operating
Partnership or the date of the related acquisition, as the case may be.

"Annual Debt Service Charge" means, for any period, the interest expense of
the Operating Partnership and its Subsidiaries for such period (including,
without duplication, (i) all amortization of debt discount and premiums, (ii)
all accrued interest, (iii) all capitalized interest, and (iv) the interest
component of capitalized lease obligations), determined on a consolidated basis
in accordance with generally accepted accounting principles.

"Consolidated Income Available for Debt Service" for any period means
Consolidated Net Income of the Operating Partnership and its Subsidiaries for
such period, plus amounts which have been deducted and minus amounts which have
been added for (without duplication) (i) interest expense on Debt, (ii)
provision for taxes based on income, (iii) amortization of debt discount,
premium and deferred financing costs, (iv) provisions for gains and losses on
sales or other dispositions of properties and other investments, (v) property
depreciation and amortization, (vi) the effect of any non-cash items, and (vii)
amortization of deferred charges, all determined on a consolidated basis in
accordance with generally accepted accounting principles.

"Consolidated Net Income" for any period means the amount of net income (or
loss) of the Operating Partnership and its Subsidiaries for such period,
excluding (without duplication) (i) extraordinary items and (ii) the portion of
net income (but not losses) of the Operating Partnership and its Subsidiaries
allocable to minority interests in unconsolidated Persons to the extent that
cash dividends or distributions have not actually

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been received by the Operating Partnership or one of Subsidiaries, all
determined on a consolidated basis in accordance with generally accepted
accounting principles.

"Debt" means, with respect to any Person, any indebtedness of such Person,
whether or not contingent, in respect of (i) borrowed money or evidenced by
bonds, notes, debentures or similar instruments, (ii) indebtedness secured by
any Lien on any property or asset owned by such Person, but only to the extent
of the lesser of (x) the amount of indebtedness so secured and (y) the fair
market value (determined in good faith by the board of directors of such Person
or, in the case of the Operating Partnership or a Subsidiary, by the Operating
Partnership's General Partner's Board of Directors) of the property subject to
such Lien, (iii) reimbursement obligations, contingent or otherwise, in
connection with any letters of credit actually issued or amounts representing
the balance deferred and unpaid of the purchase price of any property except any
such balance that constitutes an accrued expense or trade payable, or (iv) any
lease of property by such Person as lessee which is required to be reflected on
such Person's balance sheet as a capitalized lease in accordance with generally
accepted accounting principles, and also includes, to the extent not otherwise
included, any obligation of such Person to be liable for, or to pay, as obligor,
guarantor or otherwise (other than for purposes of collection in the ordinary
course of business), Debt of the types referred to above of another Person (it
being understood that Debt shall be deemed to be incurred by such Person
whenever such person shall create, assume, guarantee or otherwise become liable
in respect thereof).

"Lien" means any mortgage, deed of trust, lien, charge, pledge, security
interest, security agreement, or other encumbrance of any kind.

"Subsidiary" means (i) a corporation, partnership, joint venture, limited
liability company or other Person the majority of the shares, if any, of the
non-voting capital stock or other equivalent ownership interests of which
(except directors' qualifying shares) are at the time directly or indirectly
owned by the Operating Partnership and/or any other Subsidiary or Subsidiaries,
and the majority of the shares of the voting capital stock or other equivalent
ownership interests of which (except directors' qualifying shares) are at the
time directly or indirectly owned by the Operating Partnership, any other
Subsidiary or Subsidiaries, and (ii) any other Person the accounts of which are
consolidated with the accounts of the Operating Partnership.

"Total Assets" means the sum of (without duplication) (i) Undepreciated
Real Estate Assets and (ii) all other assets (excluding accounts receivable and
intangibles) of the Operating Partnership and its Subsidiaries, all determined
on a consolidated basis in accordance with generally accepted accounting
principles.

"Total Unencumbered Assets" means the sum of (without duplication) (i)
those Undepreciated Real Estate Assets which are not subject to a Lien securing
Debt and (ii) all other assets (excluding accounts receivable and intangibles)
of the Operating Partnership and its Subsidiaries not subject to a Lien securing
Debt, all determined on a consolidated basis in accordance with generally
accepted accounting principles.

"Undepreciated Real Estate Assets" means, as of any date, the cost
(original cost plus capital improvements) of real estate assets of the Operating
Partnership and its Subsidiaries on such date, before depreciation and
amortization, all determined on a consolidated basis in accordance with
generally accepted accounting principles.

"Unsecured Debt" means Debt of the Operating Partnership or any of its
Subsidiaries which is not secured by a Lien on any property or assets of the
Operating Partnership or any of its Subsidiaries.

EVENTS OF DEFAULT, NOTICE AND WAIVER

The Indenture will provide that the following events are "Events of
Default" with respect to any series of the Notes issued thereunder: (i) default
for 30 days in the payment of any interest on any Note of such series; (ii)
default in the payment of any principal of (or premium, if any, on) any Note of
such series at its Maturity Date; (iii) default in the performance of any other
covenant or warranty of the Operating Partnership contained in the Indenture,
continued for 60 days after written notice as provided in the Indenture; (iv)
(a) default by the Operating Partnership or any Subsidiary of the Operating
Partnership in the payment (whether at stated maturity, upon acceleration, upon
required prepayment or otherwise), beyond any period of
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grace provided therefor, of any principal of or interest on any bond, note,
debenture or other evidence of indebtedness, or (b) any other breach or default
(or other event or condition) shall occur under any agreement, indenture or
instrument relating to any such bond, note, debenture or other evidence of
indebtedness beyond any cure period provided therefor, if as a result thereof
the holder or holders of any such bond, note, debenture or other evidence of
indebtedness (or a person on behalf of such holder or holders) has the immediate
right to cause (upon the giving of notice if required) any such bond, note,
debenture or other evidence of indebtedness to become or be declared due and
payable, or required to be prepaid, redeemed, purchased or defeased (or an offer
of prepayment, redemption, purchase or defeasance be made), prior to its stated
maturity (other than by a scheduled mandatory prepayment), which in the
aggregate under (a) and (b) have a principal amount equal or greater than
$20,000,000; (v) the entry by a court of competent jurisdiction of one or more
judgments, orders or decrees against the Operating Partnership or any
Significant Subsidiary (as defined below) in an aggregate amount (excluding
amounts fully covered by insurance) in excess of $20,000,000 and such judgments,
orders or decrees remain undischarged, unstayed and unsatisfied in an aggregate
amount (excluding amounts fully covered by insurance) in excess of $20,000,000
for a period of 30 consecutive days; and (vi) certain events of bankruptcy,
insolvency or reorganization with respect to the Operating Partnership or of any
General Partner or any Significant Subsidiary. (See Section 501 of the form of
Indenture.) The term "Significant Subsidiary" means any Subsidiary which is a
significant subsidiary (as defined in Regulation S-X promulgated under the
Securities Act as in effect on January 1, 1998) of the Operating Partnership.

If an Event of Default under the Indenture with respect to a series of
Notes occurs and is continuing, then in every such case the Trustee or the
Holders of not less than 25% in principal amount of the outstanding Notes of
such series may declare the principal amount of all of the Notes of such series
to be due and payable immediately by written notice thereof to the Operating
Partnership (and to the Trustee if given by the Holders). However, at any time
after such a declaration of acceleration with respect to the Notes of such
series has been made, the Holders of not less than a majority in principal
amount of outstanding Notes of such series may rescind and annul such
declaration and its consequences if (i) the Operating Partnership shall have
deposited with the Trustee all required payments of the principal of (and
premium, if any) and interest, if any, on the Notes of such series (other than
amounts which have become due and payable as a result of such acceleration),
plus certain fees, expenses, disbursements and advances of the Trustee and (ii)
all Events of Default (other than the nonpayment of accelerated principal (or
specified portion thereof), premium, if any, and interest) with respect to the
Notes of such series have been cured or waived as provided in the Indenture.
(See Section 502 of the form of Indenture.) The Indenture will also provide that
the Holders of not less than a majority in principal amount of the outstanding
Notes of a series may waive any past default with respect to such Notes and its
consequences, except a default (x) in the payment of the principal of (or
premium, if any) or interest, if any, on any Note of such series or (y) in
respect of a covenant or provision contained in the Indenture that cannot be
modified or amended without the consent of the Holder of each Outstanding Note
of such series affected thereby. (See Section 513 of the form of Indenture.)

The Indenture will require the Trustee to give notice to the Holders of
Notes of a series issued thereunder within 90 days of a default with respect to
such Notes under the Indenture known to the Trustee, unless such default shall
have been cured or waived; provided, however, that the Trustee may withhold
notice to the Holders of any Notes of such series of any default (except a
default in the payment of the principal of (or premium, if any) or interest, if
any, on any Note of such series ) if a Responsible Officer of such Trustee
determines such withholding to be in the interest of such Holders. (See Section
601 of the form of Indenture.)

The Indenture will provide that no Holder of Notes of any series may
institute any proceeding, judicial or otherwise, with respect to the Indenture
or for any remedy thereunder, except in the case of the failure of the Trustee,
for 60 days, to act after it has received a written request to institute
proceedings in respect of an Event of Default from the Holders of not less than
25% in principal amount of the Outstanding Notes of such series, as well as an
offer of reasonable indemnity. (See Section 507 of the form of Indenture.) This
provision will not prevent, however, any Holder of Notes from instituting suit
for the enforcement of payment of the principal of (and premium, if any) and
interest, if any, on such Notes held by that Holder at the respective due dates
thereof. (See Section 508 of the form of Indenture.) The Indenture will provide
that, subject to provisions of

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the Indenture relating to its duties in case of default, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any Holders of any Notes of any series then Outstanding
under the Indenture, unless the Holders of Notes of any such series shall have
offered to the Trustee thereunder reasonable security or indemnity. (See Section
602 of the form of Indenture.) The Holders of not less than a majority in
principal amount of the Outstanding Notes of any series shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or of exercising any trust or power conferred upon the
Trustee with respect to such series. However, the Trustee may refuse to follow
any direction which is in conflict with any law or the Indenture, which may
involve the Trustee in personal liability or which may be unduly prejudicial to
the Holders of Notes of such series not joining therein. (See Section 512 of the
form of Indenture.)

Within 120 days after the close of each fiscal year, the Operating
Partnership must deliver to the Trustee a certificate, signed by one of several
specified officers of the General Partner of the Operating Partnership, stating
whether or not such officer has knowledge of any noncompliance under the
Indenture and, if so, specifying such noncompliance and the nature and status
thereof. (See Section 1014 of the form of Indenture.) Further, upon any request
by the Operating Partnership to take any action under the Indenture, the
Operating Partnership will furnish to the Trustee (a) and Officers' Certificate
stating that all conditions precedent, if any, provided for in the Indenture
relating to the proposed action have been complied with, and (b) an opinion of
counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with.

MODIFICATION OF THE INDENTURE

Modifications and amendments of the Indenture may be made only with the
consent of the Holders of not less than a majority in principal amount of all
Outstanding Notes which are affected by such modification or amendment;
provided, however, that no such modification or amendment may, without the
consent of the Holder of each such Note affected thereby, (i) change the
Maturity Date of the principal of, or any installment of interest, if any, (or
premium, if any) on, any such Note, (ii) reduce the principal amount of, or the
rate or amount of interest on, or any amount of premium payable on any such Note
that would be due and payable upon declaration of acceleration of the maturity
thereof or would be provable in bankruptcy, or adversely affect any right of the
Holder of any such Note to repayment of such Note at such Holder's option, (iii)
change the Place of Payment, or the coin or currency, for payment of principal
of (or premium, if any) or interest, if any, on any such Note, (iv) impair the
right to institute suit for the enforcement of any payment on or with respect to
any such Note, (v) reduce the percentage in principal amount of Outstanding
Notes necessary to modify or amend the Indenture, to waive compliance with
certain provisions thereof or certain defaults and consequences thereunder or to
reduce the quorum or voting requirements set forth in the Indenture, or (vi)
modify any of the foregoing provisions or any of the provisions relating to the
waiver of certain past defaults or certain covenants, except to increase the
required percentage to effect such action or to provide that certain other
provisions may not be modified or waived without the consent of the Holder of
such Note. (See Section 902 of the form of Indenture.)

The Indenture provides that the Holders of not less than a majority in
principal amount of Outstanding Notes have the right to waive compliance by the
Operating Partnership with certain covenants in the Indenture, including those
described in the section of this Prospectus captioned "Description of Notes --
Certain Covenants." (See Section 1013 of the form of Indenture.)

Modifications and amendments of the Indenture may be made by the Operating
Partnership and the Trustee without the consent of any Holder of Notes issued
thereunder for any of the following purposes: (i) to evidence the succession of
another Person to the Operating Partnership as obligor under the Indenture; (ii)
to add to the covenants of the Operating Partnership for the benefit of the
Holders of the Notes or to surrender any right or power conferred upon the
Operating Partnership in the Indenture; (iii) to add Events of Default for the
benefit of the Holders of the Notes; (iv) to add or change any provisions of the
Indenture to facilitate the issuance of the Notes in uncertificated form,
provided that such action shall not adversely affect the interests of the
Holders of Notes in any material respect; (v) to secure the Notes; (vi) to
provide for the acceptance of appointment by a successor Trustee or to
facilitate the administration of the trusts under the
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Indenture by more than one Trustee; (vii) to cure any ambiguity, defect or
inconsistency in the Indenture or to make any other provisions with respect to
matters or questions arising thereunder, provided that such action shall not
adversely affect the interests of Holders of Outstanding Notes in any material
respect; or (viii) to supplement any of the provisions of the Indenture to the
extent necessary to permit or facilitate defeasance, covenant defeasance and
discharge of any Notes, provided that such action shall not adversely affect the
interests of the Holders of the Notes in any material respect. (See Section 901
of the form of Indenture.)

The Indenture will provide that in determining whether the Holders of the
requisite principal amount of Outstanding Notes of a series have given any
request, demand, authorization, direction, notice, consent or waiver thereunder
or whether a quorum is present at a meeting of Holders of the Notes of a series,
Notes of each series owned by the Operating Partnership or any other obligor
upon such Notes or any Affiliate of the Operating Partnership or of such other
obligor shall be disregarded. (See Section 101 of the form of Indenture.)

The Indenture will contain provisions for convening meetings of the Holders
of Notes of a series. (See Section 1401 of the form of Indenture.) A meeting may
be called at any time by the Trustee and also, upon request, by the Operating
Partnership or the Holders of at least 25% in principal amount of the
Outstanding Notes of such series, in any such case upon notice given as provided
in the Indenture. (See Section 1402 of the form of Indenture.) Except for any
consent that must be given by the Holder of each Note affected by certain
modifications and amendments of the Indenture, any resolution presented at a
meeting or adjourned meeting duly reconvened at which a quorum is present may be
adopted by the affirmative vote of the Holders of a majority in principal amount
of the Outstanding Notes of such series; provided, however, that, except as
referred to above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the Holders of a specified percentage, which is less or
more than a majority, in principal amount of the Outstanding Notes of such
series may be adopted at a meeting or adjourned meeting duly reconvened at which
a quorum is present by the affirmative vote of the Holders of such specified
percentage in principal amount of the Outstanding Notes of such series. Any
resolution passed or decision taken at any meeting of Holders of Notes of any
series duly held in accordance with the Indenture will be binding on all Holders
of Notes of such series. The quorum at any meeting called to adopt a resolution,
and at any reconvened meeting, will be Persons holding or representing a
majority in principal amount of the Outstanding Notes of any series; provided,
however, that if any action is to be taken at such meeting with respect to a
consent or waiver which may be given by the Holders of not less than a specified
percentage, which is less or more than a majority, in principal amount of the
Outstanding Notes of such series, the Persons holding or representing such
specified percentage in principal amount of the Outstanding Notes of such series
will constitute a quorum. (See Section 1404 of the form of Indenture.)

Notwithstanding the provisions described above, the Indenture will provide
that if any action is to be taken at a meeting of Holders of Notes of any series
with respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that the Indenture expressly provides may be made, given
or taken by the Holders of a specified percentage in principal amount of all
Outstanding Notes of such series affected thereby: (i) there shall be no minimum
quorum requirement for such meeting and (ii) the principal amount of the
Outstanding Notes of such series that are entitled to vote in favor of such
request, demand, authorization, direction, notice, consent, waiver or other
action shall be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made,
given or taken under the Indenture. (See Section 1404 of the form of Indenture.)

DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE

Upon request of the Operating Partnership the Indenture shall cease to be
of further effect with respect to the Notes of a series (except as to certain
limited provisions of the Indenture which shall survive) when either (i) all
Notes of such series have been delivered to the Trustee for cancellation
(subject to certain exceptions) or (ii) all Notes of such series have become due
and payable or will become due and payable within one year (or, if redeemable,
are scheduled for redemption within one year) and the Operating Partnership has
irrevocably deposited with the Trustee, in trust, funds in an amount sufficient
to pay the entire indebtedness on the Notes of such series in respect of
principal (and premium, if any) and interest to the date of such deposit
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(if such Notes have become due and payable) or to the stated maturity or
redemption date, as the case may be.

The Indenture provides that the Operating Partnership may elect either (i)
to defease and be discharged from any and all obligations with respect to a
series of Notes (except, among other things, for the obligations to register the
transfer or exchange of such Notes, to replace temporary or mutilated,
destroyed, lost or stolen Notes of such series, to maintain an office or agency
in respect of the Notes of such series and to hold moneys for payment in trust)
("defeasance") (see Section 1302 of the form of Indenture) or (ii) to be
released from its obligations with respect to the Notes of such series under the
applicable covenants described above under the caption "Certain Covenants"
(except that the Operating Partnership shall remain subject to the covenant to
preserve and keep in full force and effect its existence, except as permitted
under the provisions described under "Merger, Consolidation or Sale") and its
obligations with respect to any other covenants applicable to the Notes of such
series, and any omission to comply with such obligations shall not constitute a
default or an Event of Default with respect to the Notes ("covenant defeasance")
(see Section 1303 of the form of Indenture), in either case upon the irrevocable
deposit by the Operating Partnership with the Trustee, in trust, of the amount
payable at the applicable Maturity Date or, if applicable, upon redemption, or
Government Obligations (as defined below), or both, applicable to the Notes of
such series which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, if any) and interest on such Notes, on the
scheduled due dates therefor or the applicable redemption date, as the case may
be.

Such a trust may only be established if, among other things, (i) the
Operating Partnership has delivered to the Trustee a legal opinion to the effect
that the Holders of the Notes will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred, and such legal opinion, in
the case of defeasance, must refer to and be based upon a ruling of the Internal
Revenue Service or a change in applicable United States federal income tax law
occurring after the date of the Indenture; (ii) if the cash and Government
Obligations deposited are sufficient to pay the outstanding Notes of such
series, provided such Notes are redeemed on a particular redemption date, the
Operating Partnership shall have given the Trustee irrevocable instructions to
redeem the Notes of such series on such date; and (iii) no Event of Default or
event which with notice or lapse of time or both would become an Event of
Default with respect to the Notes shall have occurred and shall be continuing on
the date of, or, solely in the case of Events of Default described in clause
(vi) of the first paragraph under the caption "-- Events of Default, Notice and
Waiver" above, during the period ending on the 91st day after the date of, such
deposit into trust. (See Section 1304 of the form of Indenture.)

"Government Obligations" means securities which are (i) direct obligations
of the United States of America, for the payment of which its full faith and
credit is pledged, or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of America, the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt. (See Section 101 of the form of Indenture.)

In the event the Operating Partnership effects covenant defeasance with
respect to the Notes of any series and such Notes are declared due and payable
because of the occurrence of any Event of Default (other than an Event of
Default with respect to any covenant as to which there has been covenant
defeasance), the amount of monies and Government Obligations deposited with the
Trustee to effect such covenant defeasance may not be sufficient to pay amounts
due on such Notes at the time of their Maturity Date or at the time of
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the acceleration resulting from such Event of Default. In any such event, the
Operating Partnership would remain liable to make payment of such amounts due at
the time of acceleration.

GLOBAL NOTES

The Notes of each series will be issued in the form of one or more fully
registered book-entry Notes of such series (each, a "Global Note") that will be
deposited with, or on behalf of, The Depository Trust Company, New York, New
York ("DTC"). Global Notes will be issued in fully registered form.

The Operating Partnership anticipates that the Global Notes will be
deposited with, or on behalf of DTC, and that such Global Note will be
registered in the name of Cede & Co., DTC's nominee. The Operating Partnership
further anticipates that the following provisions will apply to the depository
arrangements with respect to the Global Notes.

So long as DTC or its nominee is the registered owner of the Global Notes,
DTC or its nominee, as the case may be, will be considered the sole Holder of
the Notes represented by such Global Note for all purposes under the Indenture.
Except as described below, owners of beneficial interests in the Global Notes
will not be entitled to have Notes represented by such Global Note registered in
their names, will not receive or be entitled to receive physical delivery of
Notes in certificated form and will not be considered the owners or Holders
thereof under the Indenture. The laws of some states require that certain
purchasers of securities take physical delivery of such securities in
certificated form; accordingly, such laws may limit the transferability of
beneficial interests in the Global Notes.

The Global Notes will be exchangeable for certificated Notes only if (i)
DTC notifies the Operating Partnership that it is unwilling or unable to
continue as depository or DTC ceases to be a clearing agency registered under
the Exchange Act (if so required by applicable law or regulation) and, in either
case, a successor depository is not appointed by the Operating Partnership
within 90 days after the Operating Partnership receives such notice or becomes
aware of such ineligibility, (ii) the Operating Partnership in its sole
discretion determines that the Global Notes shall be exchangeable for
certificated Notes or (iii) there shall have occurred and be continuing an Event
of Default with respect to Notes of any series under the Indenture and
beneficial owners representing a majority in aggregate principal amount of the
Notes of such series represented by a Global Note advise DTC to cease acting as
depository. Upon any such exchange, owners of a beneficial interest in such
Global Note will be entitled to physical delivery of individual Notes of such
series in certificated form of like tenor, terms and rank, equal in principal
amount to such beneficial interest, and to have such Notes in certificated form
registered in the names of the beneficial owners, which names are expected to be
provided by DTC's relevant Participants (as identified by DTC) to the Trustee.
Notes so issued in certificated form will be issued in denominations of $1,000
or any integral multiple thereof, and will be issued in registered form only,
without coupons.

The following is based on information furnished to the Operating
Partnership:

DTC will act as securities depository for the Notes. The Notes will be
issued as fully registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). One fully registered Note certificate will be
issued with respect to each $200 million (or such other amount as shall be
permitted by DTC from time to time) of principal amount of the Notes, and an
additional certificate will be issued with respect to any remaining principal
amount.

DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct

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Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others, such as securities brokers and
dealers, and banks and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants are
on file with the Commission.

Purchases of Notes under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each actual purchaser of each Note ("Beneficial Owner") is
in turn recorded on the Direct and Indirect Participants' records. A Beneficial
Owner does not receive written confirmation from DTC of its purchase, but is
expected to receive a written confirmation providing details of the transaction,
as well as periodic statements of its holdings, from the Direct or Indirect
Participant through which such Beneficial Owner entered into the transaction.
Transfers of ownership interests in Notes are accomplished by entries made on
the books of Direct and Indirect Participants acting on behalf of Beneficial
Owners. Beneficial Owners do not receive certificates representing their
ownership interests in Notes, except under the circumstances described above.

To facilitate subsequent transfers, the Notes are registered in the name of
DTC's nominee, Cede & Co. The deposit of the Notes with DTC and their
registration in the name of Cede & Co. will effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the Notes;
DTC records reflect only the identity of the Direct Participants to whose
accounts Notes are credited, which may or may not be the Beneficial Owners. The
Participants remain responsible for keeping account of their holdings on behalf
of their customers.

Delivery of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners are governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.

Neither DTC nor Cede & Co. consents or votes with respect to the Notes.
Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy") to the issuer
as soon as possible after the record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose accounts
the Notes are credited on the record date (identified on a list attached to the
Omnibus Proxy).

Principal payments, premium payments, if any, and interest payments, if
any, on the Notes will be made to DTC. DTC's practice is to credit Direct
Participants' accounts on the payment date in accordance with their respective
holdings as shown on DTC's records unless DTC has reason to believe that it will
not receive payment on the payment date. Payments by Direct and Indirect
Participants to Beneficial Owners are governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name" and are the
responsibility of such Direct and Indirect Participants and not of DTC, the
Trustee or the Operating Partnership, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal (and
premium, if any) and interest, if any, to DTC is the responsibility of the
Operating Partnership or the Trustee, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect Participants.

If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the Notes of any series represented by the Global Notes are being
redeemed, DTC's practice is to determine by lot the amount of the interest of
each Direct Participant in such issue to be redeemed.

DTC may discontinue providing its services as securities depository with
respect to the Notes of any series at any time by giving reasonable notice to
the Operating Partnership or the Trustee. Under such circumstances, in the event
that a successor securities depository is not appointed, Note certificates are
required to be printed and delivered as described above.

The Operating Partnership may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities depository). In that
event, Note certificates will be printed and delivered as described above.
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The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Operating Partnership believes to be
reliable, but the Operating Partnership takes no responsibility for the accuracy
thereof.

None of the Operating Partnership, the Underwriters, the Trustee or any
applicable paying agent will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial interests
in the Global Notes, or for maintaining, supervising or reviewing any records
relating to such beneficial interest.

Notices or demands to or upon the Operating Partnership in respect of the
Notes and the Indenture may be served and, in the event that Notes are issued in
definitive certificated form, Notes may be surrendered for payment, registration
of transfer or exchange, at the office or agency of the Operating Partnership
maintained for such purpose in the Borough of Manhattan, The City of New York,
which shall initially be the office of the Trustee, which on the date of this
Prospectus is located at , New York, New York .

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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE REPS

The following is a summary of certain United States Federal income tax
considerations relating to the purchase, ownership and disposition of the REPS
by an initial holder of the REPS who purchases the REPS on the date of original
issuance. This summary is based upon current provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), existing and proposed Treasury
regulations promulgated thereunder and current administrative rulings and court
decisions currently in effect, all of which are subject to change, possibly with
retroactive effect. The discussion does not deal with all Federal tax
considerations applicable to all categories of investors (including insurance
companies, tax-exempt organizations, financial institutions or broker-dealers,
foreign corporations, foreign partnerships and persons who are not citizens or
residents of the United States), some of which may be subject to special rules.
In addition, this summary is limited to holders who will hold the REPS as
"capital assets" (generally, property held for investment) within the meaning of
Section 1221 of the Code. This summary only addresses the United States Federal
income tax considerations of the REPS until the Coupon Reset Date.

Investors are urged to consult their own tax advisors to determine the
Federal, state, local, foreign, and other tax consequences relating to the
purchase, ownership and disposition of the REPS.

Prospective investors should note that no rulings have been or are expected
to be sought from the Internal Revenue Service (the "Service") with respect to
any of the Federal income tax considerations discussed below, and no assurance
can be given that the Service will not take contrary positions.

TREATMENT OF REPS

The United States Federal income tax treatment of debt obligations such as
the REPS is not entirely certain. Because the REPS are subject to a mandatory
put or call on the Coupon Reset Date, the Operating Partnership intends to treat
the REPS as maturing on the Coupon Reset Date for United States Federal income
tax purposes and as being reissued on the Coupon Reset Date should the
Callholder sell the REPS pursuant to the Coupon Reset Process. Based on such
treatment, stated interest on the REPS generally will be taxable to a holder as
ordinary income at the time it is paid or accrued in accordance with the
holder's regular method of tax accounting.

Under the foregoing treatment, upon the sale, exchange, redemption, or
other disposition of the REPS, a holder will generally recognize taxable gain or
loss equal to the difference between the amount realized by such holder on such
sale, exchange, redemption, or other disposition (except to the extent that such
amount realized represents accrued and unpaid interest that such holder has not
included in gross income previously) and such holder's adjusted tax basis in the
REPS. Pursuant to the Taxpayer Relief Act of 1997, in the case of an individual
holder, any capital gain recognized on the sale, exchange, redemption, or other
disposition of the REPS will generally be subject to United States Federal
income tax at a stated maximum rate of (i) 20%, if the holder's holding period
in the REPS was more than 18 months at the time of such sale, exchange,
redemption, or other disposition; (ii) 28%, if the holder's holding period in
the REPS was more than one year, but not more than 18 months, at the time of
such sale, exchange, redemption, or other disposition; and (iii) 39.6%, if the
holder's holding period in the REPS was not more than one year at the time of
such sale, exchange, redemption, or other disposition. Any capital loss
recognized by a holder on the sale, exchange, redemption, or other disposition
of the REPS will generally be long-term capital loss or short-term capital loss
depending on whether the holder held the REPS for more than one year. The
deductibility of capital losses is subject to limitations.

There can be no assurance, however, that the Service will agree with the
Operating Partnership's treatment of the REPS, and it is possible that the
Service could assert another treatment. For instance, it is possible that the
Service could seek to treat the REPS as maturing on the Final REPS Maturity Date
and to treat the issue price of the REPS as including the value of the Call
Option. Because of the Coupon Reset Process, if the REPS were treated as
maturing on the Final REPS Maturity Date, Treasury regulations relating to
contingent payment debt obligations would appear to be applicable. The effect of
such Treasury regulations would be to (i) require holders, regardless of their
usual method of accounting, to use an accrual method with respect to the REPS;
(ii) result in the possibility that holders would be required to accrue
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income in excess of actual cash payments received; and (iii) generally result in
ordinary rather than capital treatment of any gain or loss on the sale,
exchange, redemption, or other disposition of the REPS.

BACKUP WITHHOLDING

The Operating Partnership will report to holders of REPS and the Service
the amount of interest paid during each calendar year and the amount of tax
withheld, if any. Under the backup withholding rules, a holder of REPS may be
subject to backup withholding at the rate of 31% with respect to payments made
on the REPS as well as proceeds from the disposition of REPS unless such holder
(i) is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact, or (ii) 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 holder that does not provide the Operating Partnership 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
holder's income tax liability.

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DESCRIPTION OF CERTAIN PROVISIONS OF THE
PARTNERSHIP AGREEMENT OF THE OPERATING PARTNERSHIP

Substantially all of the Company's assets are held, and all of its
operations are conducted, by or through the Operating Partnership. The Company
is the sole general partner of the Operating Partnership and owns a 97.1%
interest therein. The right and power to manage the Operating Partnership is
vested exclusively in the Company, as sole general partner. The interest in the
Operating Partnership allocated to the Company is designated as a general
partner interest. Except with respect to distributions of cash and allocations
of income and loss, and except as otherwise noted herein and elsewhere in this
Prospectus, the description herein of Units is applicable also to Performance
Units, and holders of Performance Units are treated as limited partners. The
following summary of the Amended and Restated Agreement of Limited Partnership
of the Operating Partnership (the "Partnership Agreement") and the descriptions
of certain provisions set forth elsewhere in this Prospectus are qualified in
their entirety by reference to the Partnership Agreement, which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part.

GENERAL

Holders of Units hold limited partnership interests in the Operating
Partnership, and all holders of partnership interests (including the Company in
its capacity as general partner) are entitled to share in cash distributions
from, and in the profits and losses of, the Operating Partnership. The number of
GP Units held by the Company is equal to the total number of shares of Common
Stock outstanding. Accordingly, the distributions paid by the Company per share
outstanding are expected to be equal to the distributions per Unit paid on the
outstanding Units. The Units have not been registered pursuant to Federal or
state securities laws, and they will not be listed on the NYSE or any other
exchange or quoted on any national market system. However, the shares of Common
Stock that may be issued by the Company upon redemption of the Units may be sold
in registered transactions, or transactions exempt from registration under the
Securities Act. The limited partners of the Operating Partnership have the
rights to which limited partners are entitled under the Partnership Agreement
and the Partnership Act. The Partnership Agreement imposes certain restrictions
on the transfer of Units, as described below.

PURPOSE, BUSINESS AND MANAGEMENT

The Operating Partnership is organized as a Delaware limited partnership
pursuant to the terms of the Partnership Agreement. The Company is the sole
general partner of the Operating Partnership and conducts substantially all of
its business through the Operating Partnership, except for investment advisory
services (which are conducted through AMB Investment Management). The Operating
Partnership owns 100% of the non-voting preferred stock of AMB Investment
Management (representing 95% of its economic interest) and the Company's
executive officers own all of the outstanding voting common stock of AMB
Investment Management (representing 5% of its economic interest).

The primary purpose of the Operating Partnership is, in general, to
acquire, purchase, own, operate, manage, develop, redevelop, invest in, finance,
refinance, sell, lease and otherwise deal with industrial and retail properties
and assets related thereto, and interests therein. The Operating Partnership is
authorized to conduct any business that may be lawfully conducted by a limited
partnership formed under the Partnership Act, except that the Partnership
Agreement requires the business of the Operating Partnership to be conducted in
such a manner that will permit the Company to be classified as a REIT under
Section 856 of the Code, unless the Company ceases to qualify as a REIT for
reasons other than the conduct of the business of the Operating Partnership.
Subject to the foregoing limitation, the Operating Partnership may enter into
partnerships, joint ventures or similar arrangements and may own interests
directly or indirectly in any other entity.

The Company, as the 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 (as discussed below) and except as expressly limited in the
Partnership Agreement.

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The Company has the right to make all decisions and take all actions with
respect to the Operating Partnership's acquisition and operation of the
Properties and all other assets and businesses of or related to the 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, each limited partner expressly acknowledged in the Partnership
Agreement that the Company, as general partner, is acting on behalf of the
Operating Partnership's limited partners and the Company's stockholders
collectively, and is under no obligation to consider the tax consequences to
limited partners when making decisions for the benefit of the Operating
Partnership. The Company intends to make decisions in its capacity as general
partner of the Operating Partnership so as to maximize the profitability of the
Company and the Operating Partnership as a whole, independent of the tax effects
on the limited partners. The Company and the Operating Partnership have no
liability to a limited partner as a result of any liabilities or damages
incurred or suffered by, or benefits not derived by, a limited partner as a
result of an action or inaction of the Company as general partner of the
Operating Partnership as long as the Company acted in good faith. Limited
partners have no right or authority to act for or to bind the Operating
Partnership.

Investors who received Units in connection with the Formation Transactions,
as limited partners of the Operating Partnership, have no authority to transact
business for, or participate in the management activities or decisions of, the
Operating Partnership, except as provided in the Partnership Agreement and as
required by applicable law.

ENGAGING IN OTHER BUSINESSES; CONFLICTS OF INTEREST

The Company may not conduct any business other than in connection with the
ownership, acquisition and disposition of Operating Partnership interests as a
general partner and the management of the business of the Operating Partnership,
its operation as a public reporting company with a class (or classes) of
securities registered under the Exchange Act, its operation as a REIT and such
activities as are incidental to such activities (including, without limitation,
ownership of any interest in AMB Investment Management or a management or
finance subsidiary organized as a partnership, limited liability company or
corporation) without the consent of the holders of a majority of the limited
partnership interests. Except as may otherwise be agreed to in writing, each
limited partner, and its affiliates, is free to engage in any business or
activity, even if such business or activity competes with or is enhanced by the
business of the Operating Partnership. The Partnership Agreement does not
prevent another person or entity that acquires control of the Company in the
future from conducting other businesses or owning other assets, even though such
businesses or assets may be ones that it would be in the best interests of the
limited partners for the Operating Partnership to own. The Company, in the
exercise of its power and authority under the Partnership Agreement, may
contract and otherwise deal with or otherwise obligate the Operating Partnership
to entities in which the Company or any one or more of the officers, directors
or stockholders of the Company may have an ownership or other financial
interest, whether direct or indirect.

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

The Company does 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 reimburses the Company for all expenses it incurs relating to its
activities as general partner, its continued existence and qualification as a
REIT and all other liabilities incurred by the Company in connection with the
pursuit of its business and affairs. The Company may retain such persons or
entities as it shall determine (including itself, any entity in which the
Company has an interest, or any entity with which it is affiliated) to provide
services to or on behalf of the Operating Partnership. The Company is entitled
to reimbursement from the Operating Partnership for its out of pocket expenses
(other than amounts paid or payable to the Company or any entity in which the
Company has an interest or with which it is affiliated) incurred in connection
with Operating Partnership business. Such expenses include those incurred in
connection with the administration and activities of the Operating Partnership,
such as the maintenance of the Operating Partnership books and records,
management of the Operating Partnership property and assets, and

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preparation of information regarding the Operating Partnership provided to the
partners in the preparation of their individual tax returns. Except as expressly
permitted by the Operating Partnership Agreement, however, 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.

EXCULPATION AND INDEMNIFICATION OF THE COMPANY

The Partnership Agreement generally provides that the Company, as general
partner of the Operating Partnership, will incur no liability to the Operating
Partnership or any limited partner for losses sustained, liabilities incurred,
or benefits not derived as a result of errors in judgment or for any mistakes of
fact or law or for anything which it may do or refrain from doing in connection
with the business and affairs of the Operating Partnership if the Company
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
Company may consult with counsel, accountants, appraisers, management
consultants, investment bankers, and other consultants and advisors selected by
it. An opinion by any such consultant on a matter which the Company believes to
be within such consultant's professional or expert competence is deemed to be
complete protection as to any action taken or omitted to be taken by the Company
based on such opinion and in good faith.

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

SALES OF ASSETS; LIQUIDATION

Under the Partnership Agreement, the Company, as general partner, generally
has the exclusive authority to determine whether, when and on what terms the
assets of the Operating Partnership (including the Properties) will be sold.
However, the Company has agreed, in connection with the contribution of
Properties from taxable Investors in the Formation Transactions (with an
estimated aggregate value of approximately $54.2 million), not to dispose of
such assets in a taxable sale or exchange prior to November 26, 2001 (the fourth
anniversary of the consummation of the Formation Transactions) and, thereafter,
to use commercially reasonable efforts to minimize the adverse tax consequences
of any such sale. The Company may enter into similar agreements in connection
with other acquisitions of properties for Units.

A merger of the Operating Partnership with another entity generally
requires an affirmative vote of the holders of a majority of the outstanding
percentage interest (including that held directly or indirectly by the Company),
subject to certain consent rights of holders of Units as described below under
"Amendment of the Partnership Agreement." A dissolution or liquidation of the
Operating Partnership, including a sale or disposition of all or substantially
all of the Operating Partnership's assets and properties, also requires the
consent of a majority of all Units held by limited partners, including
Performance Units.

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CAPITAL CONTRIBUTION

The Partnership Agreement provides that if the Operating Partnership
requires additional funds at any time or from time to time in excess of funds
available to the Operating Partnership from borrowings or capital contributions,
the Company may borrow such funds from a financial institution or other lender
or through public or private debt offerings and lend such funds to the Operating
Partnership on the same terms and conditions as are applicable to the Company's
borrowing of such funds. As an alternative to borrowing funds required by the
Operating Partnership, the Company may contribute the amount of such required
funds as an additional capital contribution to the Operating Partnership. If the
Company so contributes additional capital to the Operating Partnership, the
Company's partnership interest in the Operating Partnership will be increased on
a proportionate basis. Conversely, the partnership interests of the limited
partners will be decreased on a proportionate basis in the event of additional
capital contributions by the Company. See "Policies With Respect to Certain
Activities -- Financing Policies."

REMOVAL OF THE GENERAL PARTNER; TRANSFERABILITY OF THE COMPANY'S INTERESTS;
TREATMENT OF UNITS IN SIGNIFICANT TRANSACTIONS

The general partner may not be removed by the limited partners, with or
without cause, other than with the consent of the general partner. The
Partnership Agreement provides that the Company may not voluntarily withdraw
from the Operating Partnership, without the consent of the limited partners.
However, except as set forth below, the Company may transfer or assign its
general partner interest in connection with a merger, consolidation or sale of
substantially all the assets of the Company without limited partner consent.

Neither the Company nor the Operating Partnership may engage in any merger,
consolidation or other combination with or into another person, or effect any
reclassification, recapitalization or change of its outstanding equity
interests, and the Company may not sell all or substantially all of its assets
(each a "Termination Transaction") unless in connection with the Termination
Transaction all holders of Units either will receive, or will have the right to
elect to receive, for each Unit an amount of cash, securities or other property
equal to the product of the number of shares of Common Stock into which each
Unit is then exchangeable and the greatest amount of cash, securities or other
property paid to the holder of one Share in consideration of one Share pursuant
to the Termination Transaction. If, in connection with the Termination
Transaction, a purchase, tender or exchange offer shall have been made to and
accepted by the holders of the outstanding shares of Common Stock, each holder
of Units will receive, or will have the right to elect to receive, the greatest
amount of cash, securities or other property which such holder would have
received had it exercised its right to redemption and received shares of Common
Stock in exchange for its Units immediately prior to the expiration of such
purchase, tender or exchange offer and had thereupon accepted such purchase,
tender or exchange offer. Performance Units issued or to be issued will also
have the benefit of such provisions, irrespective of the capital account then
applicable thereto.

A Termination Transaction may also occur if the following conditions are
met: (i) substantially all of the assets directly or indirectly owned by the
surviving entity are held directly or indirectly by the Operating Partnership or
another limited partnership or limited liability company which is the survivor
of a merger, consolidation or combination of assets with the Operating
Partnership (in each case, the "Surviving Partnership"); (ii) the holders of
Units, including the holders of Performance Units issued or to be issued, own a
percentage interest of the Surviving Partnership based on the relative fair
market value of the net assets of the Operating Partnership and the other net
assets of the Surviving Partnership immediately prior to the consummation of
such transaction; (iii) the rights, preferences and privileges of such holders
in the Surviving Partnership, including the holders of Performance Units issued
or to be issued, are at least as favorable as those in effect immediately prior
to the consummation of such transaction and as those applicable to any other
limited partners or non-managing members of the Surviving Partnership (except,
as to Performance Units, for such differences with Units regarding liquidation,
redemption or exchange as are described herein); and (iv) such rights of the
limited partners, including the holders of Performance Units issued or to be
issued, include at least one of the following: (a) the right to redeem their
interests in the Surviving Partnership for the consideration available to such
persons pursuant to the preceding paragraph; or (b) the right to redeem their
Units for cash on terms equivalent to those in effect immediately prior to the
consummation of such
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transaction, or, if the ultimate controlling person of the Surviving Partnership
has publicly traded common equity securities, such common equity securities,
with an exchange ratio based on the relative fair market value of such
securities and the Common Stock. For purposes of this paragraph, the
determination of relative fair market values and rights, preferences and
privileges of the limited partners shall be reasonably determined by the
Company's Board of Directors as of the time of the Termination Transaction and,
to the extent applicable, the values shall be no less favorable to the holders
of Units than the relative values reflected in the terms of the Termination
Transaction.

In addition, in the event of a Termination Transaction, the arrangements
with respect to Performance Units and Performance Shares will be equitably
adjusted to reflect the terms of the transaction, including, to the extent that
the shares are exchanged for consideration other than publicly traded common
equity, the transfer or release of remaining Performance Shares, and resulting
issuance of any Performance Units, as of the consummation of the Termination
Transaction or set forth in the applicable Supplement.

REDEMPTION/EXCHANGE RIGHTS

Holders of Units will have the right, commencing on the first anniversary
of becoming a limited partner of the Operating Partnership, to require the
Operating Partnership to redeem part or all of their Units for cash (based upon
the fair market value of an equivalent number of shares of Common Stock at the
time of such redemption) or the Company may elect to exchange such Units for
shares of Common Stock (on a one-for-one basis, subject to adjustment in the
event of stock splits, stock dividends, issuance of certain rights, certain
extraordinary distributions and similar events). The Company presently
anticipates that it will elect to issue shares of Common Stock in exchange for
Units in connection with each such redemption request, rather than having the
Operating Partnership pay cash. With each such redemption or exchange, the
Company's percentage ownership interest in the Operating Partnership will
increase. This redemption/exchange right may be exercised by limited partners
from time to time, in whole or in part, subject to the limitations that such
right may not be exercised at any time to the extent such exercise would result
in any person actually or constructively owning shares of Common Stock in excess
of the Ownership Limit or such other amount as permitted by the Board of
Directors, as applicable, assuming common stock was issued in such exchange.
Holders of Performance Units also have limited redemption/exchange rights, as
discussed under the caption "-- Performance Units" below.

PERFORMANCE UNITS

Notwithstanding the foregoing discussion of distributions and allocations
of income or loss of the Operating Partnership, depending on the trading price
of the Common Stock after November 26, 1998 (the first anniversary of the IPO),
the executive officers, in their capacity as limited partners of the Operating
Partnership, may receive Performance Units. The Performance Units are be similar
to Units in many respects, including (i) the right to share in operating
distributions, and allocations of operating income and loss, of the Operating
Partnership on a pro rata basis with Units; and (ii) certain redemption and
exchange rights, including limited rights to cause the Operating Partnership to
redeem such Performance Units for cash or, at the Company's option, to exchange
such units for shares of Common Stock. Any such redemption rights, however, will
be dependent upon an increase in the value of the assets of the Operating
Partnership (in some cases measured by reference to the trading price of the
shares of Common Stock) subsequent to the issuance of such Performance Units.
Without such an increase, the holders of Performance Units will not be entitled
to receive any proceeds upon the liquidation of the Operating Partnership or the
redemption of their Performance Units. If any Performance Units were issued to
the executive officers , in their capacity as limited partners of the Operating
Partnership, an equal number of GP Units allocable to the Company and Units
allocable to Performance Investors who are limited partners in the Operating
Partnership were transferred to the Operating Partnership. In addition, if any
of the Company's GP Units were transferred to the Operating Partnership as a
result of the issuance of Performance Units, an equal number of Performance
Shares were transferred by Company stockholders to the Company from the
applicable Performance Investors.

Accordingly, no Company stockholder or limited partner in the Operating
Partnership (other than Performance Investors, to the extent of their
obligations to transfer Performance Shares to the Company or
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the Operating Partnership, as applicable) was diluted as a result of the
issuance of Performance Units to the executive officers.

REGISTRATION RIGHTS

The Company granted to Investors receiving Units in connection with the
Formation Transactions certain registration rights (collectively, the
"Registration Rights") with respect to the shares of Common Stock issuable upon
exchange of Units or otherwise (the "Registrable Shares"). The Company has
agreed to file and generally keep continuously effective beginning one year
after the completion of the IPO a registration statement covering the issuance
of shares of Common Stock upon exchange of Units and the resale thereof.
Pursuant to the terms and conditions of such Registration Rights, prior to the
date upon which shares of Common Stock issued as of the date of the consummation
of the IPO would be eligible for resale under Rule 144(k) under the Securities
Act, as such rule may be amended from time to time (or any similar rule or
regulation hereafter adopted by the SEC), each Investor will be limited to
resales of Registrable Shares to the number of Registrable Shares which
otherwise would be eligible for resale by such Investor pursuant to Rule 144,
assuming such Registrable Shares were issued as of the date of the consummation
of the IPO. The shelf registration statement will also cover Shares issuable
upon exchange of Performance Units. The Company may also agree to provide the
Registration Rights to any other person who may become an owner of Units,
provided such person provides the Company with satisfactory undertakings. The
Company will bear expenses incident to its registration obligations upon
exercise of the Registration Rights, including the payment of Federal securities
law and state Blue Sky registration fees, except that it will not bear any
underwriting discounts or commissions or transfer taxes relating to registration
of Registrable Shares.

DUTIES AND CONFLICTS

Except as otherwise set forth in "Policies with Respect to Certain
Activities -- Conflicts of Interest Policies" and "Management -- Employment
Agreements," any limited partner of the Operating Partnership may engage in
other business activities outside the Operating Partnership, including business
activities that directly compete with the Operating Partnership.

MEETINGS; VOTING

Meetings of the limited partners may be called by the Company, on its own
motion, or upon written request of limited partners owning at least 25% of the
then outstanding Units. Limited partners may vote either in person or by proxy
at meetings. Any action that is required or permitted to be taken by the limited
partners may be taken either at a meeting of the limited partners or without a
meeting if consents in writing setting forth the action so taken are signed by
limited partners owning not less than the minimum number of Units that would be
necessary to authorize or take such action at a meeting of the limited partners
at which all limited partners entitled to vote on such action were present. On
matters for which limited partners are entitled to vote, each limited partner
has a vote equal to the number of Units the limited partner holds. A transferee
of Units who has not been admitted as a substituted limited partner with respect
to such Units will have no voting rights with respect to such Units, even if
such transferee holds other Units as to which it has been admitted as a limited
partner. The Partnership Agreement does not provide for annual meetings of the
limited partners, and the Company does not anticipate calling such meetings.

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 general partner, and partners (including the Company) holding a
majority of the percentage interest of the partnership. 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 as denoted herein) or the dissolution of the Operating Partnership, may not
be amended without the approval of a majority of the percentage interests of the
partnership. Notwithstanding the foregoing, the Company, as general partner, has
the power, without the consent of the limited partners, to
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amend the Partnership Agreement as may be required to, among other things, (i)
add to the obligations of the Company as general partner or surrender any right
or power granted to the Company as general partner, (ii) reflect the admission,
substitution, termination or withdrawal of partners in accordance with the terms
of the Partnership Agreement, (iii) establish the rights, powers, duties and
preferences of any additional partnership interests issued in accordance with
the terms of the Partnership Agreement, (iv) reflect a change of an
inconsequential nature that does not materially adversely affect any limited
partner, or cure any ambiguity, correct or supplement any provisions of the
Partnership Agreement not inconsistent with law or with other provisions of the
Partnership Agreement, or make other changes concerning matters under the
Partnership Agreement that are not otherwise inconsistent with the Partnership
Agreement or applicable law or (v) satisfy any requirements of Federal, state or
local law.

Certain amendments, including amendments effected directly or indirectly
through a merger or sale of assets of the Operating Partnership or otherwise,
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, either of which actions will have the effect of changing the
percentage interests of the partners and thus altering their interests in
profits, losses and distributions) or (iv) alter the limited partner's
redemption right, must be approved by the Company and each limited partner that
would be adversely affected by such amendment. Such protections apply to both
holders of Units and holders of Performance Units. In addition, no amendment may
be effected, directly or indirectly, through a merger or sale of assets of the
Operating Partnership or otherwise, which would adversely affect the rights of
former stockholders of AMBIRA to receive Performance Units as described herein.

BOOKS AND REPORTS

The Operating Partnership's books and records are maintained at the
principal office of the Operating Partnership, which is located at 505
Montgomery Street, San Francisco, California 94111. All elections and options
available to the Operating Partnership for Federal or state income tax purposes
may be taken or rejected by the Operating Partnership in the sole discretion of
the Company. The limited partners have the right, subject to certain
limitations, to receive copies of the most recent SEC filings by the Company,
the Operating Partnership's Federal, state and local income tax returns, a list
of limited partners, the Partnership Agreement, the partnership certificate and
all amendments thereto and certain information about the capital contributions
of the partners. The Company may keep confidential from the limited partners any
information that the Company believes to be in the nature of trade secrets or
other information the disclosure of which the Company in good faith believes is
not in the best interests of the Operating Partnership or which the Operating
Partnership is required by law or by agreements with unaffiliated third parties
to keep confidential.

The Company will use reasonable efforts to furnish to each limited partner,
within 90 days after the close of each taxable year, the tax information
reasonably required by the limited partners for Federal and state income tax
reporting purposes.

TERM

The Operating Partnership will continue in full force and effect for
approximately 99 years or until sooner dissolved pursuant to the terms of the
Partnership Agreement.

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DESCRIPTION OF CAPITAL STOCK

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

GENERAL

Under the Articles of Incorporation, as amended (the "Articles of
Incorporation"), the authorized capital stock of the Company consists of
500,000,000 shares of common stock, par value $.01 per share ("Common Stock"),
and 100,000,000 shares of preferred stock, par value $.01 per share ("Preferred
Stock"). As of December 31, 1997, no shares of Preferred Stock and 85,874,513
shares of Common Stock were issued and outstanding.

COMMON STOCK

Each outstanding share of Common Stock entitles the holder to one vote on
all matters presented to stockholders for a vote, including the election of
directors, and, except as otherwise required by law and except as provided in
any resolution adopted by the Board of Directors with respect to any other class
or series of stock establishing the designation, powers, preferences and
relative, participating, optional or other special rights and powers of such
series, the holders of such shares possess the exclusive voting power, subject
to the provisions of the Company's Articles of Incorporation regarding the
ownership of shares of Common Stock in excess of the Ownership Limit or such
other limit as provided in the Company's Articles of Incorporation or as
otherwise permitted by the Board of Directors. Holders of shares of Common Stock
do not have any conversion, exchange, sinking fund, redemption or appraisal
rights or any preemptive rights to subscribe for any securities of the Company
or cumulative voting rights in the election of directors. All shares of Common
Stock that are issued and outstanding are duly authorized, fully paid and
nonassessable. Subject to the preferential rights of any other shares or series
of stock and to the provisions of the Articles of Incorporation regarding
ownership of shares of Common Stock in excess of the Ownership Limit, or such
other limit as provided in the Company's Articles of Incorporation or as
otherwise permitted by the Board of Directors, distributions may be paid to the
holders of shares of Common Stock if and when authorized and declared by the
Board of Directors of the Company out of funds legally available therefor. The
Company intends to make quarterly distributions, beginning with distributions
for the portion of the quarter from the consummation of the IPO to December 31,
1997.

Under the MGCL, stockholders are generally not liable for the Company's
debts or obligations. If the Company is liquidated, subject to the right of any
holders of Preferred Stock to receive preferential distributions, each
outstanding share of Common Stock will be entitled to participate pro rata in
the assets remaining after payment of, or adequate provision for, all known
debts and liabilities of the Company, including debts and liabilities arising
out of its status as general partner of the Operating Partnership.

Subject to the provisions of the Articles of Incorporation regarding the
ownership of shares of Common Stock in excess of the Ownership Limit, or such
other limit as provided in the Company's Articles of Incorporation or as
otherwise permitted by the Board of Directors described below, all shares of
Common Stock have equal distribution, liquidation and voting rights, and have no
preference or exchange rights.

Under the MGCL, a Maryland corporation generally cannot dissolve, amend its
charter, merge, sell all or substantially all of its assets, engage in a share
exchange or engage in similar transactions outside the ordinary course of
business unless approved by the affirmative vote of stockholders holding at
least two-thirds of the 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 corporation's charter. Under the MGCL, the
term "substantially all of the Company's assets" is not defined and is,
therefore, subject to Maryland common law and to judicial interpretation and
review in the context of the unique facts and circumstances of any particular
transaction. The Articles of Incorporation do not provide for a lesser
percentage in any such situation.

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The Articles of Incorporation authorize the Board of Directors to
reclassify any unissued shares of Common Stock into other classes or series of
classes of stock and to establish the number of shares in each class or series
and to set the preferences, conversion and other rights, voting powers,
restrictions, limitations and restrictions on ownership, limitations as to
dividends or other distributions, qualifications and terms or conditions of
redemption for each such class or series.

PREFERRED STOCK

Preferred Stock may be issued from time to time, in one or more classes or
series, as authorized by the Board of Directors. No Preferred Stock is currently
issued or outstanding. Prior to the issuance of shares of each class or series,
the Board of Directors is required by the MGCL and the Company's Articles of
Incorporation to fix for each class or series the terms, preferences, conversion
or other rights, voting powers, restrictions, limitations as to distributions,
qualifications and terms or conditions of redemption, as permitted by Maryland
law. Because the Board of Directors has the power to establish the preferences,
powers and rights of each class or series of Preferred Stock, it may afford the
holders of any class or series of Preferred Stock preferences, powers and
rights, voting or otherwise, senior to the rights of holders of shares of Common
Stock. The issuance of Preferred Stock could have the effect of delaying or
preventing a change of control of the Company that might involve a premium price
for holders of shares of Common Stock or otherwise be in their best interest.
The Board of Directors has no present plans to issue any Preferred Stock.

108
<PAGE> 116

UNDERWRITERS

Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the Underwriters named
below have severally agreed to purchase, and the Operating Partnership has
agreed to sell to them, severally, the respective principal amount of Notes set
forth opposite their respective names below:

<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT
OF 2008 NOTES OF 2018 NOTES OF REPS
NAME ------------- ------------- ------------
<S> <C> <C> <C>
Morgan Stanley & Co. Incorporated....
Goldman, Sachs & Co..................
J.P. Morgan Securities Inc...........
------------ ------------ ------------
Total...................... $ $ $
============ ============ ============
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Notes 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 Notes
offered hereby if any are taken.

The Underwriters propose to offer part of the Notes directly to the public
at the public offering price set forth on the cover page of this Prospectus and
part to certain dealers at a price that represents a concession not in excess of
% of the principal amount of the Notes. Any Underwriter may allow, and such
dealers may reallow, a concession not in excess of % of the principal
amount of the Notes to certain other dealers. After the initial offering of the
Notes, the offering price and other selling terms may from time to time be
varied by the Underwriters.

The Operating Partnership and the Company have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.

Neither the Operating Partnership nor the Company intends to apply for
listing of the Notes on a national securities exchange, but have been advised by
the Underwriters that they presently intend to make a market in the Notes as
permitted by applicable laws and regulations. The Underwriters are not
obligated, however, to make a market in the Notes and any such market making may
be discontinued at any time at the sole discretion of the any Underwriter.
Accordingly, no assurance can be given as the liquidity of, or trading market
for, the Notes.

In order to facilitate the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Underwriters may stabilize the price of the Notes and
the Underwriters may bid for, and purchase, the Notes in the open market.
Finally, the underwriting syndicate may reclaim selling concessions allowed to
an Underwriter or a dealer for distributing the Notes in the Offering, if the
syndicate repurchases previously distributed Notes 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 Notes above
independent market levels. The Underwriters are not required to engage in these
activities, and may end any of these activities at any time.

The Operating Partnership intends to use the net proceeds from the sale of
the Notes offered hereby to repay indebtedness outstanding under the Credit
Facility and for general purposes. Morgan Guaranty Trust Company of New York, an
affiliate of J.P. Morgan Securities Inc., one of the Underwriters, is the agent
and a lender under the Credit Facility. As the Company expects that in excess of
10% of the net proceeds will be used to repay indebtedness under the Credit
Facility, the Offering is being made in compliance with the requirements of Rule
2710(c)(8) of the Conduct Rules of the National Association of Securities
Dealers, Inc. See "Use of Proceeds."

109
<PAGE> 117

LEGAL MATTERS

Certain legal matters in connection with the Offering will be passed upon
for the Operating Partnership by Latham & Watkins, Los Angeles, California.
Certain legal matters will be passed upon for the Underwriters by Gibson, Dunn &
Crutcher LLP, Los Angeles, California. Certain legal matters relating to
Maryland law, including the validity of the issuance of the Notes offered
hereby, will be passed upon for the Company, as general partner of the Operating
Partnership, by Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland.

EXPERTS

The financial statements and schedules included in this Prospectus, to the
extent and for the periods indicated in their reports thereto, have been audited
by Arthur Andersen LLP, independent public accountants, and are included herein
in reliance upon the authority of said firm as experts in auditing and
accounting in giving said reports.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: Seven World Trade Center, Suite 1300, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials can be obtained by mail from the
Public Reference Section of the Commission, at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy statements and other information regarding registrants
that file electronically with the Commission. In addition, reports, proxy
statements and other information concerning the Company can be inspected at the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.

This Prospectus constitutes a part of a Registration Statement on Form S-11
(together with amendments and exhibits thereto, the "Registration Statement")
filed by the Registrants with the Commission under the Securities Act. The
Prospectus omits certain of the information contained in the Registration
Statement, and reference is hereby made to the Registration Statement for
further information with respect to the Registrants and the securities offered
hereby. Any statements contained herein concerning the provisions of any
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission are not necessarily complete, and in each instance reference
is made to the copy of such document so filed. Each such statement is qualified
in its entirety by such reference.

110
<PAGE> 118

GLOSSARY

"ACBM" means asbestos-containing building materials.

"ADA" means the Americans with Disabilities Act of 1990.

"affiliate" has the meaning given to it in the Securities Act.

"AMB" means AMB Institutional Realty Advisors, Inc., a California
corporation.

"AMB Intercompany Party" means a party to the Intercompany Agreement.

"AMB Predecessors" means collectively, AMB and certain real estate
investment funds, trusts, corporations and partnerships that prior to the
Offering owned the Properties, as identified in Note 1. Organization and Basis
of Presentation to the historical financial statements of the AMB Contributed
Properties, including CIF, VAF, WPF and the Individual Account Investors.

"AMB Property Corporation" means AMB Property Corporation, a Maryland
corporation with its principal office at 505 Montgomery Street, San Francisco,
California 94111.

"AMBCREA" means AMB Corporate Real Estate Advisors, Inc., a California
corporation.

"AMBI" means AMB Investments, Inc., a California corporation.

"AMB Investment Management" means AMB Institutional Realty Advisors, Inc.,
a Maryland corporation, of which the Company owns 100% of the non-voting
preferred stock (representing 95% of its economic value) and the executive
officers owns 100% of the outstanding voting common stock (representing 5% of
its economic value) with its operations conducted through the Investment
Management Partnership and which, through the Investment Management Partnership,
provides the real estate advisory services to the Company and to certain of
AMB's clients which did not participate in the Formation Transactions.

"Anchor Tenants" means retail tenants occupying more than 10,000 rentable
square feet and all grocery stores and drugstores.

"Annualized Base Rent" means the monthly contractual rent under existing
leases at December 31, 1997, multiplied by 12. This amount excludes expense
reimbursements and rental abatements for industrial and retail properties as
well as percentage rents for retail properties.

"Articles of Incorporation" means the Articles of Incorporation of the
Company.

"Bylaws" means the bylaws of the Company.

"CIF" means AMB Current Income Fund, Inc., a Maryland corporation.

"Code" means the Internal Revenue Code of 1986.

"Common Stock" means shares of common stock of the Company.

"Company" means AMB Property Corporation and its subsidiaries, including
AMB Property, L.P., and with respect to the period prior to the IPO, the AMB
Predecessors.

"Credit Facility" means the Operating Partnership's unsecured $500 million
credit facility among the Operating Partnership, MGT and a syndicate of 12 other
banks.

"Debt-to-Total Market Capitalization Ratio" means the ratio calculated
based on the Company's total consolidated debt and its pro rata share of
unconsolidated debt as a percentage of the market value of outstanding shares of
Common Stock and Units (not owned by the Company) plus the Company's total
consolidated debt and its pro rata share of unconsolidated debt.

"Eastern region" means the Eastern region of the United States as defined
by the National Council of Real Estate Investment Fiduciaries which includes the
states of Connecticut, Delaware, Kentucky, Maine,

111
<PAGE> 119

Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina,
Pennsylvania, Rhode Island, South Carolina, Vermont, West Virginia and the
District of Columbia.

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

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

"expense reimbursements" means each tenant's proportionate share of taxes,
insurance and operating expenses to be reimbursed to the Company.

"FASB" means the Financial Accounting Standards Board.

"Formation Transactions" means certain transactions which the Company, the
Operating Partnership and AMB Investment Management engaged in to enable the
Company to continue and grow the real estate operations of the AMB Predecessors,
to facilitate the IPO, to enable the Company to qualify as a REIT for Federal
income tax purposes commencing with its taxable year ended December 31, 1997 and
to preserve certain tax advantages for the existing owners of the Properties.

"forward-looking statements" means statements relating to, without
limitation, future economic performance, plans and objectives of management for
future operations and projections of revenue and other financial items, which
can be identified by the use of forward-looking terminology such as "may,"
"will," "should," "expect," "anticipate," "estimate" or "continue" or the
negative thereof or other variations thereon or comparable terminology.

"Funds from Operations" or "FFO" means income (loss) from operations before
disposal of real estate properties, minority interests and extraordinary items
plus depreciation and amortization, excluding depreciation of furniture,
fixtures and equipment less FFO attributable to minority interests in
consolidated joint ventures which are not convertible into shares of Common
Stock.

"GAAP" means generally accepted accounting principles.

"GP Units" means units of the Operating Partnership representing the
general partnership interest therein, with generally identical rights to
distributions as the Units.

"Holders" means holders of the Notes.

"Independent Director" means a director who is not an employee, officer or
affiliate of the Company or a subsidiary or division thereof, or a relative of a
principal executive officer, or who is not an individual member of an
organization acting as advisor, consultant or legal counsel, receiving
compensation on a continuing basis from the Company in addition to director's
fees.

"Individual Account Investors" means certain individual account investors,
each of which has assets under management with AMB pursuant to an investment
advisory agreement.

"Industrial Properties" means the industrial properties comprised
principally of warehouse distribution facilities which are owned by the Company.

"in-fill" means those markets which are typified by significant population
densities and low availability of land which could be developed into competitive
retail properties. Such properties allow for a more precise analysis of their
trade areas and competition than properties located in areas which are
undergoing substantial real estate development.

"Intercompany Agreement" means that certain agreement dated January 1,
1993, as amended, entered into by and among AMBI, AMB, AMBCREA, AMB Properties,
AMB Development, Inc., AMB Institutional Housing Partners and other related or
commonly controlled business entities as may become parties thereto from to
time.

"Investment Committee" means that certain management committee which
reviews and approves each investment of the Company and the Operating
Partnership.

112
<PAGE> 120

"Investment Management Partnership" means AMB Investment Management Limited
Partnership, a Maryland limited partnership, of which AMB Investment Management
is the sole general partner and owns the entire capital interests, and through
which the operations of AMB Investment Management are conducted.

"IPO" means the initial public offering of the Company's common stock.

"IRS" means the United States Internal Revenue Service.

"Joint Ventures" means the joint ventures, limited liability companies and
partnerships between certain third parties.

"MGCL" means Maryland General Corporation Law.

"MGT" means Morgan Guaranty Trust Company of New York.

"Midwestern region," means the Midwestern region of the United States as
defined by the National Council of Real Estate Investment Fiduciaries which
includes the states of Illinois, Iowa, Indiana, Kansas, Michigan, Minnesota,
Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin.

"Named Executive Officers" means the Company's Chief Executive Officer and
the four other most highly compensated executive officers.

"NAIOP" means the National Association of Industrial and Office Parks.

"NAREIM" means the National Association of Real Estate Investment Managers.

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

"Noteholder" means the Person in whose name a Note is registered.

"NYSE" means the New York Stock Exchange.

"Offering" means the offering of the Notes made hereby.

"Operating Partnership" means AMB Property, L.P., a Delaware limited
partnership of which the Company is the general partner.

"Ownership Limit" means the Company generally will prohibit ownership,
directly or by virtue of the constructive ownership provisions of the Code, by
any single stockholder of more than 9.8% of the issued and outstanding shares of
Common Stock (subject to certain exceptions) and generally will prohibit
ownership, directly or by virtue of the constructive ownership provisions of the
Code, by any single stockholder of more than 9.8% of the issued and outstanding
shares of any class or series of the Company's Preferred Stock.

"Partnership Act" means the Delaware Uniform Limited Partnership Act.

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

"percentage rents" means the rents calculated as a percentage of a tenant's
gross sales above predetermined thresholds.

Performance Investors" means those Investors which own assets (either
directly or through CIF, VAF or WPF) which are subject to advisory agreements
with AMB and include an incentive fee provision or, in the case of WPF, a "catch
up adjustment."

"Performance Shares" means the specified portion of the Shares issuable in
the Formation Transactions to Performance Investors.

"Performance Units" means units of the Operating Partnership issuable to
certain officers and employees of the Operating Partnership.

"Preferred Stock" means preferred shares of beneficial interest, $0.01 par
value per share, which the Articles of Incorporation of the Company authorize
the Board of Directors to cause the Company to issue, in series, and to
establish the preferences, rights and other terms of any series so issued.
113
<PAGE> 121

"Properties" means the Industrial Properties and the Retail Properties.

"Prospectus" means the prospectus to be used in connection with the
Offering of the Notes.

"Registrable Shares" means the Shares issuable upon exchange of Units or
otherwise, the holder of which has certain registration rights with respect to
those Shares.

"Registration Rights" means certain registration rights with respect to the
Shares issuable upon exchange of Units or otherwise granted to investors who
received Units in connection with the Formation Transactions.

"REIT" means a real estate investment trust under the Code.

"restricted securities" has the meaning given to it in Rule 144 under the
Securities Act.

"Retail Properties" means the retail properties comprised principally of
community shopping centers which are owned by the Company.

"Rule 144" means the rule adopted by the SEC that permits holders of
restricted securities as well as affiliates of an issuer of the securities,
pursuant to certain conditions and subject to certain restrictions, to sell
their securities publicly without registration under the Securities Act.

"San Francisco Bay Area" means the area comprised of the nine counties in
immediate proximity to the San Francisco Bay.

"SEC" or "Commission" means the Securities and Exchange Commission.

"Section 401(k) Plan" means the Company's Section 401(k) savings/retirement
plan.

"Secured Facility" means a 12-year non-recourse secured financing facility
due December 12, 2008 which is secured by six Properties.

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

"Southern region" means the Southern region of the United States as defined
by the National Council of Real Estate Investment Fiduciaries which includes the
states of Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Oklahoma,
Tennessee and Texas.

"stabilization" means when capital improvements for repositioning,
development and redevelopment programs have been completed and in effect for a
sufficient period of time (but in no case more than 12 months after shell
completion) to achieve market occupancy of at least 95%.

"Stock Incentive Plan" means the Stock Option and Incentive Plan
established by the Company.

"Subsidiaries" means the subsidiaries of AMB Property Corporation and AMB
Property, L.P.

"Termination Transaction" means, with respect to the Company, any merger,
consolidation or other combination with or into another person, a sale of all or
substantially all of its assets or any reclassification, recapitalization or
change of its outstanding equity interests, unless in connection with such
transaction, all holders of Units either will receive, or will have the right to
elect to receive, for each Unit an amount of cash, securities or other property
equal to the product of the number of Shares into which each Unit is then
exchangeable and the greatest amount of cash, securities or other property paid
to the holder of one Share in consideration of one Share pursuant to such
transaction.

"Transferee" means an assignee, legatee, distributee or other transferee of
all or any portion of a partner's interest in the Operating Partnership.

"Treasury Regulations" means the IRS regulations.

"Underwriters" means those underwriters named herein for whom Morgan
Stanley & Co. Incorporated, Goldman, Sachs & Co. and J.P. Morgan Securities Inc.
are acting as representatives.

114
<PAGE> 122

"Underwriting Agreement" means that certain underwriting agreement pursuant
to which the Underwriters have severally agreed to purchase, and the Company has
agreed to sell to them, severally, the aggregate principal amount of the Notes
as set forth on the table under the caption "Underwriters" herein.

"Units" means units of the Operating Partnership.

"VAF" means AMB Value Added Fund, Inc., a Maryland corporation.

"Western region" means the Western region of the United States as defined
by the National Council of Real Estate Investment Fiduciaries which includes the
states of Alaska, Arizona, California, Colorado, Hawaii, Montana, Nevada, New
Mexico, Oregon, Utah, Washington and Wyoming.

"White Paper" means the White Paper on Funds from Operations approved by
the Board of Governors of the NAREIT in March 1995.

"WPF" means AMB Western Properties Fund-I, a California limited
partnership.

115
<PAGE> 123

INDEX TO FINANCIAL INFORMATION

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
AMB PROPERTY, L.P.
-- Pro forma condensed consolidated balance sheet as of
December 31, 1997...................................... F-3
-- Notes to pro forma condensed consolidated balance
sheet.................................................. F-4
-- Pro forma condensed consolidated statement of
operations for the year ended
December 31, 1997..................................... F-5
-- Notes to pro forma condensed consolidated statement of
operations............................................. F-6

HISTORICAL FINANCIAL INFORMATION
AMB PROPERTY CORPORATION
-- Report of independent public accountants............... F-11
-- Consolidated balance sheets as of December 31, 1996 and
1997................................................... F-12
-- Consolidated statements of operations for the years
ended December 31, 1995, 1996 and 1997................. F-13
-- Consolidated statements of cash flows for the years
ended December 31, 1995, 1996 and 1997................. F-14
-- Consolidated statements of stockholders' equity for the
years ended December 31, 1995, 1996 and 1997........... F-15
-- Notes to consolidated financial statements............. F-16

AMB CONTRIBUTED PROPERTIES
-- Report of independent public accountants............... F-31
-- Combined balance sheets as of December 31, 1995 and
1996 and September 30, 1997 (unaudited)................ F-32
-- Combined statements of operations for the years ended
December 31, 1994, 1995 and 1996, the nine months ended
September 30, 1996 (unaudited) and the period from
January 1, 1997 to November 25, 1997(unaudited)........ F-33
-- Combined statements of owners' equity for the years
ended December 31, 1994, 1995 and 1996 and the nine
months ended September 30, 1997 (unaudited)............ F-34
-- Combined statements of cash flows for the years ended
December 31, 1994, 1995 and 1996, the nine months ended
September 30, 1996 (unaudited) and the period from
January 1, 1997 to November 25, 1997(unaudited)........ F-35
-- Notes to combined financial statements................. F-36

THE 1998 ACQUIRED PROPERTIES
-- Report of independent public accountants............... F-42
-- Combined statement of revenues and certain expenses for
the year ended December 31, 1997....................... F-43
-- Notes to combined statement of revenues and certain
expenses............................................... F-44

THE 1997 ACQUIRED PROPERTIES
-- Report of independent public accountants............... F-46
-- Combined statements of revenues and certain expenses
for the year ended December 31, 1996 and the period
from January 1, 1997 to the date of acquisition
(unaudited)............................................ F-47
-- Notes to combined statements of revenues and certain
expenses............................................... F-48
</TABLE>

F-1
<PAGE> 124

AMB PROPERTY, L.P.

PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

BACKGROUND

The accompanying unaudited pro forma condensed consolidated balance sheet
as of December 31, 1997 has been prepared to reflect: (i) the acquisition of
properties subsequent to December 31, 1997, (ii) the Offering and (iii) certain
other adjustments as if such transactions and adjustments had occurred on
December 31, 1997. The accompanying unaudited pro forma condensed consolidated
statement of operations has been prepared to reflect: (i) the incremental effect
of the acquisition of properties during 1997, (ii) the incremental effect of the
disposition or partial disposition of properties during 1997, (iii) the IPO and
Formation Transactions, (iv) the acquisition of properties subsequent to
December 31, 1997, (v) pro forma debt adjustments resulting from the Offering
and (vi) certain other adjustments as if such transactions and adjustments had
occurred on January 1, 1997.

These unaudited pro forma condensed consolidated statements should be read
in connection with the historical combined financial statements and notes
thereto of the AMB Contributed Properties and the consolidated financial
statements and notes thereto of AMB Property Corporation included elsewhere in
this Prospectus. In the opinion of management, the pro forma condensed
consolidated financial information provides for all adjustments necessary to
reflect the effects of the IPO and Formation Transactions, the Offering,
property acquisitions and dispositions and certain other transactions.

The pro forma information is unaudited and is not necessarily indicative of
the consolidated results that would have occurred if the transactions and
adjustments reflected therein had been consummated in the period or on the date
presented, or on any particular date in the future, nor does it purport to
represent the financial position, results of operations or changes in cash flows
for future periods.

F-2
<PAGE> 125

AMB PROPERTY, L.P.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997 (UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
OPERATING 1998 PROPERTY OTHER PRE-OFFERING
PARTNERSHIP(1) ACQUISITIONS(2) ADJUSTMENTS(3) PRO FORMA OFFERING(4) PRO FORMA
-------------- --------------- -------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in real estate,
net.......................... $2,438,846 $290,815 $ -- $2,729,661 $ -- $2,729,661
Cash and cash equivalents...... 39,968 (13,338) (7,808) 18,822 5,224 24,046
Other assets................... 27,441 -- -- 27,441 275 27,716
---------- -------- -------- ---------- --------- ----------
Total assets......... $2,506,255 $277,477 $ (7,808) $2,775,924 $ 5,499 $2,781,423
========== ======== ======== ========== ========= ==========

LIABILITIES AND PARTNERS'
CAPITAL

Secured debt................... $ 535,652 $ 48,600 $ -- $ 584,252 $ -- $ 584,252
Credit facility................ 150,000 164,501 30,000 344,501 (344,501) --
Unsecured notes................ -- -- -- -- 350,000 350,000
Other liabilities.............. 87,421 -- (37,808) 49,613 -- 49,613
---------- -------- -------- ---------- --------- ----------
Total liabilities.... 773,073 213,101 (7,808) 978,366 5,499 983,865
---------- -------- -------- ---------- --------- ----------

Minority interests............. 15,784 36,976 -- 52,760 -- 52,760
---------- -------- -------- ---------- --------- ----------

Partners' capital
Limited partner........... 49,368 27,400 -- 76,768 -- 76,768
General partner........... 1,668,030 -- -- 1,668,030 -- 1,668,030
---------- -------- -------- ---------- --------- ----------
Total capital........ 1,717,398 27,400 -- 1,744,798 -- 1,744,798
---------- -------- -------- ---------- --------- ----------
$2,506,255 $277,477 $ (7,808) $2,775,924 $ 5,499 $2,781,423
========== ======== ======== ========== ========= ==========
</TABLE>

F-3
<PAGE> 126

AMB PROPERTY, L.P.

NOTES TO PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)

1. Reflects the historical consolidated balance sheet of AMB Property, L.P.
as of December 31, 1997. See the historical consolidated financial statements
and notes thereto of AMB Property Corporation, which holds a 97.1% general
partner interest in AMB Property, L.P., included elsewhere in this Prospectus.

2. Reflects property acquisitions subsequent to December 31, 1997 for an
estimated total purchase price of approximately $290,815, including estimated
acquisition costs. The Operating Partnership has funded these acquisitions
through cash on hand, borrowings under its Credit Facility, the assumption of
mortgage notes payable and the issuance of 1,106,446 Operating Partnership
units. The 1998 property acquisitions include the following properties:

<TABLE>
<CAPTION>
PROPERTY NAME ACQUISITION PRICE
------------- -----------------
<S> <C>
Cascade....................................... $ 11,302
Wilsonville................................... 17,991
Atlanta South Phase III....................... 6,036
Boston Industrial Portfolio................... 87,800
Mansfield Industrial Portfolio................ 6,169
Orlando Central Park.......................... 30,300
Jamesburg..................................... 46,802
Corporate Park Industrial..................... 27,150
Minneapolis Industrial Portfolio.............. 15,000
Springs Gate.................................. 6,115
Northridge.................................... 10,150
Totem Lake Malls.............................. 26,000
--------
$290,815
========
</TABLE>

The properties listed above are grouped as follows for purposes of property
disclosures included elsewhere in this Prospectus: (i) Mansfield Industrial
Portfolio is comprised of Locke Drive and Forbes Boulevard, (ii) Orlando Central
Park is comprised of Chancellor Square, Presidents Drive and Sand Lake Service
Center, (iii) Corporate Park Industrial is comprised of Corporate Park and
Hickory Hill, (iv) Boston Industrial Portfolio, which includes one building with
a value of $2,444 which is expected to close in April 1998, is comprised of
Braintree Industrial, Braintree Office, Stoughton Industrial, Arsenal Street,
Bedford Street, Brockton Industrial, Collins Street, Hartwell Avenue, United
Drive and Mazzeo and (v) Minneapolis Industrial Portfolio is comprised of
Braemar Business Center, Edenvale Business Center, Parkway Business Center and
Round Lake Business Center. The Springs Gate acquisition represents the
acquisition of land for future development.

Jamesburg and Corporate Park Industrial are owned by a joint venture with a
client of AMB Investment Management in which the Operating Partnership owns a
controlling 50% interest. Accordingly, the Operating Partnership has recorded
the joint venture partner's interest of $36,976 as minority interest.

See the combined statement of revenues and certain expenses of the 1998
Acquired Properties included elsewhere in this Prospectus.

3. Reflects the effects of the payment of approximately $37,808 in working
capital to the owners of the AMB Contributed Properties. The Operating
Partnership funded this payment with approximately $7,808 of cash on hand and
borrowings under the Credit Facility of approximately $30,000.

4. Reflects the effect of the Offering, including (i) the issuance of
Unsecured Notes in the amount of $350,000, resulting in net proceeds of
approximately $349,725 after payment of approximately $3,275 of financing costs
and receipt of $3,000 of call option premium and (ii) the repayment of
borrowings under the Credit Facility of approximately $344,501 using the net
proceeds of the Offering.

F-4
<PAGE> 127

AMB PROPERTY, L.P.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)
<TABLE>
<CAPTION>
INITIAL PUBLIC
AMB OFFERING AND
OPERATING CONTRIBUTED 1997 PROPERTY 1997 PROPERTY FORMATION 1997 AS
PARTNERSHIP(1) PROPERTIES(2) ACQUISITIONS(3) DISPOSITIONS(4) TRANSACTIONS(5) ADJUSTED
-------------- ------------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Rental revenue............ $ 26,465 $207,391 $47,554 ($1,200) $ 2,455 $ 282,665
Interest and other
income.................. 645 1,217 176 -- (29) 2,009
----------- -------- ------- ------- -------- -----------
Total revenues.... 27,110 208,608 47,730 (1,200) 2,426 284,674
----------- -------- ------- ------- -------- -----------
OPERATING EXPENSES
Real estate taxes and
property operating
expenses................ 8,899 72,452 10,815 (363) (10,325) 81,478
Interest expense.......... 3,528 45,009 -- (75) (3,033) 45,429
Depreciation and
amortization............ 4,195 32,616 -- (157) 9,232 45,886
General, administrative
and other............... 1,197 823 -- -- 5,958 7,978
----------- -------- ------- ------- -------- -----------
Total operating
expenses........ 17,819 150,900 10,815 (595) 1,832 180,771
----------- -------- ------- ------- -------- -----------
Income from operations
before disposal of real
estate and minority
interests............... 9,291 57,708 36,915 (605) 594 103,903
Gain on disposal of real
estate.................. -- 360 -- (360) -- --
----------- -------- ------- ------- -------- -----------
Income from operations
before minority
interests............... 9,291 58,068 36,915 (965) 594 103,903
Minority interests........ (117) (884) (296) -- -- (1,297)
----------- -------- ------- ------- -------- -----------
Net income................ $ 9,174 $ 57,184 $36,619 ($ 965) $ 594 $ 102,606
=========== ======== ======= ======= ======== ===========
Net income per unit....... $ 0.10 $ 1.16
=========== ===========
Weighted average units.... 88,416,676 88,416,676
=========== ===========

<CAPTION>
PRO FORMA
DEBT
1998 PROPERTY ADJUSTMENTS
ACQUISITIONS(6) (7) PRO FORMA
--------------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Rental revenue............ $34,495 $ -- $ 317,160
Interest and other
income.................. -- -- 2,009
------- -------- -----------
Total revenues.... 34,495 -- 319,169
------- -------- -----------
OPERATING EXPENSES
Real estate taxes and
property operating
expenses................ 8,632 -- 90,110
Interest expense.......... -- 17,755 63,184
Depreciation and
amortization............ 5,453 -- 51,339
General, administrative
and other............... -- -- 7,978
------- -------- -----------
Total operating
expenses........ 14,085 17,755 212,611
------- -------- -----------
Income from operations
before disposal of real
estate and minority
interests............... 20,410 (17,755) 106,558
Gain on disposal of real
estate.................. -- -- --
------- -------- -----------
Income from operations
before minority
interests............... 20,410 (17,755) 106,558
Minority interests........ (2,747) -- (4,044)
------- -------- -----------
Net income................ $17,663 ($17,755) $ 102,514(8)
======= ======== ===========
Net income per unit....... $ 1.15(9)
===========
Weighted average units.... 89,523,122
===========
</TABLE>

F-5
<PAGE> 128

AMB PROPERTY, L.P.

NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)

1. Reflects the historical consolidated operations of AMB Property, L.P.
for the period from November 26, 1997 to December 31, 1997. See the historical
consolidated financial statements and notes thereto of AMB Property Corporation,
which holds a 97.1% general partner interest in AMB Property, L.P., included
elsewhere in this Prospectus.

2. Reflects the historical combined operations of the AMB Contributed
Properties for the period from January 1, 1997 to November 25, 1997. See the
historical combined financial statements and notes thereto of the AMB
Contributed Properties included elsewhere in this Prospectus.

3. Reflects the incremental effects of properties acquired during the year
ended December 31, 1997 based on the historical operations of such properties
for periods prior to acquisition by the Operating Partnership or the owners of
the AMB Contributed Properties. Below is a summary of the incremental effect of
such properties:

<TABLE>
<CAPTION>
1997
ACQUIRED OTHER
PROPERTIES PROPERTIES TOTAL
---------- ---------- --------
<S> <C> <C> <C>
Rental revenues............................. $41,116 $ 6,438 $ 47,554
Other income................................ 174 2 176
Real estate taxes and property operating
expenses.................................. (9,322) (1,493) (10,815)
------- ------- --------
Pro forma effect............................ $31,968 $ 4,947 $ 36,915
======= ======= ========
</TABLE>

One of the acquisitions described above, Manhattan Village represents the
acquisition of a property and the formation of several joint ventures that own
the property, in which the Operating Partnership owns a 90% interest. The joint
venture is accounted for on a consolidated basis, and accordingly, a 10%
minority interest has been reflected relative to this acquisition.

See the combined statements of revenues and certain expenses of the 1997
Acquired Properties included elsewhere in this Prospectus.

F-6
<PAGE> 129
AMB PROPERTY, L.P.

NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)

The following table sets forth the incremental revenues and certain
expenses for periods prior to acquisition for the "Other Properties" acquired in
1997, but not included in the combined statements of revenues and certain
expenses of the 1997 Acquired Properties included elsewhere in this Prospectus.
See "Business and Properties."

<TABLE>
<CAPTION>
REAL ESTATE
TAXES AND
PROPERTY REVENUES IN
RENTAL OTHER OPERATING EXCESS OF
PROPERTY ACQUIRED REVENUES INCOME EXPENSES CERTAIN EXPENSES
----------------- -------- ------ ----------- ----------------
<S> <C> <C> <C> <C>
Shady Oak...................... $ 326 $-- $ (70) $ 256
Metric Center.................. 635 -- (50) 585
Southfield..................... 171 -- (40) 131
Atlanta South Phase II......... 109 -- (57) 52
O'Hare Industrial Portfolio
(Ardmore).................... 265 -- (74) 191
Windsor Court.................. 151 -- (53) 98
Beacon Building 8.............. 765 -- (180) 585
Greenleaf...................... 177 -- (74) 103
Boulden........................ 1,070 -- (269) 801
Mid-Atlantic Business Center... 1,711 2 (414) 1,299
Brittania Business Park........ 1,058 -- (212) 846
------ --- ------- ------
$6,438 $ 2 $(1,493) $4,947
====== === ======= ======
</TABLE>

4. Reflects the incremental effects of the disposition or partial
disposition of properties during 1997, based upon the historical operations of
such properties. See Note 7 to the historical combined financial statements of
the AMB Contributed Properties included elsewhere in this Prospectus.

5. Reflects the effects of the application of purchase accounting as a
result of the IPO and Formation Transactions, resulting in pro forma expense
adjustments as follows: (i) an increase in depreciation expense of $9,232, (ii)
the reclassification of certain property-related expenses from general and
administrative expense to property operating expense (due to the internalization
of management) of approximately $5,196 and (iii) a net increase in general,
administrative and other expenses of $5,958, after reclassification of
property-related expenses. Such changes are the result of the estimated changes
in costs due to operating as a public entity including investor relations,
accounting and legal fees and other costs related to the internalization of
management. Estimated depreciation and amortization has been based upon asset
lives of 5 to 40 years.

Also reflects the elimination of the advisory fee expense charged by AMB to
the owners of the AMB Contributed Properties of $15,521 (excluding approximately
$2,027 in real estate acquisition fees paid to AMB which have been accounted for
as acquisition costs by the owners of the AMB Contributed Properties and
accordingly capitalized into investments in real estate).

F-7
<PAGE> 130
AMB PROPERTY, L.P.

NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)

Also reflects an adjustment to historical interest expense to derive 1997
as adjusted interest expense, which has been based upon the Operating
Partnership's debt balances as of December 31, 1997. The calculation of 1997 as
adjusted interest expense is as follows:

<TABLE>
<S> <C>
Secured debt, balance of $517,366 (before premium of
$18,286),
assumed interest rate of 7.82%............................ $40,458
Credit Facility, balance of $150,000, assumed interest rate
of 6.90%.................................................. 10,350
Amortization of debt premium, $18,286 balance, 8 year
term...................................................... (2,924)
Amortization of financing costs, $900 balance, 3 year
term...................................................... 300
Unused Credit Facility fees, unused balance of $350,000, fee
of 0.20%.................................................. 700
Capitalized interest, average historical construction in
process of $48,303, overall weighted average interest rate
of 7.5%................................................... (3,455)
-------
1997 as adjusted interest expense........................... $45,429
=======
</TABLE>

Also reflects an adjustment to record rental revenues on a straight-line
basis for the Properties from January 1, 1997, the assumed date of acquisition
by the Operating Partnership. The pro forma straight-line rent adjustment for
the year ended December 31, 1997 is calculated as the difference between (i) pro
forma straight-line rental revenues of $5,447 and (ii) historical straight-line
rental revenues of $2,992.

Also reflects an adjustment to (i) eliminate excess interest income of the
properties of $1,304 and (ii) reflect the incremental effect of establishing the
Operating Partnership's investment in AMB Investment Management. The pro forma
operations of AMB Investment Management and the Operating Partnership's share of
AMB Investment Management's net income based upon its 95% economic interest are
as follows:

<TABLE>
<S> <C>
Advisory revenues........................................... $ 5,487
General and administrative expenses......................... (4,465)
Depreciation and amortization............................... (72)
-------
Income before income taxes.................................. 950
Income taxes (at assumed effective tax rate of 40%)......... (380)
-------
Income before minority interest............................. 570
Minority interest........................................... (17)
-------
Net income.................................................. $ 553
-------
Operating Partnership's share of net income................. $ 525
=======
</TABLE>

Advisory revenues consist of actual fees earned by AMB for the period from
January 1, 1997 to November 25, 1997 from the assets that are managed by AMB
Investment Management and the actual results of AMB Investment Management for
the period from November 26, 1997 to December 31, 1997.

General and administrative expenses consist of direct costs and indirect
costs allocated to AMB Investment Management by the Operating Partnership. Such
indirect costs have been allocated based upon the percentage of total assets
managed by AMB Investment Management.

In addition to its share of AMB Investment Management's net income, the
Operating Partnership will receive an acquisition fee for acquisition services
provided to AMB Investment Management in 1997. The pro forma fees for 1997
amount to $750.

F-8
<PAGE> 131
AMB PROPERTY, L.P.

NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)

6. Reflects the incremental effects of properties acquired subsequent to
December 31, 1997 based on the operations of such properties for periods prior
to acquisition by the Operating Partnership. Below is a summary of the
incremental effect of such properties:

<TABLE>
<CAPTION>
1998
ACQUIRED OTHER
PROPERTIES PROPERTIES TOTAL
---------- ---------- -------
<S> <C> <C> <C>
Rental and other revenues.................... $24,313 $10,182 $34,495
Real estate taxes and property operating
expenses................................... (5,933) (2,699) (8,632)
------- ------- -------
Pro forma effect............................. $18,380 $ 7,483 $25,863
======= ======= =======
</TABLE>

Two of the acquisitions described above, Jamesburg and Corporate Park
Industrial, represent joint ventures with a client of AMB Investment Management
in which the Operating Partnership owns a controlling 50% interest. The joint
venture acquisitions will be accounted for on a consolidated basis and,
accordingly, a minority interest of $2,747 has been reflected relative to these
acquisitions.

See the combined statement of revenues and certain expenses of the 1998
Acquired Properties included elsewhere in this Prospectus.

The following table sets forth the incremental revenues and certain
expenses for periods prior to acquisition for the "Other Properties" acquired in
1998, but not included in the combined statements of revenues and certain
expenses of the 1998 Acquired Properties included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
REAL ESTATE
TAXES AND
PROPERTY REVENUES IN
RENTAL OPERATING EXCESS OF
PROPERTY ACQUIRED REVENUES EXPENSES CERTAIN EXPENSES
----------------- -------- ----------- ----------------
<S> <C> <C> <C>
Wilsonville....................... $ 2,026 $ (500) $1,526
Atlanta South Phase III........... 773 (200) 573
Mansfield Industrial Portfolio.... 343 (12) 331
Corporate Park Industrial......... 3,241 (572) 2,669
Minneapolis Industrial
Portfolio....................... 2,468 (881) 1,587
Northridge........................ 1,331 (534) 797
------- ------- ------
$10,182 $(2,699) $7,483
======= ======= ======
</TABLE>

Also reflects estimated depreciation and amortization of the 1998 property
acquisitions based on estimated useful lives of 40 years.

F-9
<PAGE> 132
AMB PROPERTY, L.P.

NOTES TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)

7. Reflects an adjustment to derive pro forma interest expense, which has
been based upon the pro forma debt balances as of December 31, 1997. The
calculation of pro forma interest expense is as follows:

<TABLE>
<S> <C>
Secured debt, pro forma balance of $517,366 (before premium
of $18,286), assumed interest rate of 7.82%............... $40,458
Assumed secured debt on the 1998 property acquisitions, pro
forma balance of $48,600, assumed interest rate of 7.0%... 3,402
Unsecured Notes, pro forma balance of $350,000, assumed
weighted average interest rate of 7.18%................... 25,130
Amortization of deferred financing costs, $4,175 balance, 3
to 15 year terms.......................................... 656
Amortization of debt premium, $18,286 balance, 8 year
term...................................................... (2,924)
Amortization of call option premium, pro forma balance of
$3,000, 7 year term....................................... (428)
Unused Credit Facility fees, unused pro forma balance of
$500,000, fee of 0.20%.................................... 1,000
Capitalized interest, average construction in process of
$54,803, overall weighted average assumed interest rate of
7.5%...................................................... (4,110)
-------
Pro forma interest expense.................................. $63,184
=======
</TABLE>

The net change in interest expense is the result of the repayment of
borrowings on the Credit Facility of approximately $344,501 with the net
proceeds from the Offering and the assumption of approximately $48,600 in
secured debt in connection with the 1998 property acquisitions.

8. The pro forma taxable income of the Operating Partnership for the year
ended December 31, 1997 is approximately $102,731 which is based upon pro forma
income from operations before minority interest of approximately $106,558 plus
book depreciation and amortization of approximately $51,339 less other book/tax
differences of approximately $10,189 and less tax depreciation and amortization
of approximately $44,977.

The pro forma net income of AMB Property Corporation for the year ended
December 31, 1997 is $98,337 which is equal to the pro forma net income of the
Operating Partnership of $102,514 less income allocable to the limited partners
in the Operating Partnership of $4,177.

9. Represents basic earnings per unit. The Operating Partnership has no
outstanding dilutive securities.

F-10
<PAGE> 133

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
AMB Property Corporation:

We have audited the accompanying consolidated balance sheets of AMB
Property Corporation and subsidiaries as of December 31, 1996 and 1997, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements and the schedule referred to below are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and the 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 financial position of AMB Property Corporation,
and subsidiaries as of December 31, 1996 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to the
financial statements is presented for purposes of complying with the Securities
and Exchange Commission rules and is not a required part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.

/s/ ARTHUR ANDERSEN LLP

San Francisco, California
January 27, 1998

F-11
<PAGE> 134

AMB PROPERTY CORPORATION

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
1996 1997
------ ----------
<S> <C> <C>
ASSETS
Investments in real estate:
Land and improvements..................................... $ -- $ 550,635
Buildings and improvements................................ -- 1,822,516
Construction in progress.................................. -- 69,848
------ ----------
Total investments in real estate.................. -- 2,442,999
Accumulated depreciation and amortization................. -- (4,153)
------ ----------
Net investments in real estate.................... -- 2,438,846
Cash and cash equivalents................................... 3,093 39,968
Other assets................................................ 3,992 27,441
------ ----------
Total assets...................................... $7,085 $2,506,255
====== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Debt:
Secured debt.............................................. $ -- $ 535,652
Unsecured credit facility................................. -- 150,000
------ ----------
Total debt........................................ -- 685,652
Other liabilities........................................... 648 49,350
Payable to affiliates....................................... -- 38,071
------ ----------
Total liabilities................................. 648 773,073
------ ----------
Commitments and contingencies............................... -- --
Minority interests.......................................... 137 65,152
Stockholders' equity:
Preferred stock of AMB Property Corporation, $.01 par
value, 100,000,000 shares authorized, none issued or
outstanding............................................ -- --
Common stock of AMB Property Corporation, $.01 par value,
500,000,000 shares authorized, 85,874,513 issued and
outstanding............................................ -- 859
Additional paid-in capital of AMB Property Corporation.... -- 1,667,171
Common stock of Predecessor, no par value, 500,000,000
shares authorized, 5,181,450 issued and outstanding.... 1,349 --
Additional paid-in capital of Predecessor................. 1,298 --
Notes receivable from stockholders of Predecessor......... (869) --
Retained earnings......................................... 4,522 --
------ ----------
Total stockholders' equity........................ 6,300 1,668,030
------ ----------
Total liabilities and stockholders' equity........ $7,085 $2,506,255
====== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-12
<PAGE> 135

AMB PROPERTY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
REVENUES
Rental revenues..................................... $ -- $ -- $ 26,465
Investment management and other income.............. 16,865 23,991 29,597
---------- ---------- -----------
Total revenues.............................. 16,865 23,991 56,062
OPERATING EXPENSES
Property operating expenses......................... -- -- 5,312
Real estate taxes................................... -- -- 3,587
General and administrative.......................... -- -- 1,197
Interest, including amortization.................... -- -- 3,528
Depreciation and amortization....................... -- -- 4,195
Investment management expenses...................... 13,569 16,851 19,358
---------- ---------- -----------
Total operating expenses.................... 13,569 16,851 37,177
---------- ---------- -----------
Income from operations before minority
interests................................. 3,296 7,140 18,885
Minority interests' share of net income............... (34) (137) (657)
---------- ---------- -----------
Net income available to common
stockholders.............................. $ 3,262 $ 7,003 $ 18,228
========== ========== ===========
INCOME PER SHARE OF COMMON STOCK
Basic............................................ $ 0.64 $ 1.38 $ 1.39
========== ========== ===========
Diluted.......................................... $ 0.64 $ 1.38 $ 1.38
========== ========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic............................................ 5,079,855 5,079,855 13,140,218
========== ========== ===========
Diluted.......................................... 5,079,855 5,079,855 13,168,036
========== ========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-13
<PAGE> 136

AMB PROPERTY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
1995 1996 1997
------- ------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 3,262 $ 7,003 $ 18,228
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. -- -- 4,195
Straight-line rents....................................... -- -- (901)
Amortization of debt premiums and financing costs......... -- -- (266)
Minority interests' share of net income................... 34 137 657
Equity in income of AMB Investment Management............. -- -- (61)
Changes in assets and liabilities:
Other assets.............................................. (1,538) (249) (11,873)
Other liabilities......................................... 429 (25) 2,301
------- ------- ---------
Net cash provided by operating activities................... 2,187 6,866 12,280
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to properties..................................... -- -- (222,497)
Additions to buildings improvements and leasing costs....... -- -- (1,769)
Additions to construction in progress....................... -- -- (2,606)
Cash paid for property in Formation Transactions, net of
cash acquired............................................. -- -- (5,935)
------- ------- ---------
Net cash used for investing activities...................... -- -- (232,807)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock (net of $21,091 commission)...... -- -- 317,009
Borrowings on Credit Facility............................. 750 -- 150,000
Borrowings on secured debt................................ -- -- 850
Repayment of Credit Facility.............................. (750) -- (182,000)
Payments on secured debt.................................. -- -- (516)
Payment of financing fees................................. -- -- (900)
Dividends paid to Predecessor stockholders................ (2,925) (5,262) (16,404)
Distributions paid to AMB Property Corporation
stockholders........................................... -- -- (11,506)
Distributions to minority interests of Predecessor........ -- (34) --
Principal payment of notes receivable from stockholders of
Predecessor............................................ 56 318 869
------- ------- ---------
Net cash provided by (used in) financing activities......... (2,869) (4,978) 257,402
------- ------- ---------
Net increase (decrease) in cash and cash equivalents........ (682) 1,888 36,875
Cash and cash equivalents at beginning of period............ 1,887 1,205 3,093
------- ------- ---------
Cash and cash equivalents at end of period.................. $ 1,205 $ 3,093 $ 39,968
======= ======= =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-14
<PAGE> 137

AMB PROPERTY CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARES)

<TABLE>
<CAPTION>
COMMON STOCK NOTES
------------------- ADDITIONAL RECEIVABLE
NUMBER OF PAID-IN RETAINED FROM
SHARES AMOUNT CAPITAL EARNINGS STOCKHOLDERS TOTAL
---------- ------ ---------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
PREDECESSOR
Balance at December 31, 1994........... 4,978,260 $ 699 $ 1,298 $ 2,444 $(593) $ 3,848
Net income........................... -- -- -- 3,262 -- 3,262
Dividends declared and paid.......... -- -- -- (2,925) -- (2,925)
Principal payment of notes receivable
from stockholders.................. -- -- -- -- 56 56
Issuance of common stock for notes... 101,595 343 -- -- (343) --
---------- ------ ---------- -------- ----- ----------
Balance at December 31, 1995........... 5,079,855 1,042 1,298 2,781 (880) 4,241
Net income........................... -- -- -- 7,003 -- 7,003
Dividends declared and paid.......... -- -- -- (5,262) -- (5,262)
Principal payment of notes receivable
from stockholders.................. -- -- -- -- 318 318
Issuance of common stock for notes... 101,595 307 -- -- (307) --
---------- ------ ---------- -------- ----- ----------
Balance at December 31, 1996........... 5,181,450 1,349 1,298 4,522 (869) 6,300
AMB PROPERTY CORPORATION
Net income........................... -- -- -- 18,228 -- 18,228
Dividends declared and paid to
Predecessor stockholders........... -- (990) (1,298) (14,116) -- (16,404)
Principal payment of notes receivable
from stockholders.................. -- -- -- -- 869 869
Exchange of Predecessor shares for
shares of AMB Property Corporation,
net................................ (434,834) (312) 312 -- -- --
Issuance of common stock for
Properties......................... 65,022,185 651 1,369,740 -- -- 1,370,391
Issuance of common stock, net of
Offering costs of $38,068.......... 16,100,000 161 299,871 -- -- 300,032
Issuance of restricted stock......... 5,712 -- 120 -- -- 120
---------- ------ ---------- -------- ----- ----------
Distributions paid to AMB Property
Corporation stockholders........... -- -- (2,872) (8,634) -- (11,506)
---------- ------ ---------- -------- ----- ----------
Balance at December 31, 1997........... 85,874,513 $ 859 $1,667,171 $ -- $ -- $1,668,030
========== ====== ========== ======== ===== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-15
<PAGE> 138

AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)

1. ORGANIZATION AND FORMATION OF COMPANY

AMB Property Corporation, a Maryland corporation (the "Company"), commenced
operations as a fully integrated real estate company effective with the
completion of its initial public offering (the "Offering") on November 26, 1997.
The Company has elected to be taxed as a real estate investment trust ("REIT")
under Sections 856 through 860 of the Internal Revenue Code of 1986 (the
"Code"), as amended. The Company, through its controlling interest in its
subsidiary AMB Property, L.P., a Delaware limited partnership (the "Operating
Partnership"), is engaged in the ownership, operation, management, acquisition,
renovation, expansion, and development of industrial properties and community
shopping centers in target markets nationwide. Unless the context otherwise
requires, the "Company" shall include AMB Property Corporation, the Operating
Partnership and its controlled subsidiaries.

The Company and the Operating Partnership were formed shortly before
consummation of the Offering. AMB Institutional Realty Advisors, Inc., a
California corporation and registered investment advisor (the "Predecessor"),
formed AMB Property Corporation, a wholly owned Maryland subsidiary, and merged
with and into the Company (the "Merger") in exchange for 4,746,616 shares of the
Company's Common Stock. In addition, the Company and the Operating Partnership
acquired, through a series of mergers and other transactions, 31.8 million
rentable square feet of industrial property and 6.3 million rentable square feet
of retail property in exchange for 65,022,185 shares of the Company's Common
Stock, 2,542,163 limited partnership interests ("LP Units") in the Operating
Partnership, the assumption of debt, and to a limited extent, cash. The purchase
method of accounting was applied to the acquisition of the properties.
Collectively, the Merger and the other formation transactions described above
are referred to as the "Formation Transactions."

On November 26, 1997, the Company completed its Offering of 16,100,000
shares of Common Stock, $0.01 par value per share (the "Common Stock") for
$21.00 per share, resulting in gross offering proceeds of approximately
$338,100. Net of underwriters' commission and offering costs aggregating
$38,068, the Company received approximately $300,032 in proceeds from the
Offering. The net proceeds of the Offering were used to repay indebtedness, to
purchase interests from certain investors who elected not to receive shares or
units in the Company, to fund property acquisitions, and to meet general
corporate working capital requirements.

As of December 31, 1997, the Company owns a 97.1% interest in the Operating
Partnership represented by a number of units of general partnership interest
("GP Units") which are convertible into an equal number of shares of Common
Stock. The investors that elected to receive LP Units own the remaining 2.9%
ownership interest in the Operating Partnership. For local law purposes,
properties in certain states are owned through limited partnerships and limited
liability companies owned 99% by the Operating Partnership and 1% by a wholly
owned subsidiary of the Company. The ownership of such Properties through such
entities does not materially affect the Company's overall ownership of the
interests in the Properties. As the sole general partner of the Operating
Partnership, the Company has the full, exclusive and complete responsibility and
discretion in the management and control of the Operating Partnership.

In connection with the Formation Transactions, the Operating Partnership
formed AMB Investment Management Corporation, a Maryland corporation ("AMB
Investment Management"). AMB Investment Management conducts its operations
through AMB Investment Management Limited Partnership, a Maryland limited
partnership ("AMB Investment Management Partnership"), of which it is the sole
general partner and owns the entire capital interest. AMB Investment Management
was formed to succeed to the Predecessor's investment management business of
providing real estate investment management services on a fee basis to clients.

F-16
<PAGE> 139
AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)

The Operating Partnership purchased 100% of AMB Investment Management's
non-voting preferred stock (representing a 95% economic interest). The executive
officers of the Company collectively purchased 100% of the Investment Management
Subsidiary's voting common stock (representing a 5% economic interest therein).

As of December 31, 1997, the Company owned 37.3 million rentable square
feet of industrial properties (the "Industrial Properties"), principally
warehouse distribution properties, that were 95.7% leased and 6.2 million
rentable square feet of retail properties (the "Retail Properties"), principally
grocer-anchored community shopping centers, that were 96.1% leased.
Collectively, the Industrial Properties and the Retail Properties are referred
to as the "Properties."

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

These financial statements have been prepared in accordance with generally
accepted accounting principles using the accrual method of accounting. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the financial
position, results of operations and cash flows of the Company, its wholly owned
qualified REIT subsidiaries, the Operating Partnership, and eight joint ventures
(the "Joint Ventures") in which the Company has a controlling interest.
Third-party equity interests in the Operating Partnership and the Joint Ventures
are reflected as minority interests in the consolidated financial statements.
All significant intercompany amounts have been eliminated.

BASIS OF PRESENTATION

The consolidated financial statements of the Company for 1997 include the
results of operations of the Company, including property operations for the
period from November 26, 1997 (the commencement of operations as a fully
integrated real estate company) to December 31, 1997 and the results of the
Company's Predecessor, an investment manager, for the period from January 1,
1997 to November 25, 1997.

INVESTMENTS IN REAL ESTATE

Investments in real estate are stated at the lower of depreciated cost or
net realizable value. Net realizable value for financial reporting purposes is
reviewed for impairment on a property-by-property basis whenever events or
changes in circumstances indicate that the carrying amount of a property may not
be recoverable. Impairment is recognized when estimated expected future cash
flows (undiscounted and without interest charges)are less than the carrying
amount of the property. To the extent an impairment has occurred, the excess of
the carrying amount of the property over its estimated fair value will be
charged to income. As of December 31, 1997, there were no impairments of the
carrying values of the Properties.

F-17
<PAGE> 140
AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)

Depreciation and amortization are calculated using the straight-line method
over the estimated useful lives of the investments. The estimated lives are as
follows:

<TABLE>
<S> <C>
Land improvements................................... 5 to 40 years
Buildings and improvements.......................... 5 to 40 years
Tenant improvements and leasing costs............... Term of the related lease
</TABLE>

The cost of buildings and improvements includes the purchase price of the
property or interest in property, legal fees and acquisition costs, and
interest, property taxes, and other costs incurred during the period of
construction.

Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations or betterments that extend the economic useful
life of assets are capitalized.

Project costs directly associated with the development and construction of
a real estate project are capitalized as construction in progress. In addition,
interest, real estate taxes and other costs are capitalized during the
construction period.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash held in financial institutions and
other highly liquid short-term investments with original maturities of three
months or less. Cash and cash equivalents as of December 31, 1997 include
restricted cash of $8,074, which represents amounts held in escrow in connection
with property purchases and capital improvements.

DEFERRED FINANCING

Costs incurred in connection with financing are capitalized and amortized
to interest expense on a straight-line basis (which approximates the effective
interest method) over the term of the related loan. As of December 31, 1997,
deferred financing fees were $871, net of accumulated amortization of $29. Such
amounts are included in Other Assets on the consolidated balance sheet.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments include short-term investments,
accounts receivable, accounts payable, accrued expenses, construction loans
payable, mortgage debt, secured debt, unsecured notes payable, and an unsecured
credit facility. The fair value of these instruments approximates its carrying
or contract values.

DEBT PREMIUMS

In connection with the Formation Transactions, the Company assumed certain
secured debt with an aggregate principal value of $517,031 and a fair value of
$535,613. The difference between the principal value and the fair value was
recorded as a debt premium. The debt premium is being amortized into interest
expense over the term of the related debt instrument using the effective
interest method. As of December 31, 1997, the unamortized debt premium was
$18,286.

MINORITY INTERESTS

Minority interests in the Company represent the limited partnership
interests in the Operating Partnership and interests held by certain third
parties in eight real estate joint ventures that are consolidated for financial
reporting purposes. Such investments are consolidated because 1) the Company
owns a majority owner interest, or 2) the Company holds significant control over
the entity through a 50% or greater ownership
F-18
<PAGE> 141
AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)

interest combined with the ability to control major operating decisions such as
approval of budgets, selection of property managers and change in financing.

The following table distinguishes the minority interest ownership held by
certain joint ventures ("Minority Interest -- Joint Ventures") and the limited
partnership interests in the Operating Partnership ("Minority
Interest -- Limited Partners") as of December 31, 1997.

<TABLE>
<S> <C>
Minority Interest -- Joint Ventures................ $15,784
Minority Interest -- Limited Partners.............. 49,368
-------
$65,152
=======
</TABLE>

REVENUES

The Company, as a lessor, retains substantially all of the benefits and
risks of ownership of the Properties and accounts for its leases as operating
leases. Rental revenues are recognized on a straight-line basis over the term of
the leases.

Reimbursements from tenants for real estate taxes and other recoverable
operating expenses are recognized as revenue in the period the applicable
expenses are incurred.

INVESTMENT MANAGEMENT AND OTHER INCOME

Investment management income consists primarily of professional fees
generated from the Predecessors' real estate investment management services for
periods prior to the Formation Transactions and the Company's equity in the
earnings of AMB Investment Management for periods subsequent to the Formation
Transactions. Other income consists primarily of interest income on cash and
cash equivalents.

INVESTMENT MANAGEMENT EXPENSE

Investment management expense represents the operating expenses of the
Predecessor for periods prior to November 26, 1997 and consists of salaries and
benefits and other management related expenses.

EARNINGS PER SHARE

For purposes of calculating diluted earnings per share the Company includes
all dilutive securities. For the year ended December 31, 1997 the impact of such
dilutive securities was to increase weighted average shares outstanding by
27,818 shares. Such dilution results from the Company's outstanding options and
was computed using the treasury stock method. There were no dilutive securities
outstanding during the years ended December 31, 1995 and 1996.

RECLASSIFICATIONS

The consolidated financial statements for prior periods have been
reclassified to conform with current classifications with no effect on results
of operations.

FUTURE ACCOUNTING PRONOUNCEMENTS

F-19
<PAGE> 142
AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)

internally for evaluating segment performance and deciding how to allocate
resources to segments. The Company expects to adopt this SFAS in 1998 to the
extent applicable.

3. TRANSACTIONS WITH AFFILIATES

As discussed in "Organization and Formation of the Company," the Operating
Partnership formed AMB Investment Management (which conducts its operations
through the Investment Management Partnership) for the purpose of carrying on
the operations of the Predecessor. The Company and the Investment Management
Partnership have an agreement that allows for the sharing of certain costs and
employees. Additionally, the Company provides the Investment Management
Partnership with certain acquisition-related services.

As part of the Formation Transactions, the Operating Partnership was
required to pay an amount equal to the net working capital balances at November
25, 1997 of the Predecessor and the acquired properties to the owners of said
entities. As of December 31, 1997, the Company owed approximately $37,808 to
owners related to these working capital distributions. Such amount is included
in Payable to affiliates on the consolidated balance sheet and was paid
subsequent to year-end.

The Company and the Investment Management Partnership share common office
space under lease obligations of an affiliate of the Predecessor. Such lease
obligations are charged to the Company and the Investment Management Partnership
at cost. For the period ended December 31, 1995, 1996 and 1997, the Company paid
approximately $435, $510 and $700, respectively for occupancy costs related to
the lease obligations of the affiliate.

4. DEBT

As of December 31, 1997, debt, excluding unamortized debt premiums,
consists of the following:

<TABLE>
<S> <C>
Secured debt, varying coupon interest
rates from 7.01% to 10.38%, due
November 1998 to December 2008............................ $ 517,366
Unsecured credit facility, variable
interest at LIBOR plus 1.10% (7.10% at
December 31, 1997) due November 2000...................... 150,000
----------
Total Debt........................................ $ 667,366
==========
</TABLE>

Secured debt generally requires monthly principal and interest payments.
The secured debt is secured by deeds of trust on 48 Properties. The carrying
value of real estate investments pledged as collateral under deeds of trust for
the secured debt is $1,049,003 as of December 31, 1997. All of the secured debt
bears interest at fixed rates, except for one loan which bears a variable
interest rate at LIBOR plus 2.75%, 8.75% at December 31, 1997, or prime plus 5%
at the borrower's option. The secured debt has various financial and
non-financial covenants. Additionally, certain of the secured debt is
cross-collateralized.

The Company has a $500,000 unsecured revolving credit agreement (the
"Credit Facility") with Morgan Guaranty Trust Company of New York as agent, and
a syndicate of 12 other banks. The Credit Facility has a term of three years,
and is subject to a fee that accrues on the daily average undrawn funds, which
varies between 0.15% to 0.25% based on the Company's credit rating. The Credit
Facility has various financial and non-financial covenants.

The weighted-average fixed interest rate on secured debt at December 31,
1997 was 7.82%. Interest capitalized related to construction projects for the
period from November 26, 1997 to December 31, 1997 was $448. There was no
capitalized interest for periods prior to the Formation Transactions.

F-20
<PAGE> 143
AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)

The scheduled maturities of the secured debt as of December 31, 1997 are as
follows:

<TABLE>
<S> <C>
1998...................................................... $ 19,390
1999...................................................... 9,666
2000...................................................... 11,862
2001...................................................... 35,654
2002...................................................... 43,967
Thereafter................................................ 396,827
--------
$517,366
========
</TABLE>

5. LEASING ACTIVITY

Future minimum rental income due under noncancelable leases in effect at
December 31, 1997 with tenants is as follows:

<TABLE>
<S> <C>
1998..................................................... $ 214,400
1999..................................................... 188,926
2000..................................................... 160,592
2001..................................................... 128,241
2002..................................................... 101,733
Thereafter............................................... 459,070
----------
$1,252,962
==========
</TABLE>

In addition to minimum rental payments, certain tenants pay reimbursements
for their pro rata share of specified operating expenses, which amounted to
$5,267 for the period from November 26, 1997 to December 31, 1997. These amounts
are included as rental income and operating expenses in the accompanying
consolidated statements of operations. Certain of the leases also provide for
the payment of additional rent based on a percentage of the tenant's revenues.
Some leases contain options to renew. No individual tenant accounts for greater
than 2% of rental revenues.

6. INCOME TAXES

The Company intends to be taxed as a REIT under the Code for the fiscal
year ended December 31, 1997. To qualify as a REIT, the Company must meet a
number of organizational and operational requirements, including a requirement
that it currently distribute at least 95% of its taxable income. It is
management's intention to adhere to these requirements and maintain the
Company's REIT status. As a REIT, the Company generally will not be subject to
corporate level federal income tax on net income it distributes currently to its
stockholders. As such, no provision for federal income taxes has been included
in the accompanying consolidated financial statements. If the Company fails to
qualify as a REIT in any taxable year, it will be subject to federal income
taxes at regular corporate rates (including any applicable alternative minimum
tax) and may not be able to qualify as a REIT for four subsequent taxable years.
Even if the Company qualifies for taxation as a REIT, the Company may be subject
to certain state and local taxes on its income and property and to federal
income and excise taxes on its undistributed taxable income.

For federal income tax purposes, cash distributions paid to stockholders
may be characterized as ordinary income, return of capital (generally
non-taxable) or capital gains. On December 8, 1997, the Company declared a
distribution of $0.134 per common share, payable on December 29, 1997 to
stockholders of record on December 18, 1997. The distribution covered the period
from November 26, 1997 through December 31, 1997. For Federal income tax
purposes, 100% of the distribution was ordinary income.

F-21
<PAGE> 144
AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)

Prior to the Merger, the Predecessor conducted its business as an S
corporation, and therefore was exempt from federal income taxes under Subchapter
S of the Code. Under this election federal income taxes were paid by the
stockholders of the Predecessor.

7. STOCK INCENTIVE PLAN AND 401(K) PLAN

STOCK INCENTIVE PLAN

In November 1997, the Company established a Stock Option and Incentive Plan
(the "Stock Incentive Plan") for the purpose of attracting and retaining
eligible officers, directors and employees. The Company has reserved for
issuance 5,750,000 shares of Common Stock under the Stock Incentive Plan. In
November 1997, the Company granted 3,153,750 non-qualified options to certain
directors, officers and employees. Each option is exchangeable for one share of
the Company's Common Stock and has an exercise price equal to $21.00, the
Company's market price at the date of grant. The options have a 10-year term and
vest pro rata in annual installments over a four-year period from the date of
grant.

The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for its Stock Incentive
Plan. Opinion 25 measures compensation cost using the intrinsic value based
method of accounting. Under this method, compensation cost is the excess, if
any, of the quoted market price of the stock at the date of grant over the
amount an employee must pay to acquire the stock. Accordingly, no compensation
cost has been recognized for the Company's Stock Incentive Plan, as the option
price at the date of grant was equal to the market price. However, if the
Company had measured compensation cost using the fair value base method
prescribed in SFAS 123, "Accounting for Stock-Based Compensation," the impact on
pro forma net income and earnings per share would not have been material.

The fair value of each option grant was estimated at the date of grant
using the Black-Scholes option-pricing model with the following assumptions used
for grants in 1997: dividend yield of 6.52%, expected volatility of 18.75%,
risk-free interest rate of 5.86%, and expected lives of 10 years.

Following is a summary of the option activity for the year ended December
31, 1997:

<TABLE>
<CAPTION>
SHARES
UNDER REMAINING
OPTION EXERCISE CONTRACTUAL
(000) PRICE LIFE
-------- -------- -----------
<S> <C> <C> <C>
Outstanding, 11/25/97................................. -- -- --
Granted............................................... 3,154 $21.0 10 years
Exercised............................................. -- -- --
Forfeited............................................. (10) -- --
------ ----- --------
Outstanding, 12/31/97................................. 3,144 $21.0 10 years
====== ===== ========
Options exercisable at year-end....................... 184 $21.0
====== =====
Fair value of options granted during the year......... $ 2.28
======
</TABLE>

RESTRICTED STOCK

In 1997, the Company sold 5,712 restricted shares of its Common Stock to
certain independent directors for $0.01 per share in cash.

F-22
<PAGE> 145
AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)

401(K) PLAN

In November 1997, the Company established a Section 401(k)
Savings/Retirement Plan (the "Section 401(k) Plan"), which is a continuation of
the Section 401(k) plan of the Predecessor, to cover eligible employees of the
Company and any designated affiliate. The Section 401(k) Plan, permits eligible
employees of the Company to defer up to 10% of their annual compensation,
subject to certain limitations imposed by the Code. The employees' elective
deferrals are immediately vested and non-forfeitable upon contribution to the
Section 401(k) Plan. The Company matches the employee contributions to the
Section 401(k)Plan in an amount equal to 50% of the first 3.5% of annual
compensation deferred by each employee and may also make discretionary
contributions to the plan. As of December 31, 1997, the Company's accrual for
401(k) match was $140. Such amount was included in Other liabilities on the
consolidated balance sheet.

Except for the Section 401(k) Plan, the Company offers no other
post-retirement or post-employment benefits to its employees.

8. SUPPLEMENTAL INFORMATION TO STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1996 1997
---- ---- ----------
<S> <C> <C> <C>
Cash paid for interest................................... $-- $-- $ 2,509
=== === ==========
Non-cash transactions:
Acquisitions of properties in Formation Transactions... $-- $-- $2,216,137
Assumption of debt..................................... -- -- (717,613)
Cash acquired.......................................... -- -- (43,978)
Other assumed assets and liabilities................... -- -- (13,862)
Minority interest...................................... -- -- (64,358)
Shares issued.......................................... -- -- (1,370,391)
--- --- ----------
Net cash paid, net of cash acquired...................... $-- $-- $ 5,935
=== === ==========
</TABLE>

9. PRO FORMA INFORMATION (UNAUDITED)

The following unaudited pro forma condensed consolidated statement of
operations has been prepared as if the Formation Transactions, the Offering (as
described in Note 1) and property acquisitions and dispositions had occurred on
January 1, 1996. In the opinion of management, the pro forma condensed
consolidated statement of operations does not purport to present the
consolidated results that would have occurred if the aforementioned transactions
had been consummated on January 1, 1996, nor does it purport to present the
consolidated results of operations for future periods.

F-23
<PAGE> 146
AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Total revenues............................................ $ 265,550 $ 284,674
Income from operations before minority interests.......... 90,694 103,903
Net income available to common stockholders............... 87,313 99,508
INCOME PER SHARE OF COMMON STOCK
Basic................................................... $ 1.02 $ 1.16
=========== ===========
Diluted................................................. $ 1.01 $ 1.15
=========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic................................................... 85,874,513 85,874,513
=========== ===========
Diluted................................................. 86,156,556 86,156,556
=========== ===========
</TABLE>

10. COMMITMENTS AND CONTINGENCIES

LITIGATION

In the normal course of business, from time to time, the Company is
involved in legal actions relating to the ownership and operations of its
Properties. In management's opinion, the liabilities, if any, that may
ultimately result from such legal actions are not expected to have a materially
adverse effect on the consolidated financial position, results of operations, or
cash flows of the Company.

ENVIRONMENTAL MATTERS

The Company follows the policy of monitoring its Properties for the
presence of hazardous or toxic substances. The Company is not aware of any
environmental liability with respect to the Properties that would have a
material adverse effect on the Company's business, assets or results of
operations. There can be no assurance that such a material environmental
liability does not exist. The existence of any such material environmental
liability would have an adverse effect on the Company's results of operations
and cash flow.

GENERAL UNINSURED LOSSES

The Company carries comprehensive liability, fire, flood, environmental,
extended coverage and rental loss insurance with policy specifications, limits
and deductibles customarily carried for similar properties. There are, however,
certain types of extraordinary losses that may be either uninsurable, or not
economically insurable. Should an uninsured loss occur, the Company could lose
its investment in, and anticipated profits and cash flows, from a property.

Certain of the Properties are located in areas that are subject to
earthquake activity; the Company has therefore obtained limited earthquake
insurance.

11. OPERATING PARTNERSHIP

As of December 31, 1997 the Company owned a 97.1% general partner interest
in the Operating Partnership. Therefore, the Company consolidates the Operating
Partnership and records the remaining 2.9% limited partner interests as minority
interest in the consolidated financial statements.

The Operating Partnership commenced operations as a fully intergrated real
estate company on November 26, 1997 upon completion of the Formation
Transactions. For financial reporting purposes, AMB Institutional Realty
Advisors, Inc. is not considered to be the predecessor of the Operating
Partnership. The

F-24
<PAGE> 147
AMB PROPERTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND SQUARE FEET DATA)

following table sets forth summary financial information of the Operating
Partnership as of and for the period from November 26, 1997 to December 31, 1997
(in thousands, except unit data):

<TABLE>
<S> <C>
Investments in real estate, net............................. $2,438,846
Total assets................................................ 2,506,255
Debt........................................................ 685,652
Partners' capital........................................... 1,717,398
Revenues.................................................... 27,110
Income from operations before minority interest............. 9,291
Net income.................................................. 9,174
Total units................................................. 88,416,676
Net income per unit......................................... $0.10
</TABLE>

Following is a statement of partners' capital of the Operating Partnership
from November 26, 1997 (inception) to December 31, 1997 (in thousands, except
unit data):

<TABLE>
<CAPTION>
GENERAL PARTNER LIMITED PARTNERS
----------------------- -------------------
UNITS AMOUNT UNITS AMOUNT TOTAL
---------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C>
November 25, 1997.... -- $ -- -- $ -- $ --
Contributions...... 85,874,513 1,670,902 2,542,163 49,169 1,720,071
Net income......... -- 8,634 -- 540 9,174
Distributions...... -- (11,506) -- (341) (11,847)
---------- ---------- --------- ------- ----------
December 31, 1997.... 85,874,513 $1,668,030 2,542,163 $49,368 $1,717,398
========== ========== ========= ======= ==========
</TABLE>

F-25
<PAGE> 148

AMB PROPERTY CORPORATION

SCHEDULE III

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
COSTS
CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO COMPANY ACQUISITION
----------------------- ---------------
PROPERTY LOCATION TYPE ENCUMBRANCES(1) LAND BUILDING LAND BUILDING
-------- -------- ---- --------------- --------- ----------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
72nd Avenue................ WA IND $ -- $ 1,298 $ 4,008 $ -- $ --
Acer Distribution Center... CA IND -- 3,146 9,479 -- --
Activity Distribution
Center................... CA IND 5,400 3,736 11,248 -- --
Alvarado Business Center... CA IND -- 7,906 23,757 -- 75
Amwiler-Gwinnett Industrial
Portfolio................ GA IND 14,360 6,641 19,964 -- 4
Ardenwood Corporate Park... CA IND 10,339 7,321 22,002 -- --
Artesia Industrial
Portfolio................ CA IND 54,742 23,860 71,620 -- 907
Atlanta South.............. GA IND -- 6,550 19,691 -- --
Beacon Industrial Park..... FL IND -- 10,466 31,437 -- --
Belden Avenue.............. IL IND -- 5,019 15,186 -- --
Bensenville................ IL IND 44,593 20,799 62,438 -- 19
Blue Lagoon................ FL IND 11,916 4,945 14,875 -- 23
Boulden.................... DE IND -- 2,807 8,462 -- 36
Brightseat Road............ MD IND -- 1,557 4,841 -- --
Britannia Business Park.... FL IND -- 3,199 9,637 -- 37
Cabot Business Park........ MA IND -- 16,017 48,091 -- 7
Chancellor................. FL IND 2,987 1,587 4,802 -- --
Chicago Industrial......... IL IND 3,522 1,574 4,761 -- --
Commerce................... CA IND -- 2,197 6,653 -- --
Corporate Square........... MN IND -- 4,024 12,113 -- 16
Crossroads Industrial...... IL IND -- 2,583 7,789 -- --
Dixie Highway.............. KY IND -- 1,700 5,149 -- --
Dock's Corner.............. NJ IND -- 2,050 6,190 -- --
Dock's Corner II........... NJ IND -- 2,272 6,917 -- --
Dowe Industrial............ CA IND -- 2,665 8,034 -- --
East Walnut Drive.......... CA IND -- 964 2,918 -- --
Elk Grove Village
Industrial............... IL IND -- 7,713 23,179 -- 8
Empire Drive............... KY IND -- 1,590 4,815 -- --
Executive Drive............ IL IND -- 1,399 4,236 -- --
Fairway Drive Industrial... CA IND -- 1,954 5,479 -- --

GROSS AMOUNT CARRIED AT 12/31/97
----------------------------------
YEAR OF DEPRECIABLE
TOTAL ACCUMULATED CONSTRUCTION OR LIFE
PROPERTY LAND BUILDING COSTS(2) DEPRECIATION ACQUISITION (YEARS)
-------- -------- ---------- ---------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
72nd Avenue................ $ 1,298 $ 4,008 $ 5,306 $ 9 1997 5-40
Acer Distribution Center... 3,146 9,479 12,625 22 1997 5-40
Activity Distribution
Center................... 3,736 11,248 14,984 26 1997 5-40
Alvarado Business Center... 7,906 23,832 31,738 54 1997 5-40
Amwiler-Gwinnett Industrial
Portfolio................ 6,641 19,968 26,609 46 1997 5-40
Ardenwood Corporate Park... 7,321 22,002 29,323 50 1997 5-40
Artesia Industrial
Portfolio................ 23,860 72,527 96,387 165 1997 5-40
Atlanta South.............. 6,550 19,691 26,241 45 1997 5-40
Beacon Industrial Park..... 10,466 31,437 41,903 72 1997 5-40
Belden Avenue.............. 5,019 15,186 20,205 35 1997 5-40
Bensenville................ 20,799 62,457 83,256 143 1997 5-40
Blue Lagoon................ 4,945 14,898 19,843 34 1997 5-40
Boulden.................... 2,807 8,498 11,305 19 1997 5-40
Brightseat Road............ 1,557 4,841 6,398 11 1997 5-40
Britannia Business Park.... 3,199 9,674 12,873 22 1997 5-40
Cabot Business Park........ 16,017 48,098 64,115 110 1997 5-40
Chancellor................. 1,587 4,802 6,389 11 1997 5-40
Chicago Industrial......... 1,574 4,761 6,335 11 1997 5-40
Commerce................... 2,197 6,653 8,850 15 1997 5-40
Corporate Square........... 4,024 12,129 16,153 28 1997 5-40
Crossroads Industrial...... 2,583 7,789 10,372 18 1997 5-40
Dixie Highway.............. 1,700 5,149 6,849 12 1997 5-40
Dock's Corner.............. 2,050 6,190 8,240 14 1997 5-40
Dock's Corner II........... 2,272 6,917 9,189 16 1997 5-40
Dowe Industrial............ 2,665 8,034 10,699 18 1997 5-40
East Walnut Drive.......... 964 2,918 3,882 7 1997 5-40
Elk Grove Village
Industrial............... 7,713 23,187 30,900 53 1997 5-40
Empire Drive............... 1,590 4,815 6,405 11 1997 5-40
Executive Drive............ 1,399 4,236 5,635 10 1997 5-40
Fairway Drive Industrial... 1,954 5,479 7,433 13 1997 5-40
</TABLE>

F-26
<PAGE> 149
<TABLE>
<CAPTION>
COSTS
CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO COMPANY ACQUISITION
----------------------- ---------------
PROPERTY LOCATION TYPE ENCUMBRANCES(1) LAND BUILDING LAND BUILDING
-------- -------- ---- --------------- --------- ----------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Hampden Road............... MA IND -- 2,200 6,678 -- --
Harvest Business Park...... WA IND 3,826 2,371 7,153 -- 51
Hewlett Packard
Distribution............. CA IND 3,437 1,668 5,043 -- --
Holton Drive............... KY IND -- 2,633 7,972 -- --
Industrial Drive........... OH IND -- 1,743 5,410 -- --
International Multifoods... CA IND -- 1,613 4,879 -- --
Itasca Industrial
Portfolio................ IL IND -- 6,416 19,289 -- 213
Janitrol................... OH IND -- 1,797 5,576 -- --
Jasmine Avenue............. CA IND -- 3,157 9,562 -- --
Kent Centre................ WA IND -- 3,042 9,165 -- 23
Kingsport Industrial
Park..................... WA IND 18,161 7,919 23,798 -- 96
L.A. County Industrial
Portfolio (3)............ CA IND -- 11,128 33,423 -- 17
Lake Michigan Industrial
Portfolio................ IL IND -- 2,886 8,699 -- --
Laurelwood................. CA IND -- 2,750 8,538 -- --
Lincoln Industrial
Center................... TX IND -- 671 2,052 -- --
Linder Skokie.............. IL IND -- 2,938 8,854 -- --
Lisle Industrial........... IL IND -- 2,290 6,911 -- --
Lonestar................... TX IND 17,773 7,129 21,428 -- --
McDaniel Drive............. TX IND -- 1,537 4,659 -- --
Melrose Park............... IL IND -- 2,936 9,190 -- --
Metric Center.............. TX IND -- 10,968 32,944 -- 45
Mid-Atlantic Business
Center................... PA IND -- 6,581 19,783 -- 36
Milmont Page............... CA IND -- 3,201 9,642 -- 94
Minneapolis Distribution
Portfolio................ MN IND -- 7,018 21,093 -- 95
Minneapolis Industrial
IV....................... MN IND 8,346 4,938 14,854 -- 42
Minneapolis Industrial V... MN IND 7,952 4,426 13,317 -- 46
Moffett Business Center.... CA IND 12,883 5,892 17,716 -- --
Moffett Park R&D
Portfolio................ CA IND -- 14,807 44,462 -- 598
N. Glenville Avenue........ TX IND -- 1,094 3,316 -- --
Norcross/ Brookhollow
Portfolio................ GA IND -- 3,721 11,180 -- --
Northpointe Commerce....... CA IND -- 1,773 5,358 -- --
Northwest Distribution
Center................... WA IND -- 2,234 6,743 -- 7
O'Hare Industrial
Portfolio................ IL IND -- 7,357 22,112 -- 156
Pacific Business Center.... CA IND 10,679 5,417 16,291 -- 16

GROSS AMOUNT CARRIED AT 12/31/97
----------------------------------
YEAR OF DEPRECIABLE
TOTAL ACCUMULATED CONSTRUCTION OR LIFE
PROPERTY LAND BUILDING COSTS(2) DEPRECIATION ACQUISITION (YEARS)
-------- -------- ---------- ---------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Hampden Road............... 2,200 6,678 8,878 15 1997 5-40
Harvest Business Park...... 2,371 7,204 9,575 16 1997 5-40
Hewlett Packard
Distribution............. 1,668 5,043 6,711 12 1997 5-40
Holton Drive............... 2,633 7,972 10,605 18 1997 5-40
Industrial Drive........... 1,743 5,410 7,153 12 1997 5-40
International Multifoods... 1,613 4,879 6,492 11 1997 5-40
Itasca Industrial
Portfolio................ 6,416 19,502 25,918 44 1997 5-40
Janitrol................... 1,797 5,576 7,373 13 1997 5-40
Jasmine Avenue............. 3,157 9,562 12,719 22 1997 5-40
Kent Centre................ 3,042 9,188 12,230 21 1997 5-40
Kingsport Industrial
Park..................... 7,919 23,894 31,813 54 1997 5-40
L.A. County Industrial
Portfolio (3)............ 11,128 33,440 44,568 76 1997 5-40
Lake Michigan Industrial
Portfolio................ 2,886 8,699 11,585 20 1997 5-40
Laurelwood................. 2,750 8,538 11,288 19 1997 5-40
Lincoln Industrial
Center................... 671 2,052 2,723 5 1997 5-40
Linder Skokie.............. 2,938 8,854 11,792 20 1997 5-40
Lisle Industrial........... 2,290 6,911 9,201 16 1997 5-40
Lonestar................... 7,129 21,428 28,557 49 1997 5-40
McDaniel Drive............. 1,537 4,659 6,196 11 1997 5-40
Melrose Park............... 2,936 9,190 12,126 21 1997 5-40
Metric Center.............. 10,968 32,989 43,957 75 1997 5-40
Mid-Atlantic Business
Center................... 6,581 19,819 26,400 45 1997 5-40
Milmont Page............... 3,201 9,736 12,937 22 1997 5-40
Minneapolis Distribution
Portfolio................ 7,018 21,188 28,206 48 1997 5-40
Minneapolis Industrial
IV....................... 4,938 14,896 19,834 34 1997 5-40
Minneapolis Industrial V... 4,426 13,363 17,789 30 1997 5-40
Moffett Business Center.... 5,892 17,716 23,608 40 1997 5-40
Moffett Park R&D
Portfolio................ 14,807 45,060 59,867 101 1997 5-40
N. Glenville Avenue........ 1,094 3,316 4,410 8 1997 5-40
Norcross/ Brookhollow
Portfolio................ 3,721 11,180 14,901 26 1997 5-40
Northpointe Commerce....... 1,773 5,358 7,131 12 1997 5-40
Northwest Distribution
Center................... 2,234 6,750 8,984 15 1997 5-40
O'Hare Industrial
Portfolio................ 7,357 22,268 29,625 51 1997 5-40
Pacific Business Center.... 5,417 16,307 21,724 37 1997 5-40
</TABLE>

F-27
<PAGE> 150
<TABLE>
<CAPTION>
COSTS
CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO COMPANY ACQUISITION
----------------------- ---------------
PROPERTY LOCATION TYPE ENCUMBRANCES(1) LAND BUILDING LAND BUILDING
-------- -------- ---- --------------- --------- ----------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Pagemill & Dillworth....... TX IND -- 1,877 5,690 -- --
Patuxent................... MD IND -- 1,696 5,127 -- --
Penn James
Office/Warehouse......... MN IND -- 1,991 6,013 -- 103
Pennsy Drive............... MD IND -- 657 2,011 -- 203
Presidents Drive........... FL IND -- 1,124 3,446 -- --
Presidents Drive II........ FL IND -- 2,563 7,861 -- --
Preston Court.............. MD IND -- 2,313 7,192 -- --
Production Drive........... KY IND -- 425 1,286 -- --
Santa Barbara Court........ MD IND -- 1,617 5,029 -- --
Shiloh Road................ TX IND -- 1,813 5,495 -- --
Silicon Valley R&D
Portfolio................ CA IND -- 8,024 24,205 -- --
South Bay Industrial....... CA IND 20,791 14,992 45,016 -- 465
Southfield................. GA IND -- 7,073 21,259 -- 106
Stadium Business Park...... CA IND 4,909 3,768 11,345 -- 48
Systematics................ CA IND -- 911 2,773 -- --
Texas Industrial Portfolio
(4)...................... TX IND -- 10,806 32,499 -- 218
Twin Cities................ MN IND -- 4,873 14,638 -- --
Two South Middlesex........ NJ IND -- 2,247 6,781 -- --
Valwood.................... TX IND 4,351 1,983 5,989 -- 12
Valwood Parkway II......... TX IND -- 2,219 6,729 -- --
Viscount................... FL IND -- 984 3,016 -- --
Weigman Road............... CA IND -- 1,563 4,852 -- --
West Kiest................. TX IND -- 1,395 4,231 -- --
West North Carrier......... TX IND 3,522 1,375 4,165 -- 85
Windsor Court.............. IL IND -- 766 2,338 -- --
Yosemite Drive............. CA IND -- 2,350 7,297 -- --
Zanker/Charcot
Industrial............... CA IND -- 5,282 15,887 -- 202
Applewood Village Shopping
Center................... CO RET -- 6,716 26,903 -- --
Arapahoe Village Shopping
Center................... CO RET 11,083 3,795 15,220 -- --
Aurora Marketplace......... WA RET -- 3,243 13,013 -- 4
BayHill Shopping Center.... CA RET -- 2,844 11,417 -- 64
Brentwood Commons.......... IL RET 5,460 1,810 7,280 -- 1
Civic Center Plaza......... IL RET 13,689 5,113 20,492 -- 42
Corbins Corner Shopping
Center................... CT RET -- 6,438 25,791 -- 3

GROSS AMOUNT CARRIED AT 12/31/97
----------------------------------
YEAR OF DEPRECIABLE
TOTAL ACCUMULATED CONSTRUCTION OR LIFE
PROPERTY LAND BUILDING COSTS(2) DEPRECIATION ACQUISITION (YEARS)
-------- -------- ---------- ---------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Pagemill & Dillworth....... 1,877 5,690 7,567 13 1997 5-40
Patuxent................... 1,696 5,127 6,823 12 1997 5-40
Penn James
Office/Warehouse......... 1,991 6,116 8,107 14 1997 5-40
Pennsy Drive............... 657 2,214 2,871 5 1997 5-40
Presidents Drive........... 1,124 3,446 4,570 8 1997 5-40
Presidents Drive II........ 2,563 7,861 10,424 18 1997 5-40
Preston Court.............. 2,313 7,192 9,505 16 1997 5-40
Production Drive........... 425 1,286 1,711 3 1997 5-40
Santa Barbara Court........ 1,617 5,029 6,646 11 1997 5-40
Shiloh Road................ 1,813 5,495 7,308 13 1997 5-40
Silicon Valley R&D
Portfolio................ 8,024 24,205 32,229 55 1997 5-40
South Bay Industrial....... 14,992 45,481 60,473 103 1997 5-40
Southfield................. 7,073 21,365 28,438 49 1997 5-40
Stadium Business Park...... 3,768 11,393 15,161 26 1997 5-40
Systematics................ 911 2,773 3,684 6 1997 5-40
Texas Industrial Portfolio
(4)...................... 10,806 32,717 43,523 74 1997 5-40
Twin Cities................ 4,873 14,638 19,511 33 1997 5-40
Two South Middlesex........ 2,247 6,781 9,028 15 1997 5-40
Valwood.................... 1,983 6,001 7,984 14 1997 5-40
Valwood Parkway II......... 2,219 6,729 8,948 15 1997 5-40
Viscount................... 984 3,016 4,000 7 1997 5-40
Weigman Road............... 1,563 4,852 6,415 11 1997 5-40
West Kiest................. 1,395 4,231 5,626 10 1997 5-40
West North Carrier......... 1,375 4,250 5,625 10 1997 5-40
Windsor Court.............. 766 2,338 3,104 5 1997 5-40
Yosemite Drive............. 2,350 7,297 9,647 17 1997 5-40
Zanker/Charcot
Industrial............... 5,282 16,089 21,371 36 1997 5-40
Applewood Village Shopping
Center................... 6,716 26,903 33,619 61 1997 5-40
Arapahoe Village Shopping
Center................... 3,795 15,220 19,015 35 1997 5-40
Aurora Marketplace......... 3,243 13,017 16,260 30 1997 5-40
BayHill Shopping Center.... 2,844 11,481 14,325 26 1997 5-40
Brentwood Commons.......... 1,810 7,281 9,091 17 1997 5-40
Civic Center Plaza......... 5,113 20,534 25,647 47 1997 5-40
Corbins Corner Shopping
Center................... 6,438 25,794 32,232 59 1997 5-40
</TABLE>

F-28
<PAGE> 151
<TABLE>
<CAPTION>
COSTS
CAPITALIZED
SUBSEQUENT TO
INITIAL COST TO COMPANY ACQUISITION
----------------------- ---------------
PROPERTY LOCATION TYPE ENCUMBRANCES(1) LAND BUILDING LAND BUILDING
-------- -------- ---- --------------- --------- ----------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Eastgate Plaza............. WA RET -- 2,122 8,529 -- 59
Five Points Shopping
Center................... CA RET -- 5,412 21,687 -- 96
Granada Village............ CA RET 15,678 6,533 26,172 -- 251
Kendall Mall............... FL RET 25,162 7,069 28,316 -- 16
La Jolla Village........... CA RET 19,245 6,936 27,785 -- 16
Lakeshore Plaza Shopping
Center................... CA RET 13,839 6,706 26,865 -- 74
Latham Farms............... NY RET 38,833 12,327 49,350 -- 23
Long Gate Shopping
Center................... MD RET -- 9,662 38,677 -- --
Manhattan Village Shopping
Center................... CA RET -- 16,484 66,578 -- 230
Pleasant Hill Shopping
Center................... CA RET -- 5,403 21,654 -- 13
Rancho San Diego Village
Shopping Center.......... CA RET -- 2,645 10,621 -- 2
Randall's Dairy Ashford.... TX RET -- 2,542 10,179 -- --
Randall's Austin Parkway... TX RET -- 2,139 8,563 -- --
Randall's Commons
Memorial................. TX RET -- 2,053 8,221 -- 1
Randall's Woodway.......... TX RET -- 3,075 12,313 -- --
Riverview Plaza Shopping
Center................... IL RET -- 2,656 10,663 -- --
Rockford Road Plaza........ MN RET -- 4,333 17,371 -- 35
Shoppes at Lago Mar........ FL RET 5,932 2,051 8,246 -- 66
Silverado Plaza Shopping
Center................... CA RET 5,203 1,928 7,753 -- --
Southwest Pavilion......... NV RET -- 1,575 8,140 -- 30
The Plaza at Delray........ FL RET 23,455 6,968 27,914 -- 4
Twin Oaks Shopping
Center................... CA RET -- 2,399 9,637 -- 47
Weslayan Plaza............. TX RET -- 7,842 31,409 -- 76
Woodlawn Point Shopping
Center................... GA RET 4,823 2,318 9,312 -- --
Ygnacio Plaza.............. CA RET 8,365 3,021 12,114 -- 38
-------- -------- ---------- ---- ------
$455,256 $550,635 $1,817,216 $ -- $5,300
======== ======== ========== ==== ======

GROSS AMOUNT CARRIED AT 12/31/97
----------------------------------
YEAR OF DEPRECIABLE
TOTAL ACCUMULATED CONSTRUCTION OR LIFE
PROPERTY LAND BUILDING COSTS(2) DEPRECIATION ACQUISITION (YEARS)
-------- -------- ---------- ---------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Eastgate Plaza............. 2,122 8,588 10,710 20 1997 5-40
Five Points Shopping
Center................... 5,412 21,783 27,195 50 1997 5-40
Granada Village............ 6,533 26,423 32,956 60 1997 5-40
Kendall Mall............... 7,069 28,332 35,401 65 1997 5-40
La Jolla Village........... 6,936 27,801 34,737 63 1997 5-40
Lakeshore Plaza Shopping
Center................... 6,706 26,939 33,645 61 1997 5-40
Latham Farms............... 12,327 49,373 61,700 113 1997 5-40
Long Gate Shopping
Center................... 9,662 38,677 48,339 88 1997 5-40
Manhattan Village Shopping
Center................... 16,484 66,808 83,292 152 1997 5-40
Pleasant Hill Shopping
Center................... 5,403 21,667 27,070 49 1997 5-40
Rancho San Diego Village
Shopping Center.......... 2,645 10,623 13,268 24 1997 5-40
Randall's Dairy Ashford.... 2,542 10,179 12,721 23 1997 5-40
Randall's Austin Parkway... 2,139 8,563 10,702 20 1997 5-40
Randall's Commons
Memorial................. 2,053 8,222 10,275 19 1997 5-40
Randall's Woodway.......... 3,075 12,313 15,388 28 1997 5-40
Riverview Plaza Shopping
Center................... 2,656 10,663 13,319 24 1997 5-40
Rockford Road Plaza........ 4,333 17,406 21,739 40 1997 5-40
Shoppes at Lago Mar........ 2,051 8,312 10,363 19 1997 5-40
Silverado Plaza Shopping
Center................... 1,928 7,753 9,681 18 1997 5-40
Southwest Pavilion......... 1,575 8,170 9,745 19 1997 5-40
The Plaza at Delray........ 6,968 27,918 34,886 64 1997 5-40
Twin Oaks Shopping
Center................... 2,399 9,684 12,083 22 1997 5-40
Weslayan Plaza............. 7,842 31,485 39,327 72 1997 5-40
Woodlawn Point Shopping
Center................... 2,318 9,312 11,630 21 1997 5-40
Ygnacio Plaza.............. 3,021 12,152 15,173 26 1997 5-40
-------- ---------- ---------- ------
$550,635 $1,822,516 $2,373,151 $4,153
======== ========== ========== ======
</TABLE>

F-29
<PAGE> 152

AMB PROPERTY CORPORATION

SCHEDULE III (CONTINUED)
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997
(IN THOUSANDS)

A summary of activity for real estate and accumulated depreciation for the
year ended December 31, 1997 is as follows:

<TABLE>
<CAPTION>
1997(5)
----------
<S> <C>
INVESTMENTS IN REAL ESTATE:
Balance at beginning of year.............................. $ --
Acquisition of Properties(6)........................... 2,367,851
Improvements........................................... 5,300
----------
Balance at end of year.................................... $2,373,151
==========
ACCUMULATED DEPRECIATION:
Balance at beginning of year.............................. $ --
Depreciation expense................................... 4,153
----------
Balance at end of year.................................... $ 4,153
==========
</TABLE>

- ---------------
(1) As of December 31, 1997, Properties with a net book value of $170,979 serve
as collateral for outstanding indebtedness under a secured debt facility of
$73,000.

(2) As of December 31, 1997, the aggregate cost for federal income tax purposes
of investments in real estate was approximately $2,231,504.

(3) Consists of two properties with seven buildings in Los Angeles and one
building in Anaheim.

(4) Consists of two properties with five buildings in Houston and 18 buildings
in Dallas.

(5) The Company was formed in November 1997. Since the Company did not own real
estate prior to the Formation Transaction, a reconciliation of activity for
real estate and accumulated depreciation is not provided for the years ended
December 31, 1996 and 1995.

(6) As discussed in the "Notes to Consolidated Financial Statements -- Formation
and Organization of the Company," the Company acquired Properties with a
value of $2,216,137 in exchange for shares of the Company's stock and LP
units in the Operating Partnership.

F-30
<PAGE> 153

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To AMB Property Corporation:

We have audited the accompanying combined balance sheets of the AMB
Contributed Properties as of December 31, 1995 and 1996, and the related
combined statements of operations, owners' equity and cash flows for the years
ended December 31, 1994, 1995 and 1996. These combined financial statements are
the responsibility of the management of the AMB Contributed Properties. Our
responsibility is to express an opinion on these combined 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, the evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the AMB Contributed
Properties as of December 31, 1995 and 1996, and the results of their operations
and their cash flows for the years ended December 31, 1994, 1995 and 1996, in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

San Francisco, California
March 27, 1998

F-31
<PAGE> 154

AMB CONTRIBUTED PROPERTIES

COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996
AND SEPTEMBER 30, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, 1997
------------------------ --------------------------
1995 1996 HISTORICAL AS ADJUSTED
---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Investments in real estate:
Land and land improvements................ $ 252,627 $ 431,869 $ 502,385 $ 502,385
Buildings and improvements................ 754,623 1,157,464 1,367,162 1,367,162
Construction in progress.................. 11,431 26,758 31,615 31,615
---------- ---------- ---------- ----------
Total investments in real estate..... 1,018,681 1,616,091 1,901,162 1,901,162
Less -- accumulated depreciation..... (33,726) (61,704) (87,836) (87,836)
---------- ---------- ---------- ----------
Net investments in real estate....... 984,955 1,554,387 1,813,326 1,813,326
Cash and cash equivalents................. 110,474 33,120 46,055 13,168
Accounts receivable, net.................. 9,646 13,842 17,112 17,112
Deferred rent receivable.................. 3,465 5,899 8,347 8,347
Deferred financing and leasing costs,
net..................................... 6,281 13,840 15,130 15,130
Prepaid expenses and other assets......... 2,360 1,471 4,905 4,905
---------- ---------- ---------- ----------
Total assets.................... $1,117,181 $1,622,559 $1,904,875 $1,871,988
========== ========== ========== ==========

LIABILITIES AND OWNERS' EQUITY
Debt:
Mortgage loans.......................... $ 254,067 $ 403,321 $ 443,324 $ 443,324
Secured debt facility................... -- 73,000 73,000 73,000
Secured line of credit.................. -- 46,313 43,613 43,613
Unsecured line of credit................ -- 25,500 181,300 181,300
---------- ---------- ---------- ----------
Total debt...................... 254,067 548,134 741,237 741,237
Accounts payable and other liabilities.... 11,395 14,298 19,662 19,662
Accounts payable to affiliates............ 529 2,713 3,117 3,117
Accrued real estate taxes................. 7,240 8,465 16,278 16,278
Security deposits payable................. 2,141 6,714 8,202 8,202
Unearned rental income.................... 896 1,703 2,354 2,354
---------- ---------- ---------- ----------
Total liabilities............... 276,268 582,027 790,850 790,850
Commitments and contingencies............. -- -- -- --
Minority interests........................ 3,714 12,931 16,224 16,224
Owners' equity............................ 838,007 1,028,377 1,098,526 1,065,639
Note receivable from owner................ (808) (776) (725) (725)
---------- ---------- ---------- ----------
Total owners' equity............ 837,199 1,027,601 1,097,801 1,064,914
---------- ---------- ---------- ----------
Total liabilities and owners'
equity........................ $1,117,181 $1,622,559 $1,904,875 $1,871,988
========== ========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.
F-32
<PAGE> 155

AMB CONTRIBUTED PROPERTIES

COMBINED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996,
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND
THE PERIOD FROM JANUARY 1, 1997 TO NOVEMBER 25, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS JANUARY 1,
FOR THE YEARS ENDED DECEMBER 31, ENDED 1997 TO
---------------------------------- SEPTEMBER 30, NOVEMBER 25,
1994 1995 1996 1996 1997
-------- --------- --------- ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Rental revenues.................. $50,893 $106,180 $166,415 $120,146 $207,391
Interest and other income........ 789 2,069 1,538 1,066 1,217
------- -------- -------- -------- --------
Total revenues......... 51,682 108,249 167,953 121,212 208,608
OPERATING EXPENSES
Rental expenses.................. 7,216 15,210 22,646 16,013 28,057
Real estate taxes................ 6,361 15,431 23,167 17,460 29,749
Interest expense................. 12,023 20,533 26,867 18,927 45,009
Depreciation and amortization.... 8,812 17,524 28,591 20,549 32,616
Asset management fees to
affiliate...................... 3,167 6,250 9,508 6,593 14,646
General, administrative and
other.......................... 350 782 838 586 823
------- -------- -------- -------- --------
Total operating
expenses............. 37,929 75,730 111,617 80,128 150,900
Income from operations before
disposal of properties and
minority interests............. 13,753 32,519 56,336 41,084 57,708
Gain (loss) on disposition of
properties..................... -- -- (1,471) 43 360
------- -------- -------- -------- --------
Income from operations before
minority interests............. 13,753 32,519 54,865 41,127 58,068
Minority interests' share of
(income) loss.................. (559) 12 (465) (678) (884)
------- -------- -------- -------- --------
Net income....................... $13,194 $ 32,531 $ 54,400 $ 40,449 $ 57,184
======= ======== ======== ======== ========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.
F-33
<PAGE> 156

AMB CONTRIBUTED PROPERTIES

COMBINED STATEMENTS OF OWNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
NOTE
OWNERS' RECEIVABLE
EQUITY FROM OWNER TOTAL
---------- ---------- ----------
<S> <C> <C> <C>
Balance at December 31, 1993............................ $ 208,810 $(767) $ 208,043
Contributions......................................... 312,241 -- 312,241
Distributions......................................... (43,367) -- (43,367)
Net income............................................ 13,194 -- 13,194
---------- ----- ----------
Balance at December 31, 1994............................ 490,878 (767) 490,111
Contributions......................................... 392,662 -- 392,662
Distributions......................................... (78,064) -- (78,064)
Increase in note receivable from owner................ -- (41) (41)
Net income............................................ 32,531 -- 32,531
---------- ----- ----------
Balance at December 31, 1995............................ 838,007 (808) 837,199
Contributions......................................... 253,322 -- 253,322
Distributions......................................... (117,352) -- (117,352)
Principal reduction on note receivable from owner..... -- 32 32
Net income............................................ 54,400 -- 54,400
---------- ----- ----------
Balance at December 31, 1996............................ 1,028,377 (776) 1,027,601
Contributions......................................... 112,912 -- 112,912
Distributions......................................... (89,598) -- (89,598)
Principal reduction on note receivable from owner..... -- 51 51
Net income............................................ 46,835 -- 46,835
---------- ----- ----------
Balance at September 30, 1997........................... $1,098,526 $(725) $1,097,801
========== ===== ==========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.
F-34
<PAGE> 157

AMB CONTRIBUTED PROPERTIES

COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996,
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND
THE PERIOD FROM JANUARY 1, 1997 TO NOVEMBER 25, 1997 (UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS JANUARY 1,
FOR THE YEARS ENDED DECEMBER 31, ENDED 1997 TO
--------------------------------- SEPTEMBER 30, NOVEMBER 25,
1994 1995 1996 1996 1997
--------- --------- --------- ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................... $ 13,194 $ 32,531 $ 54,400 $ 40,449 $ 57,184
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization...... 8,812 17,524 28,591 20,549 32,616
Amortization of deferred financing
costs........................... 138 217 479 360 1,088
Straight-line rents................ (1,404) (2,061) (2,434) (1,826) (2,965)
Minority interests' share of net
income (loss)................... 559 (12) 465 678 884
(Gain) loss on disposition of
properties...................... -- -- 1,471 (43) (360)
Increase in accounts receivable and
other assets.................... (776) (5,603) (3,307) (1,116) (14,166)
Increase (decrease) in payable to
affiliates...................... 1,001 (472) 2,184 (1,413) 615
Increase in accounts payable and
other liabilities............... 6,998 10,284 9,069 8,405 16,890
--------- --------- --------- --------- ---------
Net cash provided by operating
activities.................... 28,522 52,408 90,918 66,043 91,786
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to properties.............. (345,042) (352,984) (566,278) (220,685) (315,303)
Additions to leasing costs........... (1,898) (2,741) (6,002) (3,732) (4,548)
--------- --------- --------- --------- ---------
Net cash used for investing
activities...................... (346,940) (355,725) (572,280) (224,417) (319,851)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on debt................... 125,527 59,852 331,023 121,342 188,886
Payments on debt..................... (20,534) (7,744) (36,956) (29,054) (52,004)
Additions to financing fees.......... (836) (816) (3,248) (3,077) (244)
Capital distributions................ (43,367) (78,064) (117,352) (85,437) (90,107)
Capital contributions................ 312,241 384,596 231,491 -- 187,192
Contributions by minority
interests.......................... 150 457 556 78,824 7,980
Distributions to minority
interests.......................... (368) (2,994) (1,538) (1,463) (2,528)
Decrease (increase) in note
receivable from owner.............. (767) (41) 32 83 (17)
--------- --------- --------- --------- ---------
Net cash provided by financing
activities......................... 372,046 355,246 404,008 81,218 239,158
Net increase (decrease) in cash and
equivalents........................ 53,628 51,929 (77,354) (77,156) 11,093
Cash and cash equivalents at
beginning of period................ 4,917 58,545 110,474 110,474 33,120
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of
period............................. $ 58,545 $ 110,474 $ 33,120 $ 33,318 $ 44,213
========= ========= ========= ========= =========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.
F-35
<PAGE> 158

AMB CONTRIBUTED PROPERTIES

NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

1. ORGANIZATION AND BASIS OF PRESENTATION

The accompanying combined financial statements represent a combination of
the assets, liabilities and operations of 96 properties (the "Properties")
located throughout the United States, which are owned by certain real estate
investment funds, trusts and partnerships. Collectively, the combination of the
operations of the investments in the Properties is referred to as the "AMB
Contributed Properties." During the periods presented, the AMB Contributed
Properties were all managed by AMB Institutional Realty Advisors, Inc. ("AMB"),
the investment manager, under separate investment management agreements (the
"Agreements"). The AMB Contributed Properties is not a legal entity. A summary
of the various entities that own the Properties, the number of properties and
square footage as of November 25, 1997 is as follows:

<TABLE>
<CAPTION>
NUMBER
OF
PROPERTY OWNER PROPERTIES SQUARE FOOTAGE
-------------- ---------- --------------
<S> <C> <C>
AMB Current Income Fund, Inc.(1)............................ 34 14,866,408
AMB Value Added Fund, Inc................................... 5 1,740,103
AMB Western Properties Fund-I............................... 8 1,118,907
Ameritech Pension Trust..................................... 11 4,398,878
City and County of San Francisco Employees' Retirement
System.................................................... 12 3,933,608
First Allmerica Financial Life Insurance Company............ 1 484,370
Milwaukee Employes' Retirement System(1).................... 1 285,480
Southern Company System Master Retirement Trust............. 20 8,427,537
SPP Investment Management................................... 1 699,512
Various Family Trusts....................................... 3 510,298
-- ----------
Total............................................. 96 36,465,101
== ==========
</TABLE>

- ---------------
(1) AMB Current Income Fund, Inc. and Milwaukee Employes' Retirement System own
respective interests in a limited liability company of 66.7% and 33.3%. The
principal asset of the limited liability company is a 2,512,465 square foot
property. The property is included in AMB Current Income Fund, Inc.'s number
of properties and square footage above.

On November 25, 1997, the owners of the AMB Contributed Properties and AMB
completed a business combination plan whereby the owners of the Properties
contributed their property to AMB Property Corporation, a public real estate
company, in exchange for shares in AMB Property Corporation, or units in a
subsidiary partnership, AMB Property, L.P. (the "Operating Partnership") or, in
certain limited circumstances, cash (the "Formation Transaction"). The
allocation of ownership interests among the owners of the AMB Contributed
Properties and AMB was based on the agreed-upon relative values of net assets
contributed. The initial allocation among these entities may change pending the
resolution of certain future performance criteria of AMB Property Corporation.

F-36
<PAGE> 159
AMB CONTRIBUTED PROPERTIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

INVESTMENTS IN REAL ESTATE

Depreciation and amortization are calculated using the straight-line method
over the estimated useful lives of the investments. The estimated lives are as
follows:

Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations or betterments that extend the economic useful
life of assets are capitalized.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash held in financial institutions and
other highly liquid short-term investments with original maturities of three
months or less. Cash and cash equivalents as of December 31, 1995 and 1996 and
September 30, 1997 (unaudited) include restricted cash of $77,593, $11,042, and
$1,740, respectively, which represent amounts held in escrow in connection with
property purchases and capital improvements.

DEFERRED FINANCING AND LEASING COSTS

Costs incurred in connection with financing or leasing are capitalized and
amortized to interest expense and depreciation and amortization, respectively,
on a straight-line basis (which approximates the effective interest method in
the case of financing costs) over the term of the related loan or lease for
periods generally ranging from six months to 10 years. Unamortized costs are
charged to expense upon the early repayment of

F-37
<PAGE> 160
AMB CONTRIBUTED PROPERTIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)

the related debt or upon the early termination of the lease. Accumulated
amortization as of December 31, 1995 and 1996 and, September 30, 1997
(unaudited) was $1,239, $2,930 and $5,487, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Based on the borrowing rates currently available to the Properties, the
fair value of its debt at September 30, 1997 (unaudited) (with a carrying amount
of $741,237) was approximately $760,000. Such valuation is based on the current
rates offered to the AMB Contributed Properties for debt of the same remaining
maturities. The carrying amount of cash and cash equivalents approximates fair
value.

MINORITY INTERESTS

Minority interests in the AMB Contributed Properties represent interests
held by certain entities in eight real estate limited partnerships and limited
liability companies that are consolidated for financial reporting purposes. Such
investments are consolidated because 1) the Company owns a controlling general
partner's interest or holds a majority member interest, or 2) the Company as
limited partner holds significant control over the entity through a 50% or
greater ownership interest combined with the ability to control major operating
decisions such as approval of budgets, selection of property managers and change
in financing. Further, in all cases, the Company has the ability to preclude a
sale or refinancing proposed by any other partner.

REVENUES

All leases are classified as operating leases. Rental revenues are
recognized on a straight-line basis over the term of the leases. Deferred rent
receivable represents the excess of rental revenue recognized on a straight-line
basis over cash received under the applicable lease provisions.

INTEREST AND OTHER INCOME

Interest and other income primarily represents interest income on cash and
cash equivalents.

NEW ACCOUNTING PRONOUNCEMENTS

In June of 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." This statement, effective for
financial statements for periods beginning after December 15, 1997, requires
that a public business enterprise report financial and descriptive information
about its reportable operating segments. Generally, information is required to
be reported on the basis that it is used internally for evaluating segment
performance and deciding how to allocate resources to segments. This statement
is not applicable to the AMB Contributed Properties, as they are not public
business enterprises.

3. NOTE RECEIVABLE FROM OWNER

An affiliate of AMB held a 1% general partnership interest in AMB Western
Properties Fund-I. The general partner's capital contribution was made through a
note payable to AMB Western Properties Fund-I. The note accrues interest at
9.29%, payable from the general partner's quarterly cash distributions. At
December 31, 1995 and 1996 and September 30, 1997 (unaudited), outstanding
principal and interest on the note totaled $808, $776 and $725, respectively.

4. TRANSACTIONS WITH INVESTMENT MANAGER

The owners of the AMB Contributed Properties are obligated to pay AMB
acquisition fees and asset management fees, as defined in the agreements. For
the years ended December 31, 1994, 1995 and 1996, the
F-38
<PAGE> 161
AMB CONTRIBUTED PROPERTIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)

nine months ended September 30, 1996 (unaudited) and the period from January 1,
1997 to November 25, 1997 (unaudited), the AMB Contributed Properties incurred
expenses of $3,167, $6,250, $9,508, $6,593 and $14,646, respectively, related to
asset management of the Properties. In addition, acquisition fees paid to AMB of
$3,521, $3,884, $4,849, $2,053 and $2,989 were capitalized to investments in
real estate in the accompanying combined balance sheets for the years ended
December 31, 1994, 1995 and 1996, for the nine months ended September 30, 1996
(unaudited) and the period from January 1, 1997 to November 25, 1997
(unaudited), respectively. At December 31, 1995 and 1996 and September 30, 1997
(unaudited), total acquisition and asset management fees payable to AMB were
$529, $2,713 and $3,024, respectively.

Certain owners of the AMB Contributed Properties are also obligated to pay
incentive management fees to AMB during ownership and upon disposition of the
Properties to the extent that operations of the Properties and their fair values
meet certain criteria. In connection with the Formation Transaction the owners
of the AMB Contributed Properties agreed to terminate their respective existing
incentive management fee agreements with AMB. One of the owners of the AMB
Contributed Properties agreed to and paid a final incentive management fee of
$3,011.

5. DEBT

As of December 31, 1995 and 1996 and September 30, 1997 (unaudited), debt
consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1995 1996 1997
-------- -------- -------------
(UNAUDITED)
-------------
<S> <C> <C> <C>
Mortgage loans, varying interest rates from 7.0%
to 10.4%, due November 1998 to December 2008... $254,067 $403,321 $443,324
Secured debt facility, fixed interest at 7.53%,
due December 2008.............................. -- 73,000 73,000
Secured line of credit, variable interest at
LIBOR plus 0.5% (6.2% at September 30, 1997),
due October 1998............................... -- 46,313 43,613
Unsecured line of credit, variable interest at
LIBOR plus 1.5% (7.2% at September 30, 1997),
due August 1999................................ -- 25,500 181,300
-------- -------- --------
Total debt............................. $254,067 $548,134 $741,237
======== ======== ========
</TABLE>

The unsecured line of credit had total availability of $200,000 as of
September 30, 1997 (unaudited). The unsecured line includes a one-year option to
extend and a fee on average unused funds of 0.25%.

The secured debt facility and secured line of credit in aggregate had total
availability of $116,613 as of September 30, 1997.

Mortgage loans generally require monthly principal and interest payments.
The mortgage loans are secured by deeds of trust on 42 Properties. The net book
value of real estate investments pledged as collateral under deeds of trust for
mortgage loans and the secured debt facility at December 31, 1995 and 1996 and
September 30, 1997 (unaudited) is $475,783, $934,233 and $935,074, respectively.
In addition, Properties with a net book value of $129,192, $147,452 and $146,853
as of December 31, 1995 and 1996 and September 30, 1997 (unaudited),
respectively, are part of a collateral pool for cross-collateralized mortgage
debt of one of the Property owners. As such mortgage is deemed to be debt of the
real estate investment fund rather than of the Properties and as such Properties
were contributed to AMB Property Corporation free of debt, the debt is not
reflected in the accompanying combined financial statements.

F-39
<PAGE> 162
AMB CONTRIBUTED PROPERTIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)

Also included in mortgage loans is a construction loan with a balance of
$1,928 as of September 30, 1997 (unaudited). Such loan matures in 2000, has
total availability of $8,000 and bears interest at LIBOR plus 2.75% or prime
plus 5% at the borrower's option.

The secured line is collateralized by capital subscriptions receivable of
$149,436 at September 30, 1997 (unaudited) from the owners of AMB Value Added
Fund, Inc. which have been netted against owners' equity in the accompanying
combined financial statements.

The weighted-average fixed interest rate on debt at September 30, 1997
(unaudited) was 7.87%. Interest capitalized related to construction projects for
the years ended December 31, 1994, 1995 and 1996, for the nine months ended
September 30, 1996 (unaudited) and for the period from January 1, 1997 to
November 25, 1997 (unaudited) was $132, $105, $1,134, $537 and $1,092,
respectively.

The scheduled maturities of all debt outstanding as of September 30, 1997
are as follows:

<TABLE>
<S> <C>
1997 (three months)......................................... $ 1,536
1998........................................................ 63,002
1999........................................................ 190,966
2000........................................................ 9,285
2001........................................................ 35,654
Thereafter.................................................. 440,794
--------
$741,237
========
</TABLE>

6. LEASING ACTIVITY

Future minimum rentals due under noncancelable operating leases with
tenants in effect at September 30, 1997 (unaudited) are as follows:

<TABLE>
<S> <C>
1997 (three months)......................................... $ 43,059
1998........................................................ 178,488
1999........................................................ 158,878
2000........................................................ 138,977
2001........................................................ 117,644
Thereafter.................................................. 509,810
----------
$1,146,856
==========
</TABLE>

In addition to minimum rental payments, certain tenants pay reimbursements
for their pro rata share of specified operating expenses, which reimbursements
amounted to $9,077, $21,008, $33,805, $26,176 and $44,574 for the years ended
December 31, 1994, 1995 and 1996, for the nine months ended September 30, 1996
(unaudited) and for the period from January 1, 1997 to November 25, 1997
(unaudited), respectively. These amounts are included as rental income and
operating expenses in the accompanying combined statements of operations.
Certain of the leases also provide for the payment of additional rent based on a
percentage of the tenant's revenues. Some leases contain options to renew. No
individual tenant accounts for greater than 10% of rental revenues.

7. PROPERTY DISPOSITIONS

During the year ended December 31, 1996 and period from January 1, 1997 to
November 25, 1997 (unaudited), the AMB Contributed Properties disposed of
certain Properties. The accompanying combined financial statements include the
operations of such Properties for periods prior to their disposition. The
following table sets forth the revenues and expenses of the disposed Properties
included in the accompanying
F-40
<PAGE> 163
AMB CONTRIBUTED PROPERTIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)

combined financial statements for the years ended December 31, 1994, 1995 and
1996, the nine months ended September 30, 1996 (unaudited) and the period from
January 1, 1997 to November 25, 1997 (unaudited).

<TABLE>
<CAPTION>
NINE MONTHS JANUARY 1,
YEARS ENDED DECEMBER 31, ENDED 1997 TO
---------------------------- SEPTEMBER 30, NOVEMBER 25,
1994 1995 1996 1996 1997
------ ------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues........................ $1,248 $ 2,170 $ 2,624 $ 1,909 $1,200
Expenses........................ (489) (1,005) (1,475) (1,075) (595)
------ ------- ------- ------- ------
Net Income.................... $ 759 $ 1,165 $ 1,149 $ 834 $ 605
====== ======= ======= ======= ======
</TABLE>

8. INCOME TAXES

The Properties are owned by entities that are generally not subject to
federal income taxes, including tax-exempt master trusts, real estate investment
trusts and partnerships. Accordingly, no provision for income taxes has been
made in the accompanying combined financial statements.

9. COMMITMENTS AND CONTINGENCIES

ENVIRONMENTAL MATTERS

The owners of the AMB Contributed Properties follow the policy of
monitoring its properties for the presence of hazardous or toxic substances. The
owners of the AMB Contributed Properties are not aware of any environmental
liability with respect to the Properties that would have a material adverse
effect on the AMB Contributed Properties' business, assets or results of
operations; however, there can be no assurance that a material environmental
liability does not exist. The existence of any such material environmental
liability would have an adverse effect on the AMB Contributed Properties'
results of operations and cash flow.

GENERAL UNINSURED LOSSES

The AMB Contributed Properties generally carry comprehensive liability,
fire, flood, extended coverage and rental loss insurance with policy
specifications, limits and deductibles customarily carried for similar
properties. There are, however, certain types of extraordinary losses that may
be either uninsurable, or not economically insurable. Should an uninsured loss
occur, the AMB Contributed Properties could lose its investment in, and
anticipated profits and cash flows from, a property.

Certain of the AMB Contributed Properties are located in areas that are
subject to earthquake activity; the AMB Contributed Properties has therefore
obtained limited earthquake insurance.

10. AS ADJUSTED BALANCE SHEET (UNAUDITED)

The as adjusted balance sheet as of September 30, 1997 reflects a cash
distribution of approximately $32,887 to the owners of the AMB Contributed
Properties. Such distribution was made in connection with the formation of AMB
Property Corporation and was paid subsequent to December 31, 1997. The
distribution was determined based upon the net working capital position of the
Properties as of November 25, 1997.

F-41
<PAGE> 164

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To AMB Property Corporation:

We have audited the accompanying combined statement of revenues and certain
expenses of the 1998 Acquired Properties, as defined in Note 1, for the year
ended December 31, 1997. This combined financial statement is the responsibility
of the management of the Company. Our responsibility is to express an opinion on
this combined financial statement 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 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 audit provides a reasonable basis for our opinion.

The accompanying combined statement of revenues and certain expenses has
been prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not intended
to be a complete presentation of the revenues and expenses of the 1998 Acquired
Properties.

In our opinion, the combined financial statement referred to above presents
fairly, in all material respects, the revenues and certain expenses of the 1998
Acquired Properties for the year ended December 31, 1997, in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

San Francisco, California
March 27, 1998

F-42
<PAGE> 165

THE 1998 ACQUIRED PROPERTIES

COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUES:
Rental revenues........................................ $24,177
Other income........................................... 136
-------
24,313

CERTAIN EXPENSES:
Property operating expenses............................... 3,920
Real estate taxes......................................... 2,013
-------
5,933
-------
REVENUES IN EXCESS OF CERTAIN EXPENSES...................... $18,380
=======
</TABLE>

The accompanying notes are an integral part of this combined financial
statement.
F-43
<PAGE> 166

THE 1998 ACQUIRED PROPERTIES

NOTES TO COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

PROPERTIES ACQUIRED

The accompanying combined statement of revenues and certain expenses
includes the combined operations of properties acquired by AMB Property
Corporation (the "Company") during the period from January 1, 1998 to March 27,
1998. The four properties and one portfolio are collectively referred to as the
"1998 Acquired Properties."

<TABLE>
<CAPTION>
RENTABLE
SQUARE DATE
PROPERTY NAME LOCATION FEET ACQUIRED
------------- -------- --------- --------
<S> <C> <C> <C>
Boston Industrial
Portfolio................. Greater Boston Area, MA 2,858,241 3/27/98
Jamesburg................... Dayton, NJ 821,712 3/20/98
Orlando Central Park........ Orlando, FL 791,386 3/24/98
Totem Lake Malls............ Seattle, WA 290,204 3/6/98
Cascade..................... Tigard, OR 159,411 1/15/98
</TABLE>

BASIS OF PRESENTATION

The accompanying combined statement of revenues and certain expenses are
not representative of the actual operations of the 1998 Acquired Properties for
the period presented. Certain expenses may not be comparable to the expenses
expected to be incurred by the Company in the proposed future operations of the
1998 Acquired Properties; however, the Company is not aware of any material
factors relating to the 1998 Acquired Properties that would cause the reported
financial information not to be indicative of future operating results. Excluded
expenses consist of interest, depreciation and amortization and other costs not
directly related to the future operations of the 1998 Acquired Properties.

REVENUE RECOGNITION

All leases are classified as operating leases. Rental revenues are
recognized on a straight-line basis over the terms of the leases. No individual
tenant accounted for greater than 10% of revenues.

USE OF ESTIMATES

The preparation of a combined statement of revenues and certain expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

2. LEASING ACTIVITY

The following is a schedule of future minimum rental revenues for 1998 and
annually thereafter on non-cancelable operating leases in effect as of December
31, 1997.

<TABLE>
<S> <C>
1998........................................................ $ 21,201
1999........................................................ 19,677
2000........................................................ 15,986
2001........................................................ 13,957
2002........................................................ 9,431
Thereafter.................................................. 34,423
--------
Total............................................. $114,675
========
</TABLE>

F-44
<PAGE> 167
THE 1998 ACQUIRED PROPERTIES

NOTES TO COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997

In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $3,523
for the year ended December 31, 1997. These amounts are included in rental
revenues in the accompanying combined statement of revenues and certain
expenses. Certain leases contain options to renew.

F-45
<PAGE> 168

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To AMB Property Corporation:

We have audited the accompanying combined statement of revenues and certain
expenses of the 1997 Acquired Properties, as defined in Note 1, for the year
ended December 31, 1996. This combined financial statement is the responsibility
of the management of the Company. Our responsibility is to express an opinion on
this combined financial statement based on our audit.

In our opinion, the combined financial statement referred to above presents
fairly, in all material respects, the revenues and certain expenses of the 1997
Acquired Properties for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

San Francisco, California
January 27, 1998

F-46
<PAGE> 169

THE 1997 ACQUIRED PROPERTIES

COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD
FROM JANUARY 1, 1997 TO THE DATE OF ACQUISITION (UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997
------- -----------
(UNAUDITED)
<S> <C> <C>
REVENUES:
Rental revenues........................................ $49,095 $41,116
Other income........................................... 315 174
------- -------
49,410 41,290
CERTAIN EXPENSES:
Property operating expenses............................... 5,410 4,111
Real estate taxes......................................... 5,920 5,211
------- -------
11,330 9,322
------- -------
REVENUES IN EXCESS OF CERTAIN EXPENSES...................... $38,080 $31,968
======= =======
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.
F-47
<PAGE> 170

THE 1997 ACQUIRED PROPERTIES

NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD
FROM JANUARY 1, 1997 TO THE DATE OF ACQUISITION (UNAUDITED)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

PROPERTIES ACQUIRED

The accompanying combined statements of revenues and certain expenses
include the combined operations of properties acquired by the owners of the AMB
Contributed Properties and AMB Property Corporation during the period from
January 1, 1997 to December 30, 1997. The seven properties and two portfolios
are collectively referred to as the "1997 Acquired Properties."

<TABLE>
<CAPTION>
RENTABLE DATE
PROPERTY NAME LOCATION SQUARE FEET ACQUIRED
------------- -------- ----------- --------
<S> <C> <C> <C>
Manhattan Village Shopping
Center.................... Manhattan Beach, CA 423,950 8/19/97
Rockford Road Plaza......... Plymouth, MN 205,787 1/1/97
Cabot Business Park......... Mansfield, MA 1,071,517 9/15/97
Weslayan Plaza.............. Houston, TX 356,250 9/30/97
Acer Distribution Center.... San Jose, CA 196,643 10/1/97
Patuxent.................... Jessup, MD 147,383 9/16/97
Executive Drive............. Addison, IL 75,020 9/26/97
Silicon Valley R&D
Portfolio................. San Jose, CA 287,228 11/25/97
Cabot Portfolio............. Various 5,503,105 12/30/97
</TABLE>

BASIS OF PRESENTATION

The accompanying combined statements of revenues and certain expenses are
not representative of the actual operations of the 1997 Acquired Properties for
the periods presented. Certain expenses may not be comparable to the expenses
expected to be incurred by the Company in the proposed future operations of the
1997 Acquired Properties; however, the Company is not aware of any material
factors relating to the 1997 Acquired Properties that would cause the reported
financial information not to be indicative of future operating results. Excluded
expenses consist of interest, depreciation and amortization and other costs not
directly related to the future operations of the 1997 Acquired Properties.

The unaudited combined statement of revenues and certain expenses for 1997
reflect the operations of the Properties for the period from January 1, 1997
through the date of acquisition.

REVENUE RECOGNITION

All leases are classified as operating leases. Rental revenues are
recognized on a straight-line basis over the terms of the leases. No individual
tenant accounted for greater than 10% of revenues.

USE OF ESTIMATES

The preparation of the combined financial statements of revenues and
certain expense in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

F-48
<PAGE> 171
THE 1997 ACQUIRED PROPERTIES

NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD
FROM JANUARY 1, 1997 TO THE DATE OF ACQUISITION (UNAUDITED)

2. LEASING ACTIVITY

The following is a schedule of future minimum rental revenues for 1997 and
annually thereafter on non-cancelable operating leases in effect as of December
31, 1996.

<TABLE>
<S> <C>
1997.................................................... $ 9,683
1998.................................................... 38,975
1999.................................................... 37,668
2000.................................................... 33,660
2001.................................................... 29,003
Thereafter.............................................. 68,442
--------
Total......................................... $217,431
========
</TABLE>

In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $9,103
and $7,060 for the year ended December 31, 1996 and the period from January 1,
1997 to the date of acquisition (unaudited), respectively. These amounts are
included in rental revenues in the accompanying combined statements of revenues
and certain expenses. Certain leases contain options to renew.

F-49
<PAGE> 172

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder. Except
for the SEC registration fee, all amounts are estimates.

<TABLE>
<S> <C>
SEC Registration Fee........................................ $121,725
Rating Agencies Fees........................................ 50,000
Printing and Engraving Expenses............................. 95,000
Legal Fees and Expenses..................................... 200,000
Accounting Fees and Expenses................................ 75,000
Trustee Fees and Expenses................................... 100,000
Blue Sky Fees and Expenses.................................. 15,000
Miscellaneous Expenses...................................... 13,275
--------
Total............................................. $670,000
========
</TABLE>

All of the costs identified above will be paid by the Operating Partnership.

ITEM 32. SALES TO SPECIAL PARTIES

See Item 33.

ITEM 33. RECENT SALES OF UNREGISTERED SECURITIES

In connection with its formation, the Company issued 4,746,624 unregistered
shares of Common Stock to AMB for a purchase price of $21.00 per share. In
connection with the Formation Transactions, the Company issued an aggregate of
69,963,529 shares of Common Stock in connection with the mergers of certain
corporations, and the Operating Partnership issued 2,386,910 limited partnership
Units in consideration for the contribution of certain Properties.

In January 1995, AMB issued 101,595 shares of its common stock to one of
its officers, for total consideration of $342,806, and in December 1996, it
issued 101,595 shares of common stock to one of its officers, for total
consideration of $307,071.

All of the above sales were made to "accredited investors" as defined in
Regulation D under the Securities Act in transactions not involving a public
offering pursuant to Regulation D.

ITEM 34. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 2-418 of the MGCL permits a corporation to indemnify its directors
and officers and certain other parties 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 (i) the act or
omission of the director or officer was material to the matter giving rise to
the proceeding and (a) was committed in bad faith or (b) was the result of
active and deliberate dishonesty; (ii) the director or officer actually received
an improper personal benefit in money, property or services; or (iii) in the
case of any criminal proceeding, the director or officer had reasonable cause to
believe that the act or omission was unlawful. Indemnification may be made
against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by the director or officer in connection with the proceeding;
provided, however, that if the proceeding is one by or in the right of the
corporation, indemnification may not be made with respect to any proceeding in
which the director or officer has been adjudged to be liable to the corporation.
In addition, a director or officer may not be indemnified with respect to any
proceeding charging improper personal benefit to the director or officer,
whether or not involving action in the director's or officer's official
capacity, in which the director or officer was adjudged to be liable on the

II-1
<PAGE> 173

basis that personal benefit was received. The termination of any proceeding by
conviction, or upon a plea of nolo contendere or its equivalent, or an entry of
any order of probation prior to judgment, creates a rebuttable presumption that
the director or officer did not meet the requisite standard of conduct required
for indemnification to be permitted.

In addition, Section 2-418 of the MGCL requires that, unless prohibited by
its charter, a corporation indemnify any director or officer who is made a party
to any proceeding by reason of service in that capacity against reasonable
expenses incurred by the director or officer in connection with the proceeding,
in the event that the director or officer is successful, on the merits or
otherwise, in the defense of the proceeding.

The Company's Charter and Bylaws provide in effect for the indemnification
by the Company of the directors and officers of the Company to the fullest
extent permitted by applicable law. The Company has purchased directors' and
officers' liability insurance for the benefit of its directors and officers.

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

ITEM 35. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED

Not applicable.

ITEM 36. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES AND EXHIBITS

(a)(1) FINANCIAL STATEMENTS

Pro Forma Financial Information (Unaudited)

AMB Property Corporation

Pro forma condensed consolidated balance sheet as of December 31, 1997.

Notes to pro forma condensed consolidated balance sheet.

Pro forma condensed consolidated statement of operations for the year ended
December 31, 1997.

Notes to pro forma condensed consolidated statement of operations.

Historical Financial Information

AMB Property Corporation

Report of independent public accountants.

Combined balance sheets as of December 31, 1996 and 1997.

Combined statements of operations for the years ended December 31, 1995,
1996 and 1997.

Consolidated statements of cash flows for the years ended December 31,
1995, 1996 and 1997.

II-2
<PAGE> 174

Consolidated statements of stockholders' equity for the years ended
December 31, 1995, 1996 and 1997.

Notes to consolidated financial statements.

AMB Contributed Properties

Report of independent public accountants.

Combined balance sheets as of December 31, 1995 and 1996 and September 30,
1997 (unaudited).

Combined statements of operations for the years ended December 31, 1994,
1995 and 1996, the nine months ended September 30, 1996 (unaudited) and the
period from January 1, 1997 to November 25, 1997 (unaudited).

Combined statement of owners' equity for the years ended December 31, 1994,
1995 and 1996 and the nine months ended September 30, 1997 (unaudited).

Combined statements of cash flows for the years ended December 31, 1994,
1995 and 1996, the nine months ended September 30, 1996 (unaudited) and the
period from January 1, 1997 to November 25, 1997 (unaudited).

Notes to combined financial statements.

The 1998 Acquired Properties

Report of independent public accountants.

Combined statement of revenues and certain expenses for the year ended
December 31, 1997.

Notes to combined statement of revenues and certain expenses.

The 1997 Acquired Properties

Report of independent public accountants.

Combined statements of revenues and certain expenses for the year ended
December 31, 1996 and the period from January 1, 1997 to the date of
acquisition (unaudited).

Notes to combined statements of revenues and certain expenses.

(a)(2) FINANCIAL STATEMENT SCHEDULE

Historical Financial Information -- AMB Property Corporation

Schedule III -- Historical Consolidated Real Estate and Accumulated
Depreciation.

(b) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1 Articles of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Company's Registration
Statement on Form S-11 (No. 333-35915)).
3.2 Bylaws of the Registrant (incorporated by reference to
Exhibit 3.2 of the Company's Registration Statement on Form
S-11 (No. 333-35915)).
*4.1 Indenture (the "Indenture") by and among the Operating
Partnership, the Guarantors and , as trustee.
*4.2 Specimen of % Notes due 2008 (included in the Indenture
incorporated by reference as Exhibit 4.1).
</TABLE>

II-3
<PAGE> 175

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*4.3 Specimen of % Notes due 2018 (included in the Indenture
incorporated by reference as Exhibit 4.1).
*4.4 Specimen of % Reset Put Securities due 2015 (included
in the Indenture incorporated by reference as Exhibit 4.1).
10.1 Amended and Restated Agreement of Limited Partnership of AMB
Property, L.P. (incorporated by reference to Exhibit 10.1 to
the Company's Registration Statement on Form S-11 (No.
333-35915)).
10.2 Form of Registration Rights Agreement among the Registrant
and the persons named therein. (incorporated by reference to
Exhibit 10.2 to the Company's Registration Statement on Form
S-11 (No. 333-35915))
10.3 Amended and Restated Credit Agreement, dated August 8, 1997
(incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-11 (No. 333 -35915)).
10.4 Form of Employment Agreement between AMB Property
Corporation and its executive officers (incorporated by
reference to Exhibit 10.4 to the Company's Registration
Statement on Form S-11 (No. 333-35915)).
10.5 The 1997 Stock Option and Incentive Plan of the Registrant
(incorporated by reference to Exhibit 10.5 of the Company's
Registration Statement on Form S-11 (No. 333-35915)).
12.1 Statement regarding computation of ratios
*21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (included on page II-6 hereof).
*25.1 Form T-1 Statement of Eligibility and Qualification under
the Trust Indenture Act of 1939 of , as
Trustee.
27.1 Financial Data Schedule.
</TABLE>

- ---------------
* To be filed by amendment.

ITEM 37. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the provisions described under Item 34
above, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

The Registrant hereby undertakes:

(1) For purposes of determining any liability under 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

II-4
<PAGE> 176

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.

The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

II-5
<PAGE> 177

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, each of the
Registrants certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-11 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized in the City of San Francisco, State of California, on the 1st
day of April, 1998.

AMB PROPERTY CORPORATION

By: /s/ HAMID R. MOGHADAM

---------------------------------------
Hamid R. Moghadam
President and Chief Executive Officer

AMB PROPERTY, L.P.
By AMB PROPERTY CORPORATION,
its general partner

By: /s/ HAMID R. MOGHADAM

---------------------------------------
Hamid R. Moghadam
President and Chief Executive Officer

AMB PROPERTY II, L.P.
By AMB PROPERTY HOLDING CORPORATION,
its general partner

By: /s/ HAMID R. MOGHADAM

---------------------------------------
Hamid R. Moghadam
President and Chief Executive Officer

LONG GATE LLC
By AMB PROPERTY HOLDING CORPORATION,
its managing member

By: /s/ HAMID R. MOGHADAM

---------------------------------------
Hamid R. Moghadam
President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints jointly and severally, Hamid R. Moghadam,
S. Davis Carniglia, John T. Roberts, Jr., and Michael A. Coke and each one of
them, his attorneys-in-fact, each with the power of substitution, for him in any
and all capacities, to sign any and all amendments to this Registration
Statement (including post effective amendments), and to sign any registration
statement for the same offering covered by this Registration Statement that is
to be effective upon filing pursuant to Rule 462(b) promulgated under the
Securities Act of 1933, and all post-effective amendments thereto, and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying

II-6
<PAGE> 178

and confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons on
behalf of each of the Registrants and in the capacities and on the dates
indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

/s/ T. ROBERT BURKE Chairman of the Board and April 1, 1998
- ----------------------------------------------------- Director
T. Robert Burke

/s/ HAMID R. MOGHADAM President, Chief Executive April 1, 1998
- ----------------------------------------------------- Officer and Director
Hamid R. Moghadam (Principal Executive Officer)

/s/ DOUGLAS D. ABBEY Chairman of Investment April 1, 1998
- ----------------------------------------------------- Committee and Director
Douglas D. Abbey

/s/ S. DAVIS CARNIGLIA Chief Financial Officer and April 1, 1998
- ----------------------------------------------------- General Counsel (Principal
S. Davis Carniglia Financial Officer)

/s/ MICHAEL A. COKE Vice President and Director April 1, 1998
- ----------------------------------------------------- of Financial Management
Michael A. Coke Reporting (Principal
Accounting Officer)

/s/ DANIEL H. CASE, III Director April 1, 1998
- -----------------------------------------------------
Daniel H. Case, III

Director April , 1998
- -----------------------------------------------------
Robert H. Edelstein, Ph.D.

/s/ LYNN M. SEDWAY Director April 1, 1998
- -----------------------------------------------------
Lynn M. Sedway

Director April , 1998
- -----------------------------------------------------
Jeffrey L. Skelton, Ph.D.

Director April , 1998
- -----------------------------------------------------
Thomas W. Tusher

/s/ CARYL B. WELBORN Director April 1, 1998
- -----------------------------------------------------
Caryl B. Welborn
</TABLE>

II-7
<PAGE> 179

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement..............................
3.1 Articles of Incorporation of the Registrant.................
3.2 Bylaws of the Registrant....................................
*4.1 Indenture (the "Indenture") by and among the Operating
Partnership, the Guarantors and , as
trustee.....................................................
*4.2 Specimen of % Notes due 200 (included in the Indenture
incorporated by reference as Exhibit 4.1)...................
*4.3 Specimen of % Notes due 2008 (included in the Indenture
incorporated by reference as Exhibit 4.1)...................
*4.4 Specimen of % Notes due 2018 (included in the Indenture
incorporated by reference as Exhibit 4.1)...................
*4.5 Specimen of % Reset Put Securities due 2015 (included
in the Indenture incorporated by reference as Exhibit
4.1)........................................................
10.1 Amended and Restated Agreement of Limited Partnership of AMB
Property, L.P. (incorporated by reference to Exhibit 10.1 to
the Company's Registration Statement (No. 333-35915)).......
10.2 Form of Registration Rights Agreement among the Registrant
and the persons named therein (incorporated by reference to
Exhibit 10.2 to the Company's Registration Statement on Form
S-11 (No. 333-35915)).......................................
10.3 Amended and Restated Credit Agreement, dated August 8, 1997
(incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement (No. 333-35915)).....................
10.4 Form of Employment Agreement between the Registrant and
Executive Officers (incorporated by reference to Exhibit
10.4 to the Company's Registration Statement on Form S-11
(No. 333-35915))............................................
10.5 The 1997 Stock Option and Incentive Plan of the Registrant
(incorporated by reference to Exhibit 10.5 to the Company's
Registration Statement on Form S-11 (No. 333-35915))........
12.1 Statement regarding computation of ratios...................
*21.1 Subsidiaries of the Registrant..............................
23.1 Consent of Arthur Andersen LLP..............................
24.1 Power of Attorney (included on page II-6 hereof)............
*25.1 Form T-1 Statement of Eligibility and Qualification under
the Trust Indenture Act of 1939 of , as
Trustee.....................................................
27.1 Financial Data Schedule.....................................
</TABLE>

- ---------------
* To be filed by amendment.

<PAGE> 1

EXHIBIT 12.1

AMB PROPERTY CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIOS)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1997 1997 1997
1993 1994 1995 1996 HISTORICAL(1) AS ADJUSTED(2) PRO FORMA(3)
---- ------ ------ ------ ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss) from operations
before minority interests..... $798 $2,925 $3,296 $7,140 $18,885 $103,903 $106,558
Interest expense................ -- -- 4 -- 3,528 45,429 63,184
Amortization of capitalized
interest...................... -- -- -- -- 8 56 77
---- ------ ------ ------ ------- -------- --------
Total earnings........... $798 $2,925 $3,300 $7,140 $22,421 $149,388 $169,819
==== ====== ====== ====== ======= ======== ========
Fixed charges:
Interest expense(4)............. $ -- $ -- $ 4 $ -- $ 3,528 $ 45,429 $ 63,184
Capitalized interest(5)......... -- -- -- -- 448 2,979 4,110
---- ------ ------ ------ ------- -------- --------
Total fixed charges...... $ -- $ -- $ 4 $ -- $ 3,976 $ 48,408 $ 67,294
==== ====== ====== ====== ======= ======== ========
Ratio of earnings to fixed
charges(6)...................... N/A N/A 825x N/A 5.6x 3.1x 2.5x
==== ====== ====== ====== ======= ======== ========
</TABLE>

- ---------------
(1) Historical ratio of earnings to fixed charges includes the results of the
Predecessor for the period from January 1, 1997 through November 25, 1997,
and the results of the Company subsequent to November 25, 1997, the date of
acquisition by the Company.

(2) As adjusted ratio of earnings to fixed charges has been prepared as if the
Formation Transactions, the IPO and certain 1997 property acquisitions and
dispositions had occurred on January 1, 1997.

(3) Pro forma ratio of earnings to fixed charges has been prepared as if the
1998 property acquisitions and the Offering had occurred on January 1, 1997.

(4) Includes amortization of debt premiums and deferred financing fees.

(5) Historical capitalized interest represents construction interest incurred
subsequent to November 25, 1997, the date of acquisition by the Company.

(6) The ratio of earnings to fixed charges is not applicable for periods during
which the Predecessor incurred no interest expense.

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports, AMB Property Corporation, dated January 27, 1998, AMB Contributed
Properties, dated March 27, 1998, 1998 Acquired Properties, dated March 27,
1998, 1997 Acquired Properties, dated January 27, 1998, included in this
Registration Statement on Form S-11 of AMB Property, L.P., AMB Property
Corporation, AMB Property II, L.P. and Long Gate LLC on Form S-11, dated April
2, 1998.

/s/ ARTHUR ANDERSEN LLP

April 1, 1998

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-K: CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ANNUAL REPORT ON FORM
10-K.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 39,968
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 67,409
<PP&E> 2,442,999
<DEPRECIATION> 4,153
<TOTAL-ASSETS> 2,506,255
<CURRENT-LIABILITIES> 87,421
<BONDS> 685,652
0
0
<COMMON> 859
<OTHER-SE> 1,667,171
<TOTAL-LIABILITY-AND-EQUITY> 2,506,255
<SALES> 0
<TOTAL-REVENUES> 56,062
<CGS> 0
<TOTAL-COSTS> 8,899
<OTHER-EXPENSES> 4,195
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,528
<INCOME-PRETAX> 18,885
<INCOME-TAX> 0
<INCOME-CONTINUING> 18,885
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,228
<EPS-PRIMARY> 1.39
<EPS-DILUTED> 1.38

</TABLE>