CORNERSTONE PROPERTIES INC, 10-K/A, 2000-04-25

CORNERSTONE PROPERTIES INC
10-K/A, 2000-04-25
REAL ESTATE

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FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1999

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period from ____________ to
____________

COMMISSION FILE NUMBER 1-12861

CORNERSTONE PROPERTIES INC.

(Exact name of Registrant as specified in its Charter)

<TABLE>
<S> <C>
NEVADA 74-2170858
(State or other jurisdiction of
incorporation and organization) (IRS Employer Identification No.)
</TABLE>

126 EAST 56TH STREET
NEW YORK, NEW YORK
(Address of principal executive offices)

10022
(Zip Code)

(212) 605-7100
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<S> <C>
TITLE OF EACH CLASS: NAME OF EACH EXCHANGE ON WHICH REGISTERED:
- ------------------------------------- --------------------------------------------

Common Stock, no par value New York Stock Exchange
Dusseldorf Stock Exchange
Frankfurt Stock Exchange
</TABLE>

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]

EXPLANATORY NOTE

Pursuant to Rule 12b-5 under the Securities Exchange Act of 1934, as
amended, Cornerstone Properties Inc. (the "Company") hereby amends the Company's
Annual Report on Form 10-K as filed with the Securities and Exchange Commission
on March 27, 2000, to add the financial statement schedule required by Item 14
of Form 10-K.

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- --------------------------------------------------------------------------------
<PAGE>
PART III

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See the Financial Statements included as a part hereof.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

The following documents are filed as part of this annual report:

(A) FINANCIAL STATEMENTS:

<TABLE>
<CAPTION>
PAGE NUMBER
------------
<S> <C>
(i) The Company: F-1

The following financial statements and report of
independent accountants are filed herewith at the pages
indicated:
Report of Independent Accountants......................... F-2
Consolidated Balance Sheets at December 31, 1999 and
1998.................................................... F-3
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997........................ F-4
Consolidated Statements of Comprehensive Income for the
years ended December 31, 1999, 1998 and 1997............ F-5
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1999, 1998 and 1997............ F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997........................ F-7
Notes to Consolidated Financial Statements................ F-8 to F-30
Schedule III.............................................. F-31 to F-34
</TABLE>

(B) REPORTS ON FORM 8-K:

NONE.

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- ------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger among Equity Office Properties
Trust, EOP Operating Limited Partnership, Cornerstone
Properties Inc. and Cornerstone Properties Limited
Partnership dated February 11, 2000 incorporated by
reference to Exhibit 2.1 of the Company's Current Report on
Form 8-K dated February 16, 2000.

3.1(a) Restated Articles of Incorporation of Cornerstone Properties
Inc., as of March 12, 1996, incorporated by reference to
Exhibit 3.1 of the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.

3.1(b) Certificate of Amendment of Restated Articles of
Incorporation of the Company, dated October 27, 1997,
incorporated by reference to Exhibit 4.2(b) of the Company's
Registration Statement on Form S-3 filed March 2, 1998
(Registration Statement No. 333-47149).

3.2 Amended and Restated Bylaws of Cornerstone Properties Inc.,
incorporated by reference to Exhibit 3.1 of the Company's
Current Report on Form 8-K dated December 16, 1998.
</TABLE>

2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- ------------------------------------------------------------
<S> <C>
4.1 Specimen Common Stock Certificate, incorporated by reference
to Exhibit 4.1 of the Company's Registration Statement on
Form S-3 filed March 2, 1998 (Registration Statement No.
333-47149).

4.2 Certificate of Voting Powers, Designations, Preferences,
Limitations, Restrictions and Relative Rights of 7%
Cumulative Convertible Preferred Stock of the Company,
incorporated by reference to Exhibit 10.57 of the Company's
Annual Report on Form 10-K for the year ended December 31,
1995.

10.1 Convertible Promissory Note dated January 1, 1996 made by
Cornerstone Properties Inc., with Hines Colorado Limited in
the amount of $12,925,976.48, incorporated by reference to
Exhibit 10.63 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.

10.2 Agreement of Limited Partnership of Cornerstone Properties
Limited Partnership dated as of December 23, 1997,
incorporated by reference to Exhibit 10.118 of the Company's
Annual Report on Form 10-K for the year ended December 31,
1997.

10.3 First Amendment to Agreement of Limited Partnership of
Cornerstone Properties Limited Partnership, incorporated by
reference to Exhibit 10.6 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.

10.4 Second Amendment to Agreement of Limited Partnership of
Cornerstone Properties Limited Partnership, incorporated by
reference to Exhibit 10.7 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.

10.5 Third Amendment to Agreement of Limited Partnership of
Cornerstone Properties Limited Partnership, incorporated by
reference to Exhibit 10.8 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.

10.6 Fourth Amendment to Agreement of Limited Partnership of
Cornerstone Properties Limited Partnership, incorporated by
reference to Exhibit 10.9 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.

10.7* Fifth Amendment to Agreement of Limited Partnership of
Cornerstone Properties Limited Partnership.

10.8 Stock Option Agreement, dated February 11, 2000, by and
among Cornerstone Properties Inc., Equity Office Properties
Trust, Deutsche Bank AG and Deutscher Herold
Lebensversicherungs-AG, incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K
dated February 16, 2000.

10.9 Employment Agreement dated December 16, 1998 between
Cornerstone Properties Inc. and Cornerstone Properties
Limited Partnership and William Wilson III, incorporated by
reference to Exhibit 10.10 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.

10.10 Employment Agreement dated December 16, 1998 between
Cornerstone Properties Inc. and Cornerstone Properties
Limited Partnership and John S. Moody, incorporated by
reference to Exhibit 10.11 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.

10.11 Amended and Restated Cornerstone Properties Inc. 1998
Long-Term Incentive Plan, incorporated by reference to
Annex D of the Company's definitive Proxy Statement on
Schedule 14A dated November 13, 1998.

10.12 Form of Retention Agreement for executive officers of the
Company, incorporated by reference to Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
</TABLE>

3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- ------------------------------------------------------------
<S> <C>
10.13 Second Amended and Restated Revolving Credit and Guaranty
Agreement dated November 3, 1998 among Cornerstone
Properties Inc. and Cornerstone Properties Limited
Partnership (the "Borrowers"), the subsidiaries of the
Borrowers (the "Guarantors"), the Lenders, Bankers Trust
Company and The Chase Manhattan Bank and NationsBank, N.A.,
incorporated by reference to Exhibit 99.2 of the Company's
Current Report on Form 8-K dated December 1, 1998.

10.14* First Amendment to Second Amended and Restated Revolving
Credit and Guaranty Agreement dated November 3, 1998 among
Cornerstone Properties Inc. and Cornerstone Properties
Limited Partnership (the "Borrowers"), the subsidiaries of
the Borrowers (the "Guarantors"), the Lenders, Bankers Trust
Company and The Chase Manhattan Bank and NationsBank, N.A.

10.15 Amended and Restated Registration Rights and Voting
Agreement dated as of December 16, 1998 among PGGM, DIHC
and Cornerstone Properties Inc. incorporated by reference to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.

10.16 Registration Rights and Lockup Agreement dated as of
December 16, 1998 by and among Cornerstone Properties Inc.
and the investors listed therein, incorporated by reference
to Annex B of the Company's definitive Proxy Statement on
Schedule 14A dated November 13, 1998.

10.17 Voting Agreement, dated February 11, 2000, by and among
Equity Office Properties Trust, EOP Operating Limited
Partnership, WCP Services, Inc. and Stichting Pensioenfonds
voor de Gezondheid, Gaestelijke en Meatschappelljke
Belangen, incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K dated February 16,
2000.

12.1* Statement of Computation of Earnings to Fixed Charges and
Preferred Stock Dividend Requirements.

21* List of Subsidiaries.

23+ Consent of PricewaterhouseCoopers LLP.

27* For EDGAR filing purposes only, this report contains Exhibit
27, Financial Data Schedule.
</TABLE>

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

* Previously filed.

+ Filed herewith.

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

<TABLE>
<S> <C> <C>
CORNERSTONE PROPERTIES INC.
(Registrant)

/s/ JOHN S. MOODY
-----------------------------------------
DATED: April 25, 2000 John S. Moody, PRESIDENT & CEO
</TABLE>

4
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<C> <S>
------------------------------------------- Chairman of the Board and Director
William Wilson III

/s/ JOHN S. MOODY Chief Executive Officer, President and
------------------------------------------- Director
John S. Moody (Principal Executive Officer)

/s/ RODNEY C. DIMOCK
------------------------------------------- Executive Vice President and Director
Rodney C. Dimock

/s/ KEVIN P. MAHONEY Senior Vice President and Chief Financial
------------------------------------------- Officer (Principal Financial and Accounting
Kevin P. Mahoney Officer)

/s/ CECIL D. CONLEE
------------------------------------------- Director
Cecil D. Conlee

/s/ BLAKE EAGLE
------------------------------------------- Director
Blake Eagle

/s/ DR. KARL-LUDWIG HERMANN
------------------------------------------- Director
Dr. Karl-Ludwig Hermann

/s/ HANS C. MAUTNER
------------------------------------------- Director
Hans C. Mautner

------------------------------------------- Director
Dr. Lutz Mellinger

------------------------------------------- Director
Craig R. Stapleton

/s/ MICHAEL J.G. TOPHAM
------------------------------------------- Director
Michael J.G. Topham
</TABLE>

5
<PAGE>
<TABLE>
<C> <S>
------------------------------------------- Director
Dick van den Bos

------------------------------------------- Director
Jan van der Vlist

------------------------------------------- Director
Donald G. Fisher

/s/ RANDALL A. HACK
------------------------------------------- Director
Randall A. Hack
</TABLE>

DATED: April 25, 2000

6
<PAGE>
CORNERSTONE PROPERTIES INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999, 1998
AND FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Cornerstone Properties Inc.

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(i) of this Form 10-K/A present fairly, in all
material respects, the financial position of Cornerstone Properties Inc. and
subsidiaries ("Cornerstone") at December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. In addition, in our opinion, the financial
statement schedule listed in the index appearing under Item 14(a)(i) of this
Form 10-K/A presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements. These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

As discussed in Note 1 of the consolidated financial statements, on
February 11, 2000, Cornerstone announced a definitive plan of merger with Equity
Office Properties Trust.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
March 3, 2000

F-2
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1999 AND 1998

(DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Developments in progress:
Land...................................................... $ 46,132 $ 10,437
Development costs......................................... 17,000 2,519
Rental Property, at cost:
Land...................................................... 646,852 702,840
Buildings, leasehold interests and improvements........... 3,084,466 3,403,152
Deferred lease costs...................................... 157,015 143,188
---------- ----------
3,951,465 4,262,136
Less: Accumulated depreciation and amortization........... 290,998 286,664
---------- ----------
Total Development and Rental Property................. 3,660,467 3,975,472

Assets held for sale........................................ 62,185 77,568
Cash and cash equivalents................................... 19,679 61,869
Restricted cash............................................. 222,043 9,114
Investment in joint ventures................................ 31,725 31,500
Other deferred costs, net of accumulated amortization of
$7,092 and $999........................................... 42,655 47,807
Deferred tenant receivables................................. 77,243 53,489
Tenant and other receivables, net........................... 14,725 10,326
Other assets................................................ 39,506 14,839
---------- ----------
TOTAL ASSETS................................................ $4,170,228 $4,281,984
========== ==========
LIABILITIES

Long-term debt, inclusive of $16,149 and $25,031 of
unamortized premium....................................... $1,448,331 $1,532,474
Credit facility............................................. 329,000 465,000
Accrued interest............................................ 10,961 10,933
Accrued real estate taxes................................... 16,457 16,395
Accounts payable and accrued expenses....................... 45,006 51,454
Distributions payable....................................... -- 38,163
Unearned revenue and other liabilities...................... 40,881 23,890
---------- ----------
TOTAL LIABILITIES........................................... 1,890,636 2,138,309
========== ==========

MINORITY INTEREST
Minority interest in operating partnership.................. 284,566 283,388
Minority interest in joint ventures......................... 22,532 23,420
---------- ----------
TOTAL MINORITY INTEREST..................................... 307,098 306,808
========== ==========

Commitments and contingencies

Redeemable preferred stock; 344,828 shares authorized; 0
shares issued and outstanding............................. -- --

STOCKHOLDERS' EQUITY
7% Cumulative convertible preferred stock, $16.50 stated
value; 65,000,000 shares authorized; 3,030,303 shares
issued and outstanding.................................... 50,000 50,000
Common stock, no par value; 250,000,000 shares authorized;
129,610,536 shares issued and 129,252,303 shares
outstanding............................................... -- --
Paid-in capital............................................. 1,808,943 1,788,567
Retained earnings........................................... 111,150 --
Accumulated other comprehensive income...................... 9,424 --
Deferred compensation....................................... (2,012) (1,700)
---------- ----------
1,977,505 1,836,867
Treasury stock, 358,233 shares, at cost..................... (5,011) --
---------- ----------
TOTAL STOCKHOLDERS' EQUITY.................................. 1,972,494 1,836,867
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $4,170,228 $4,281,984
========== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Office and parking rentals................................ $607,409 $338,515 $159,828
Earnings in joint ventures................................ 898 11,420 --
Interest and other income................................. 9,141 9,551 14,083
-------- -------- --------
TOTAL REVENUES.......................................... 617,448 359,486 173,911
-------- -------- --------

EXPENSES
Building operating expenses............................... 132,630 75,663 35,962
Real estate taxes......................................... 71,554 46,760 25,560
Interest expense.......................................... 137,759 67,533 33,977
Depreciation and amortization............................. 96,726 59,278 30,978
General and administrative................................ 27,006 12,939 7,564
-------- -------- --------
TOTAL EXPENSES.......................................... 465,675 262,173 134,041
-------- -------- --------
151,773 97,313 39,870
-------- -------- --------
OTHER INCOME (EXPENSES)
Gain (loss) on sale of real estate assets................. 131,034 (2,076) --
Net gain on interest rate swaps........................... -- -- 99
-------- -------- --------
TOTAL OTHER INCOME (EXPENSES)........................... 131,034 (2,076) 99
-------- -------- --------

MINORITY INTEREST
Minority interest in operating partnership................ (34,982) (2,850) --
Minority interest in joint ventures....................... (5,755) (4,619) (2,368)
-------- -------- --------
TOTAL MINORITY INTEREST................................. (40,737) (7,469) (2,368)
-------- -------- --------
Income before cumulative effect of a change in accounting
principle and extraordinary loss.......................... 242,070 87,768 37,601

Cumulative effect of a change in accounting principle....... (630) -- --
Extraordinary loss.......................................... (10,787) (4,303) (54)
-------- -------- --------
NET INCOME.................................................. $230,653 $ 83,465 $ 37,547
======== ======== ========

INCOME APPLICABLE TO PREFERRED STOCK........................ $ (3,500) $ (3,500) $(10,160)
-------- -------- --------

INCOME APPLICABLE TO COMMON STOCK........................... $227,153 $ 79,965 $ 27,387
======== ======== ========
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE AND EXTRAORDINARY LOSS PER COMMON SHARE......... $ 1.85 $ 0.84 $ 0.63
======== ======== ========
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE AND
EXTRAORDINARY LOSS PER COMMON SHARE....................... $ (0.09) $ (0.04) $ --
======== ======== ========

BASIC INCOME PER COMMON SHARE............................... $ 1.76 $ 0.80 $ 0.63
======== ======== ========

DILUTED INCOME PER COMMON SHARE............................. $ 1.74 $ 0.80 $ 0.63
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

(DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net income.................................................. $230,653 $83,465 $37,547
======== ======= =======
OTHER COMPREHENSIVE INCOME:
Unrealized gain on investments............................ 3,911 -- --
Unrealized gain on interest rate swaps during the
period.................................................. 5,513 -- --
-------- ------- -------
Other comprehensive income................................ 9,424 -- --
-------- ------- -------

COMPREHENSIVE INCOME........................................ $240,077 $83,465 $37,547
======== ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK ACCUMULATED
------------------------ ---------------------- RETAINED OTHER
OUTSTANDING PAID-IN OUTSTANDING PAID-IN EARNINGS COMPREHENSIVE TREASURY
SHARES CAPITAL SHARES CAPITAL (DEFICIT) INCOME STOCK
----------- ---------- ----------- -------- --------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997...... 20,609,754 $ 160,577 3,030,303 $50,000 $(30,789) -- --

Common stock proceeds, net of
$17,204 in stock issuance
costs....................... 16,100,000 208,196 -- -- -- -- --
Preferred stock conversion.... 11,482,760 162,515 -- -- -- -- --
Dividend reinvestment, net of
$296 in stock issuance
costs....................... 696,013 10,808 -- -- -- -- --
PGGM stock.................... 34,185,500 547,000 -- -- -- -- --
Restricted stock grants....... 107,292 1,761 -- -- -- -- --
Restricted stock grant
vesting..................... -- -- -- -- -- -- --
Net income.................... -- -- -- -- 37,547 -- --
Option exercise............... 10,500 150 -- -- -- -- --
Preferred stock
distributions............... -- (3,402) -- -- (6,758) -- --
Common stock distributions
($1.04/shr)................. -- (39,418) -- -- -- -- --
----------- ---------- --------- ------- -------- ------ -------
BALANCE, DECEMBER 31, 1997.... 83,191,819 $1,048,187 3,030,303 $50,000 $ -- $ -- $ --

Common stock proceeds, net of
$14,463 in stock issuance
costs....................... 25,969,203 447,881 -- -- -- -- --
Dividend reinvestment, net of
$410 in stock issuance
costs....................... 397,404 6,294 -- -- -- -- --
Tower 56 residual purchase.... 307,692 5,500 -- -- -- -- --
Restricted stock grants....... 31,678 577 -- -- -- -- --
Restricted stock grant
vesting..................... -- -- -- -- -- -- --
Net income.................... -- -- -- -- 83,465 -- --
Minority adjustment........... -- 49,219 -- -- -- -- --
Preferred stock
distributions............... -- -- -- -- (3,500) -- --
Common stock distributions
($1.50/shr)................. -- (70,963) -- -- (79,965) -- --
One Memorial acquisition...... 3,428,571 60,000 -- -- -- -- --
Wilson Acquisition............ 14,884,417 241,872 -- -- -- -- --
----------- ---------- --------- ------- -------- ------ -------
BALANCE, DECEMBER 31, 1998.... 128,210,784 $1,788,567 3,030,303 $50,000 $ -- $ -- $ --

Stock issuance costs.......... -- (378) -- -- -- -- --
Restricted stock grants....... -- 1,760 -- -- -- -- --
Restricted stock grant
vesting..................... -- -- -- -- -- -- --
Net income.................... -- -- -- -- 230,653 -- --
Minority adjustment........... -- 1,464 -- -- -- -- --
Unrealized gain on
investments................. -- -- -- -- -- 3,911 --
Unrealized gain on swaps...... -- -- -- -- -- 5,513 --
DRIP.......................... 147,577 2,318 -- -- -- -- --
Options exercised............. 127,000 1,827 -- -- -- -- --
Unitholder redemption......... 1,125,175 13,385 -- -- -- -- --
Treasury stock................ (358,233) -- -- -- -- -- (5,011)
Preferred stock
distributions............... -- -- -- -- (3,500) -- --
Common stock distributions
($0.90/shr)................. -- -- -- -- (116,003) -- --
----------- ---------- --------- ------- -------- ------ -------
BALANCE, DECEMBER 31, 1999.... 129,252,303 $1,808,943 3,030,303 $50,000 $111,150 $9,424 $(5,011)
=========== ========== ========= ======= ======== ====== =======

DEFERRED
COMPENSATION TOTAL
------------- ----------
<S> <C> <C>
BALANCE, JANUARY 1, 1997...... $(1,248) $ 178,540
Common stock proceeds, net of
$17,204 in stock issuance
costs....................... -- 208,196
Preferred stock conversion.... -- 162,515
Dividend reinvestment, net of
$296 in stock issuance
costs....................... -- 10,808
PGGM stock.................... -- 547,000
Restricted stock grants....... (1,868) (107)
Restricted stock grant
vesting..................... 928 928
Net income.................... -- 37,547
Option exercise............... -- 150
Preferred stock
distributions............... -- (10,160)
Common stock distributions
($1.04/shr)................. -- (39,418)
------- ----------
BALANCE, DECEMBER 31, 1997.... $(2,188) $1,095,999
Common stock proceeds, net of
$14,463 in stock issuance
costs....................... -- 447,881
Dividend reinvestment, net of
$410 in stock issuance
costs....................... -- 6,294
Tower 56 residual purchase.... -- 5,500
Restricted stock grants....... (577) --
Restricted stock grant
vesting..................... 1,065 1,065
Net income.................... -- 83,465
Minority adjustment........... -- 49,219
Preferred stock
distributions............... -- (3,500)
Common stock distributions
($1.50/shr)................. -- (150,928)
One Memorial acquisition...... -- 60,000
Wilson Acquisition............ -- 241,872
------- ----------
BALANCE, DECEMBER 31, 1998.... $(1,700) $1,836,867
Stock issuance costs.......... -- (378)
Restricted stock grants....... (1,760) --
Restricted stock grant
vesting..................... 1,448 1,448
Net income.................... -- 230,653
Minority adjustment........... -- 1,464
Unrealized gain on
investments................. -- 3,911
Unrealized gain on swaps...... -- 5,513
DRIP.......................... -- 2,318
Options exercised............. -- 1,827
Unitholder redemption......... -- 13,385
Treasury stock................ -- (5,011)
Preferred stock
distributions............... -- (3,500)
Common stock distributions
($0.90/shr)................. -- (116,003)
------- ----------
BALANCE, DECEMBER 31, 1999.... $(2,012) $1,972,494
======= ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

(DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 230,653 $ 83,465 $ 37,547
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 90,790 58,980 31,826
Deferred compensation amortization...................... 1,312 1,065 928
Net change in real estate joint ventures................ (225) 5,670 --
Cumulative effect of a change in accounting principle... 630 -- --
Net gain on interest rate swap.......................... -- -- (99)
Extraordinary loss...................................... 10,787 4,303 54
Unbilled rental revenue................................. (25,858) (13,712) (3,015)
Increase in accrued interest............................ 27 6,799 3,052
Minority interest share of income....................... 40,737 7,469 2,368
(Gain) loss on sale of real estate assets............... (131,034) 2,076 --
Increase in tenant and other receivables and other
assets................................................ (15,745) (6,833) (16,920)
Increase in accounts payable, accrued expenses and other
liabilities........................................... 21,431 33,515 10,181
--------- --------- ---------
Total adjustments....................................... (7,148) 99,332 28,375
--------- --------- ---------
Net cash provided by operating activities............... 223,505 182,797 65,922
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to investment property.......................... (79,359) (797,181) (464,096)
Repayment of notes receivable............................. 134 1,518 1,259
Other investments......................................... (5,000) (41,893)
Investments in real estate joint ventures................. -- (31,391) --
Proceeds from sale of real estate assets net of amounts in
escrow.................................................. 136,713 45,865 --
--------- --------- ---------
Net cash provided by (used in) investing activities..... 52,488 (823,082) (462,837)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock offering....................... -- 462,344 225,400
Purchase of treasury shares............................... (4,889) -- --
Borrowings under mortgage loans........................... 455,000 92,377 --
Borrowings under credit facility.......................... 130,000 567,500 187,000
Repayments under credit facility.......................... (266,000) (289,500) --
Repayment of term loan.................................... -- -- (32,500)
Repayments under mortgage loans........................... (432,958) (3,426) (1,094)
Proceeds from dividend reinvestment plan.................. 2,318 6,704 11,104
Debt prepayment costs..................................... (14,898) (1,762) (216)
(Increase) decrease in restricted cash.................... (2,542) (7,211) 2,524
Stock and debt issuance costs............................. (2,758) (20,813) (20,715)
Options exercised......................................... 1,827 -- --
Unitholder redemptions.................................... (1,169) --
Distributions to minority partners........................ (28,086) (12,524) (2,717)
Distributions to preferred stockholders................... (3,500) (3,500) (10,160)
Distributions to common stockholders...................... (150,528) (112,765) (51,784)
--------- --------- ---------
Net cash (used in) provided by financing activities..... (318,183) 677,424 306,842
--------- --------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.......... (42,190) 37,139 (90,073)
CASH AND CASH EQUIVALENTS, beginning of year.............. 61,869 24,730 114,803
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year.................... $ 19,679 $ 61,869 $ 24,730
========= ========= =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-7
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997

1. NATURE OF COMPANY'S BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF THE COMPANY'S BUSINESS

Cornerstone Properties Inc. (together with its subsidiaries, "Cornerstone"
or the "Company") is a self-administered equity real estate investment trust
("REIT") which owns, through subsidiaries, interests in 83 Class A office
buildings comprising approximately 17 million rentable square feet, a shopping
center, a hotel and developable land (collectively, the "Properties," and each
interest, a "Property"). The Properties are primarily located in nine major
metropolitan areas throughout the United States: Atlanta, Boston, suburban
Chicago, Minneapolis, New York City, San Francisco Bay Area, Seattle, Southern
California and Washington, D.C. and surrounding suburbs. The Company's strategy
is to own and develop Class A office properties in prime Central Business
District locations and major suburban office markets in U.S. metropolitan areas.
Class A office properties are generally considered to be those that have the
most favorable locations and physical attributes, command premium rents and
experience the highest tenant retention rates within their markets. The Company
also provides property management, leasing, development and tenant improvement
services to third parties on a fee basis through WCP Services, Inc., a taxable
corporate subsidiary in which the Company owns 95% of the equity, but only 1% of
the voting common stock. In January 1998, Cornerstone converted its corporate
structure into an umbrella limited partnership REIT ("UPREIT"). Under the UPREIT
structure, Cornerstone owns all of its properties and conducts all of its
business through Cornerstone Properties Limited Partnership, a Delaware limited
partnership (the "Operating Partnership"), of which the Company is the sole
general partner. As of December 31, 1999, Cornerstone owned approximately 87.1%
of the common units of partnership interest ("UPREIT Units") in the Operating
Partnership.

On February 11, 2000, the Company announced that it had entered into an
agreement and plan of merger with Equity Office Properties Trust ("EOP") (the
"EOP Merger"). The merger agreement provides for a merger of Cornerstone with
and into EOP and a merger of the Operating Partnership with and into EOP
Operating Limited Partnership. In the mergers, holders of common stock of
Cornerstone and holders of Units in the Operating Partnership shall be entitled
to elect to receive, for each share or unit, as the case may be, either 0.7009
of a share of beneficial interest of EOP (or, in the case of the Cornerstone
Units, 0.7009 of a Class A Unit of EOP Operating Limited Partnership), or $18.00
per share (or per Unit, as the case may be) in cash, subject to pro ration as
provided in the merger agreement. Each share of 7% Cumulative Convertible
Preferred Stock, liquidation preference $16.50 per share, of Cornerstone shall
be converted into the right to receive $18.00, plus accrued and unpaid
dividends, in cash. For U.S. federal income tax purposes, the merger is expected
to be tax-free to Cornerstone stockholders who are U.S. persons and who receive
EOP shares in the merger, except that any such stockholder who receives cash in
addition to EOP shares generally will recognize gain (but not loss) in an amount
equal to the amount of cash received in the merger, or, if less, the excess of
the fair market value of the EOP shares and cash received in the merger over the
stockholder's basis in the Cornerstone common stock exchanged in the merger. The
merger is also expected in most cases to be tax-free to Cornerstone stockholders
who are non-U.S. persons, although certain non-U.S. stockholders may be subject
to U.S. tax under the provisions of the Foreign Investment in Real Property Tax
Act. The mergers are subject to customary closing conditions, including the
approval of the merger by the shareholders of EOP and the stockholders of
Cornerstone and the approval of the partnership merger, to the extent necessary,
by the partners of EOP Operating Limited Partnership and the Operating
Partnership.

F-8
<PAGE>
PRINCIPLES OF CONSOLIDATION

The accompanying financial statements include the accounts of Cornerstone,
its wholly-owned qualified REIT subsidiary, the Operating Partnership and
controlled partnerships. The Company has consolidated the following partnerships
because it has a majority interest in the economic benefits and is or has the
right to become the managing general partner at its sole discretion: the
Operating Partnership; NWC Limited Partnership ("NWC"); Third and University
Limited Partnership ("Third Partnership"); Two Twenty Two Berkeley Venture ("222
Berkeley"); Five Hundred Boylston West Venture ("500 Boylston"); One Ninety One
Peachtree Associates ("191 Peachtree"); 191 Finance Associates, L.P. ("191
Finance"); Avenue Associates Limited Partnership ("Market Square"); and 120
Montgomery Associates, LLC ("120 Montgomery"). The Company's investments in the
One Post Property and WCP Services, Inc. are accounted for as equity investments
(see Note 4). All significant intercompany balances and transactions have been
eliminated in consolidation.

INVESTMENT PROPERTY

The costs of the buildings, garages, leasehold interests and improvements
are being depreciated using the straight-line method over their estimated useful
lives, ranging from 20 years for electrical and mechanical installations to
40 years for structural components. Tenant improvements are being amortized over
the terms of the related leases.

Investment properties are carried at cost less accumulated depreciation.
Whenever events or changes in circumstances indicate that the carrying value of
an asset may not be recoverable (such as a significant adverse action by a
regulator, a significant physical change in the property or significant changes
in market conditions), the Company's policy is to assess any impairment in value
by making a comparison of the current and projected cash flows of each property
over its remaining useful life (undiscounted and without interest charges) to
the carrying amount of each property. Such carrying amount would be adjusted, if
necessary, to estimated fair value to reflect the impairment in value of the
property. No significant adjustments have been made in the accompanying
financial statements.

Costs directly related to the acquisition and development of rental
properties are capitalized. Capitalized development costs include interest,
property taxes, insurance and other project costs incurred during the period of
construction. Ordinary repairs and maintenance are expensed as incurred; major
replacements and betterments, which improve or extend the life of the asset, are
capitalized and depreciated over their estimated useful lives.

ASSETS HELD FOR SALE

Included in Assets Held for Sale at December 31, 1999 are four properties,
which are expected to be sold by the Company within the next year. The
Properties are valued at approximately $62.2 million, the lower of the carrying
amount or the fair value less estimated costs to sell. For the year ended
December 31, 1999, the fair value less estimated costs to sell exceeds the
carrying amount for each of these properties and therefore, the Company has not
recorded a write down on these assets. The Company discontinues the recognition
of depreciation on the assets when the property is considered held for sale.

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents include
investments with original maturities of three months or less from the date of
purchase. At December 31, 1999 and 1998, Cornerstone had on deposit with major
financial institutions substantially all of its cash and cash equivalents which
balances at times exceed federally insurable limits. Cornerstone believes it
mitigates its risk by investing in or through major financial institutions.
Recoverability of investments is dependent upon the performance of the issuer.

F-9
<PAGE>
DEFERRED LEASE COSTS

As an inducement to execute a lease, incentives are sometimes offered which
may include cash and/or other allowances. These incentives and other lease
costs, such as commissions, which are directly related to specific leases, are
deferred and amortized over the terms of the related leases.

OTHER DEFERRED COSTS

Costs incurred in the underwriting and issuance of long-term debt and
revolving lines of credit are being amortized over the term of the debt. As part
of the acquisition of the DIHC Portfolio (see Note 2), the Company purchased
several management contracts to which Stichting Pensioenfonds Voor de Gezondheid
Geestelijke en Maatschappelijke Belangen ("PGGM") was a party. The price paid
for these contracts is being amortized over four years. Included in Other
Deferred Costs is the purchase price for the intangible management and
development company assets that were acquired as part of the Wilson Acquisition
which are being amortized over a term of ten years (see Note 2).

OTHER ASSETS

The Company records costs incurred for potential investments as Other
Assets. Upon consummation of an investment, the Company capitalizes all such
costs as an adjustment to the purchase price and depreciates these costs over
the useful life of the asset. All such costs are expensed at the time it is
determined that a potential investment will not be consummated. In addition, the
Company adopted EITF 97-11 and in accordance therewith, the Company expenses all
internal acquisition costs.

Included in Other Assets is the Company's $1.5 million equity investment in
Allied Riser Communications Corp. ("ARCC") and its $3.5 million equity
investment in Cypress Communications, Inc. ("CYCO"). ARCC and CYCO are providers
of voice, video and data telecommunications services. As part of the terms of
the agreements with both ARCC and CYCO, the Company received warrants for shares
of common stock by providing ARCC and CYCO access to certain of the Company's
buildings. As such, the value of the warrants received from ARCC and CYCO of
$5.1 million and $2.1 million, respectively, is included in Other Assets. Per
the applicable requirements of Statement of Financial Accounting Standards
No. 115 "Accounting for Certain Investments in Debt and Equity Securities"
("SFAS 115"), the Company recorded an unrealized gain on its total investment in
ARCC as of December 31, 1999 of $3.9 million. A corresponding adjustment was
posted to a separate component of stockholder's equity through Other
Comprehensive Income. As of December 31, 1999, CYCO was not publicly traded and
did not fall within in the scope of SFAS 115.

MINORITY INTEREST

Minority interest in the Operating Partnership relates to the interest in
the Operating Partnership that the Company does not own, which as of
December 31, 1999 amounted to 12.9%. The Company allocates income to the
minority interest in the Operating Partnership based on the weighted-average
percentage ownership in the Operating Partnership through the year. Persons who
contributed assets to the Operating Partnership received UPREIT Units, shares of
Cornerstone's common stock (the "Common Stock"), cash or a combination thereof.
At the request of a unitholder, the Company will be obligated to redeem each
UPREIT Unit held by such unitholder for one share of Common Stock or, at the
option of the Company, cash equal to the fair market value of one share of
Common Stock at the time of redemption. Such redemptions will cause the
Company's percentage ownership in the Operating Partnership to increase. As of
December 31, 1999, the number of issued and outstanding UPREIT Units held by
unitholders other than the Company was 19,131,785 and as of such date, 1,125,175
UPREIT Units have been redeemed for shares of Common Stock on a one-for-one
basis and 76,647 UPREIT Units have been redeemed for cash.

Minority interest in real estate joint ventures represents the minority
partner's or venturer's capital account balances in NWC, Third Partnership, 222
Berkeley, 500 Boylston, 191 Peachtree, 191 Finance, Market Square and 120
Montgomery. Debit balances in certain of these capital accounts originated

F-10
<PAGE>
through special cash distributions in excess of the partner's share of income in
accordance with certain provisions of the respective partnership and joint
venture agreements. Realizability of the debit balances is continually monitored
by calculating pro forma sales proceeds under the respective agreements.

TREASURY STOCK

As of December 31, 1999, the Company reacquired 358,233 shares of Common
Stock, which was accounted for using the cost method. Of these shares, 347,400
shares were acquired under the Repurchase Program (see Note 8).

REVENUE RECOGNITION

Rental revenue is recognized ratably as earned over the terms of the leases.
Deferred tenant receivables result from rental revenues which have been earned
but will be received in future periods as a result of rent concessions provided
to tenants and scheduled future rent increases. Deferred tenant receivables were
approximately $77,243,000 and $53,489,000 at December 31, 1999 and 1998,
respectively. Expense reimbursement and escalation income for the years ended
December 31, 1999, 1998 and 1997 was approximately $101,595,000, $77,821,000 and
$36,990,000, respectively.

An allowance for doubtful accounts of approximately $3,803,000 and $253,000
has been recorded at December 31, 1999 and 1998, respectively, relating to
tenant and other receivables. Bad debt expense totaled approximately $3,694,000,
$232,000 and $221,000 during 1999, 1998, and 1997, respectively. The Company's
policy is to reserve against all trade receivables greater than 90 days past
due.

INTEREST RATE SWAP AGREEMENTS

The Company uses interest rate swaps to effectively fix the interest rates
on certain floating-rate debt. Specific types of loans and amounts that are
hedged are determined based on prevailing market conditions and the current
shape of the yield curve. The specific terms and notional amount of the swaps
are determined based on management's assessment of future interest rates, as
well as short-term strategic initiatives.

During 1999, the Company entered into and subsequently amended swap
agreements that effectively fixed the rate on $250.0 million of the amount
outstanding on the Company's Revolving Credit Facility at 6.47% for 1999 and
5.41% through the maturity of the swaps in December 2000. The swaps have been
designated as "cash flow hedges" within the meaning defined in SFAS 133 (as
defined hereinafter). At December 31, 1999, the Company recorded an unrealized
gain of $5,513,000 in Other Assets with a corresponding adjustment posted to a
separate component of stockholder's equity through Other Comprehensive Income as
defined in Statement of Financial Accounting Standards No. 130. Based on the
expiration of these instruments, the unrealized gain is expected to be
reclassified to earnings during the next twelve months. These swaps are
considered hedges for federal income tax purposes.

FEDERAL INCOME TAXES

No provision for United States Federal income taxes has been made in the
accompanying financial statements. Cornerstone has elected to be taxed as a REIT
under Sections 856-859 of the United States Internal Revenue Code (the "Code").
Under these sections of the Code, Cornerstone is permitted to deduct dividends
paid to stockholders in computing its taxable income. All taxable earnings and
profits of Cornerstone since inception have been distributed to the
stockholders.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the 1999
financial statement presentation.

F-11
<PAGE>
RECENTLY ISSUED ACCOUNTING STANDARDS

During the first quarter of 1999, the Company adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"). SFAS 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or in other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction.

During the first quarter of 1999, the Company also adopted Statement of
Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"). SOP
98-5 requires that certain costs incurred in conjunction with start-up and
organizational activities be expensed. Pursuant to the requirements of SOP 98-5,
the Company has written off all unamortized organizational costs and has
recorded a cumulative effect of a change in accounting principle of $630,044.

In addition, during the first quarter of 1999, the Company adopted Statement
of Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides guidance on whether
the costs of computer software developed or obtained for internal use should be
capitalized or expensed. The adoption of SOP 98-1 did not have a significant
effect on the Company's financial statements.

ESTIMATES AND RISKS

The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") 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. The most significant risks, estimates and assumptions are
related to the recoverability and depreciable lives of investment property, the
recoverability of deferred tenant receivables and the qualification of the
Company as a REIT. Actual results could differ from those estimates.

F-12
<PAGE>
2. PROPERTIES

The following table summarizes Cornerstone's interest in real estate
investments at December 31, 1999:

<TABLE>
<CAPTION>
MARKET NAME TOTAL RENTABLE CORNERSTONE
PROPERTY SQUARE FEET INTEREST (A) YEAR CONSTRUCTED LEASED NOTES
- ----------- -------------- ------------ ---------------- -------- --------
<S> <C> <C> <C> <C> <C>
BOSTON, MASSACHUSETTS
Sixty State Street.......................... 823,014 100.0% 1979 100% B
500 Boylston Street......................... 714,513 91.5% 1988 100% C
222 Berkeley Street......................... 530,844 91.5% 1991 100% C
125 Summer Street........................... 463,691 100.0% 1989 74%
One Memorial Drive.......................... 352,764 100.0% 1985 100% D
---------- ---
MARKET TOTAL................................ 2,884,826 96%

SAN MATEO COUNTY, CALIFORNIA
Bayhill (4 buildings)....................... 514,255 100.0% 1982-1987 96% E
Peninsula Office Park (7 buildings)......... 492,044 100.0% 1971-1998 100% E
Seaport Centre.............................. 463,418 100.0% 1988 100% E
Bay Park Plaza (2 buildings)................ 257,058 100.0% 1985-1998 100% E
One Bay Plaza............................... 176,533 100.0% 1979 99% E
---------- ---
MARKET TOTAL................................ 1,903,308 99%

ATLANTA, GEORGIA
191 Peachtree Street........................ 1,215,288 80.0% 1991 98% C,F
200 Galleria................................ 432,698 100.0% 1985 98% C
---------- ---
MARKET TOTAL................................ 1,647,986 98%

EAST BAY, CALIFORNIA
Corporate Centre (2 buildings).............. 329,348 100.0% 1985-1987 96% E
ADP Plaza (2 buildings)..................... 300,308 100.0% 1987-1989 95% E
PeopleSoft Plaza............................ 277,562 100.0% 1984 100% E
Norris Tech Center (3 buildings)............ 260,513 100.0% 1984-1990 100% E
Golden Bear Center.......................... 160,587 100.0% 1986 99% E
2700 Ygnacio Valley Road.................... 103,214 100.0% 1984 99% E
Park Plaza.................................. 87,040 100.0% 1986 100% E
1600 South Main............................. 83,277 100.0% 1983 98% E
---------- ---
MARKET TOTAL................................ 1,601,849 98%
</TABLE>

F-13
<PAGE>

<TABLE>
<CAPTION>
MARKET NAME TOTAL RENTABLE CORNERSTONE
PROPERTY SQUARE FEET INTEREST (A) YEAR CONSTRUCTED LEASED NOTES
- ----------- -------------- ------------ ---------------- -------- --------
<S> <C> <C> <C> <C> <C>
SEATTLE, WASHINGTON
Washington Mutual Tower (3 buildings)...... 1,154,560 50.0% 1988 98% G
110 Atrium Place........................... 215,172 100.0% 1981 100% E
Island Corporate Center.................... 100,009 100.0% 1987 97% E
---------- ----
MARKET TOTAL............................... 1,469,741 98%

SANTA CLARA COUNTY, CALIFORNIA
Pruneyard Office (3 buildings)............. 354,629 100.0% 1971-1999 99% E,H
10 Almaden................................. 294,809 100.0% 1989 100% E
Pruneyard Shopping Center.................. 252,210 100.0% 1970s 90% E
Embarcadero Place (4 buildings)............ 192,081 100.0% 1984 100% E
Pruneyard Inn.............................. 94,500 100.0% 1989 N/A E,I
---------- ----
MARKET TOTAL............................... 1,188,229 98%

SAN FRANCISCO, CALIFORNIA
120 Montgomery Street...................... 420,310 66.7% 1955 95% E
One Post................................... 391,450 50.0% 1969 99% E
201 California Street...................... 240,230 100.0% 1980 96% J
188 Embarcadero............................ 85,183 100.0% 1985 99% E
---------- ----
MARKET TOTAL............................... 1,137,173 97%

MINNEAPOLIS, MINNESOTA
Norwest Center............................. 1,117,439 50.0% 1988 100% K
---------- ----
MARKET TOTAL............................... 1,117,439 100%

WASHINGTON, D.C./ALEXANDRIA, VIRGINIA
Market Square (2 buildings)................ 688,709 70.0% 1990 99% C,L
99 Canal Center............................ 137,945 100.0% 1986 100% C
TransPotomac Plaza 5....................... 96,392 100.0% 1983 100% C
11 Canal Center............................ 70,365 100.0% 1986 98% C
---------- ----
MARKET TOTAL............................... 993,411 99%

SUBURBAN CHICAGO, ILLINOIS
Corporate 500 Centre (4 buildings)......... 679,039 100.0% 1986/1990 99% M
One Lincoln Centre......................... 297,040 100.0% 1986 89%
---------- ----
MARKET TOTAL............................... 976,079 96%

SANTA MONICA/WEST LOS ANGELES, CALIFORNIA
West Wilshire (2 buildings)................ 235,787 100.0% 1960-1976 94% E
Wilshire Palisades......................... 186,714 100.0% 1981 100% J
Janss Court................................ 125,709 100.0% 1989 100% E,N
Searise Office Tower....................... 122,292 100.0% 1975 100% E
Commerce Park.............................. 94,367 100.0% 1977 79% E,O
429 Santa Monica........................... 83,243 100.0% 1982 88% E
---------- ----
MARKET TOTAL............................... 848,112 95%

ORANGE COUNTY, CALIFORNIA
Bixby Ranch................................ 277,289 100.0% 1987 98% E
18301 Von Karman........................... 219,508 100.0% 1991 88% E
2677 North Main............................ 213,318 100.0% 1987 94% E
---------- ----
MARKET TOTAL............................... 710,115 94%
</TABLE>

F-14
<PAGE>

NEW YORK CITY, NEW YORK
527 Madison Avenue......................... 215,332 100.0% 1986 100%
Tower 56................................... 163,633 100.0% 1983 99% P
---------- ----
MARKET TOTAL............................... 378,965 99%

LOS ANGELES, CALIFORNIA
700 North Brand............................ 202,531 100.0% 1981 94% E
Warner Park Center......................... 57,366 100.0% 1986 100% E
---------- ----
MARKET TOTAL............................... 259,897 95%

CONEJO VALLEY (VENTURA), CALIFORNIA
Westlake Spectrum (2 buildings)............ 118,990 100.0% 1990 97% E
Agoura Hills............................... 115,208 100.0% 1987 100% E
---------- ----
MARKET TOTAL............................... 234,198 99%

OTHER REGIONS
U.S. West (Murray, Utah)................... 136,608 100.0% 1985 76% E
Exposition Centre (Sacramento,
California).............................. 72,971 100.0% 1984 70% E
---------- ----
MARKET TOTAL............................... 209,579 74%

TOTAL PORTFOLIO............................ 17,981,409 97%
---------- ----
Minority Interest Adjustment (Q)........... (728,307)
----------
CORNERSTONE PORTFOLIO...................... 17,253,102 96%
====
Adjustment For Pruneyard Inn............... (94,500)
----------
CORNERSTONE OFFICE PORTFOLIO............... 17,158,602
==========
</TABLE>

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

(A) Unless noted below, cash flow and residual proceeds will be distributed to
Cornerstone according to its percentage interest.

(B) On December 31, 1997, the Company purchased the second mortgage on Sixty
State Street. The mortgage is a cash flow mortgage through which all the
economic benefits/risks (subject to the first mortgage) inure to the
Company. The Company controls all major decisions regarding management and
leasing. The total purchase price for the second mortgage was
$131.5 million and is consolidated in buildings due to the above factors.
The $78.4 million first mortgage on the Property was originally recorded by
the Company as an $89.6 million liability due to its above-market interest
rate.

The second mortgage, which the Company holds, is collateralized only by the
improvements on Sixty State Street. Title to the improvements is owned by
Sixty State Street Trust, the ground lessee under a ground lease that
expires on December 28, 2067. The lease payments on the ground lease are
$398,896 per annum throughout the term.

(C) On October 27, 1997, the Company acquired interests in nine Class A office
properties comprising approximately 4.5 million rentable square feet in
Alexandria, Virginia (3 properties), Atlanta (2 properties), Boston (2
properties), Charlotte and Washington, D.C., as well as an undeveloped
parcel of land in Chicago (collectively, "the DIHC Portfolio"). The Company
acquired the DIHC Portfolio for a purchase price of approximately
$1.06 billion, consisting of approximately 34.2 million shares of Common
Stock valued and recorded at $16.00 per share, approximately $260.0 million
in cash and $250.0 million in promissory notes. The cash portion of the
acquisition was financed with proceeds

F-15
<PAGE>
from the Company's initial public offering in April 1997 and $54.0 million
from its Revolving Credit Facility. The Company has since sold the asset in
Charlotte as well as the undeveloped parcel of land in Chicago.

(D) On April 28, 1998, the Company purchased One Memorial Drive in Cambridge,
Massachusetts. The total purchase price for the Property was approximately
$112.5 million, approximately $23.5 million of which was paid in cash,
approximately $29.0 million of which was paid in UPREIT Units valued at
$17.50 per unit and approximately $60.0 million of which was paid in Common
Stock valued at $17.50 per share.

(E) Property was acquired as a result of the Wilson Acquisition in
December 1998. After receiving stockholder approval on December 14, 1998,
the Company acquired substantially all of the properties and real estate
operations of William Wilson & Associates and related entities ("WW&A") (the
"Wilson Acquisition"). As part of the Wilson Acquisition, the Company
acquired interests in 69 Class A office Properties, comprising approximately
9.2 million rentable square feet primarily in the San Francisco Bay Area and
in Southern California, a shopping center consisting of approximately
252,000 rentable square feet in Santa Clara, California, a hotel consisting
of 94,500 square feet in Santa Clara, California and 12.8 acres of
developable land in the San Francisco Bay Area. The Company has since sold
eleven assets comprising approximately 1.2 million square feet.

The Company acquired WW&A for a purchase price of approximately
$1.8 billion, consisting of approximately 14.9 million shares of Common
Stock valued at $17.25 per share (recorded at $16.25 per share for GAAP
purposes), approximately 16.2 million UPREIT Units valued at $17.25 per unit
(recorded at $16.25 per unit for GAAP purposes), approximately
$465.0 million in cash and the assumption of approximately $760.0 million of
property and construction related debt (recorded at $773.7 million for GAAP
purposes). The cash portion of the transaction was financed primarily from
the Company's Revolving Credit Facility and the sale of $200.0 million of
Common Stock to PGGM, an approximate 33.6% stockholder prior to the Wilson
Acquisition, priced at $17.25 per share.

(F) While the Company's stated interest in the partnership that owns 191
Peachtree Street is 80.0%, its economic interest is significantly larger
since it has acquired the first mortgage note on the Property in the amount
of $145.0 million, which earns interest at 9.375% and will receive a
priority distribution on its acquired capital base. In 1999, the partner in
the transaction, CH Associates, Ltd., received an annual Incentive
Distribution (as defined) of $250,000, with the Company receiving the
remainder of the cash flow of the Property.

The partnership that owns 191 Peachtree Street leases a portion of the land
upon which the project is located pursuant to a ground lease agreement. The
agreement requires annual payments of $45,000 through January 31, 2002 and
$75,000 through January 31, 2008. Thereafter, the annual rent increases
$2,500 per year until the expiration date of January 31, 2087. The
partnership records ground rental expense relating to this agreement on a
straight-line basis. The ground lease is renewable for an additional
99 years.

(G) While the Company's stated interest in the partnership that owns Washington
Mutual Tower is 50.0%, its economic interest in the Property is
significantly larger due to priority distributions it receives on its
invested capital base. For the year ended December 31, 1999, the Company
received 100% of the cash distributions from the partnership that owns
Washington Mutual Tower.

(H) Pruneyard Place construction was completed and occupied on April 1, 1999.
The building was entirely pre-leased.

(I) The Pruneyard Inn is a three-story hotel. An expansion was completed in
May 1999, increasing the number of rooms from 118 to 172.

(J) On June 3, 1998, the Company purchased 201 California Street and Wilshire
Palisades. The total purchase price for the Properties was approximately
$121.5 million, approximately $29.5 million of which was paid in cash,
approximately $29.1 million of which was paid in UPREIT Units valued at

F-16
<PAGE>
$17.50 per unit and approximately $62.9 million of assumed debt (recorded at
$64.6 million for GAAP purposes).

(K) While the Company's stated interest in the partnership that owns Norwest
Center is 50.0%, its economic interest in the Property is significantly
larger due to priority distributions it receives on its invested capital
base. For the year ended December 31, 1999, the Company's share of earnings
and cash distributions from the partnership that owns Norwest Center was
74.4%.

(L) During 1998, through a series of transactions, the Company acquired
partnership interests with a stated interest of approximately 70.0% in the
partnerships that own Market Square. The Company's economic interest is
significantly larger since it has acquired the first mortgage note on the
Property in the amount of $181.0 million which earns interest at 9.75% and
will receive a priority distribution on its acquired capital base. In
addition, the Company acquired a "buffer loan", with accrued principal and
interest of $49.0 million at purchase, which accrues interest at a rate of
Prime plus 1.25% and is payable from cash flow, refinancing or sales
proceeds in excess of the first mortgage. During the year ended
December 31, 1999, the Company received 100% of the cash flow from the
Property. On November 14, 1998, the Company purchased an additional interest
in the partnerships that own Market Square which enabled it to gain
sufficient control in order to consolidate the investment.

(M) On January 28, 1998, the Company purchased Corporate 500 Centre in
Deerfield, Illinois. This Property consists of four Class A office buildings
with approximately 679,000 rentable square feet. The consideration paid for
this Property was approximately $135.0 million in cash and approximately
$15.0 million in UPREIT Units valued at $18.50 per unit, for a total
purchase price of approximately $150.0 million. The Company financed a
portion of the purchase price with an $80.0 million mortgage loan from
Bankers Trust Company; this mortgage was subsequently refinanced in
October 1998.

(N) Janss Court is a seven-story Class A mixed-use building containing
approximately 126,000 square feet. In addition to approximately 93,000
square feet of retail and office space, Janss Court offers 32 apartments for
a total of 33,000 rentable square feet of residential space.

(O) The Property is subject to a ground lease agreement. The agreement requires
annual payments of $115,000 through March 31, 2002 and $121,000 from
April 1, 2002 through March 31, 2007. The lease payment increases every ten
years thereafter according to a formula based on the Consumer Price Index.
The ground lease expires on March 31, 2041.

(P) On January 5, 1998, the Company purchased for approximately $5.5 million,
the remaining participation rights in the cash flow and residual value of
Tower 56 from the former participants for 307,692 shares of Common Stock. As
a result, all of the cash flow and the residual value of Tower 56 inures to
the Company.

(Q) Rentable square feet includes an adjustment for the interest of a joint
venture or minority partner. Calculations are based on the partners'
percentage interest in the cash flows of the Property.

On March 31, 1998, the Company sold the Dearborn Land (an undeveloped parcel
of land in Chicago that was acquired as part of the acquisition of the DIHC
Portfolio in October 1997) for gross proceeds of approximately $19,000,000,
resulting in a loss of $212,228.

On April 29, 1998, the Company sold the Frick Building, located in
Pittsburgh, Pennsylvania, for gross proceeds of approximately $26,748,000,
resulting in a loss of $2,111,540.

On December 29, 1998, Avenue Associates Limited Partnership sold a
condominium unit in Market Square, located in Washington D.C., for gross
proceeds of $326,154, resulting in a gain of $247,972.

During 1999, the Company sold 13 properties for gross proceeds of
$495,705,000 resulting in a net gain of $131,033,847.

F-17
<PAGE>
The future minimum lease payments to be received by the Company under
noncancellable operating leases as of December 31, 1999 are as follows (Dollar
amounts in thousands):

<TABLE>
<S> <C>
2000........................................................ $ 396,159
2001........................................................ 373,079
2002........................................................ 327,096
2003........................................................ 269,223
2004........................................................ 211,497
Thereafter.................................................. 737,345
----------
TOTAL....................................................... $2,314,399
==========
</TABLE>

3. RESTRICTED CASH

Restricted cash includes security deposits for some of the Company's office
properties and escrow and reserve funds for real estate taxes, property
insurance, capital improvements, tenant improvements and leasing costs. These
funds were established pursuant to certain mortgage and construction financing
arrangements.

The proceeds from the sales of certain properties during 1999 totaling
approximately $211.5 million, are included in restricted cash pursuant to the
terms of Section 1031 of the Internal Revenue Code of 1986, as amended,
"Exchange of property held for productive use or investment."

4. INVESTMENT IN REAL ESTATE JOINT VENTURES

Investment in real estate joint ventures represents the Company's two
investments that are accounted for using the equity method of accounting. The
first investment is the Company's 50.0% interest in a co-tenancy with Crocker
Plaza Company for One Post, a 38-story, Class A office tower in San Francisco,
California. The Company and Crocker co-manage and lease the Property. The second
equity investment is the Company's interest in WCP Services, Inc. The Company
owns 1% of the voting common stock and 100% of the non-voting common stock of
WCP Services, Inc. The remaining shares of voting common stock of WCP
Services, Inc. are owned by certain executive officers of the Company. The
Company's ownership of voting and nonvoting common stock together represents a
95% economic interest in the earnings of WCP Services, Inc. WCP Services, Inc.
provides property management, development and tenant construction supervision
services to third parties. WCP Services, Inc. also provides tenant construction
supervision services to tenants in Properties owned by Cornerstone.

F-18
<PAGE>
5. LONG-TERM DEBT

The following table sets forth certain information regarding the
consolidated debt obligations of the Company as of December 31, 1999 and 1998,
including mortgage obligations relating to the Properties. All of this debt,
with the exception of the Convertible Promissory Note due 2001, is nonrecourse
to the Company. However, notwithstanding the nonrecourse indebtedness, the
lender may have the right to recover deficiencies from the Company in certain
circumstances, including fraud, misappropriation of funds and environmental
liabilities (Dollar amounts in thousands).

<TABLE>
<CAPTION>
PROPERTY
- --------
FIXED RATE AMORTIZATION INTEREST RATE (A) MATURITY DATE 12/31/99 12/31/98
- ---------- ------------- ----------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
TransPotomac Plaza (B).............. Interest Only 7.28% Oct-2000 65,000 65,000
West Wilshire Office and Medical.... 25 year 6.90% Jan-2002 16,926 17,301
Searise Office Tower................ 25 year 6.90% Jan-2002 11,607 11,864
Exposition Centre................... 25 year 6.90% May-2002 5,081 5,200
Wilshire Palisades.................. 22 year 6.70% Jul-2002 29,047 29,902
110 Atrium Place.................... 30 year 6.90% Mar-2004 21,517 21,838
527 Madison Avenue and
One Lincoln Centre (B)............ Interest only 7.47% Oct-2004 65,000 65,000
Sixty State Street.................. 30 year 6.84% Jan-2005 85,420 87,627
Island Corporate Center............. 30 year 6.90% Apr-2005 13,170 13,294
Washington Mutual Tower............. Interest only 7.53% Nov-2005 79,100 79,100
Norwest Center...................... Interest only 8.74% Dec-2005 110,000 110,000
Agoura Hills........................ 25 year 6.90% Dec-2005 12,003 12,328
Janss Court......................... 30 year 6.90% Dec-2005 18,357 18,723
Bayhill 4,5,6 & 7................... 25 year 6.90% Dec-2006 57,764 59,071
Market Square (C) and
200 Galleria (B).................. Interest only 7.54% Oct-2007 120,000 120,000
Corporate 500 Centre................ 25 year 6.66% Nov-2008 88,424 89,765
188 Embarcadero (D)................. 25 year 7.26% Aug-2009 15,606 9,135
Centerside II (D)................... 25 year 7.26% Aug-2009 24,254 13,818
700 North Brand (D)................. 25 year 7.26% Aug-2009 26,938 18,108
Golden Bear Center (D).............. 25 year 7.26% Aug-2009 20,477 15,753
Bixby Ranch (D)..................... 25 year 7.26% Aug-2009 28,528 20,243
One Memorial Drive (D).............. 25 year 7.26% Aug-2009 63,119 --
125 Summer Street (E)............... 25 year 7.23% Nov-2009 78,844 50,000
Tower 56 (E)........................ 25 year 7.23% Nov-2009 25,024 17,548
Peninsula Office
Park 1,3,4,5,6,8 & 9 (E).......... 25 year 7.23% Nov-2009 88,128 60,242
Embarcadero Place (E)............... 25 year 7.23% Nov-2009 38,149 26,061
201 California Street (E)........... 25 year 7.23% Nov-2009 44,504 33,071
---------- ----------
TOTAL FIXED RATE DEBT............. 7.31%(F) 7.1 yrs(F) 1,251,987 1,069,992
---------- ----------

VARIABLE RATE
- ------------------------------------
Seaport Centre (G).................. Interest only LIBOR plus 1.50% Dec-2000 58,000 58,000
The Pruneyard....................... 24 year LIBOR plus 1.50% Jul-2000 60,947 49,384
Convertible Promissory Note
due 2001 (H)...................... Interest only 8.11% max(I) Jan-2001 12,926 12,926
120 Montgomery Street............... 24 year LIBOR plus 1.40% Nov-2002 48,160 46,930
Norris Tech Center.................. 25 year LIBOR plus 1.65% Dec-2003 16,066 16,392
Other loans......................... Various Various Various 245 597
---------- ----------
TOTAL VARIABLE RATE DEBT.......... 7.40%(F) 1.5 yrs(F) 196,344 184,229
---------- ----------
</TABLE>

F-19
<PAGE>
<TABLE>
<CAPTION>
PROPERTY
- --------
REPAID DEBT AMORTIZATION INTEREST RATE (A) MATURITY DATE 12/31/99 12/31/98
- ----------- ------------- ----------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
18301 Von Karman (J)................ -- -- -- -- 10,647
1600 South Main (J)................. -- -- -- -- 5,038
Biltmore Lakes (J).................. -- -- -- -- 11,468
Belmont Shores (J).................. -- -- -- -- 9,839
2677 North Main (J)................. -- -- -- -- 10,774
2700 Ygnacio Valley Road (J)........ -- -- -- -- 5,035
Westlake Spectrum (J)............... -- -- -- -- 3,993
Park Plaza (J)...................... -- -- -- -- 4,940
Warner Park Center (J).............. -- -- -- -- 5,213
429 Santa Monica (J)................ -- -- -- -- 10,176
Crossroads (J)...................... -- -- -- -- 7,339
Westlake Spectrum II (J)............ -- -- -- -- 5,284
Two ADP Plaza (K)................... -- -- -- -- 13,400
Two Corporate Centre (K)............ -- -- -- -- 18,600
One & Two Gateway (L)............... -- -- -- -- 8,679
Scottsdale Centre (L)............... -- -- -- -- 7,745
66 Bovet (L)........................ -- -- -- -- 3,939
One Norwest Center (M).............. -- -- -- -- 98,252
1300 South El Camino (L)............ -- -- -- -- 4,007
10 Almaden (N)...................... -- -- -- -- 33,885
---------- ----------
TOTAL REPAID DEBT................. -- 278,253
---------- ----------
Total Debt.......................... 7.32%(F) 6.4 yrs(F) $1,448,331 $1,532,474
========== ==========
</TABLE>

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

(A) The interest rate is the stated interest rate (for Cornerstone originated
debt) or the mark to market rate at the time of acquisition (for debt
assumed as part of an acquisition).

(B) The three notes arising from the acquisition of several properties in the
DIHC Portfolio are cross-collateralized, having the effect of forming a
"collateral pool" for the underlying notes.

(C) The collateral for this loan is a pledge of the $181.0 million first
mortgage loan on Market Square that the Company purchased from PGGM.

(D) The six notes arising from the restructuring of certain debt with Prudential
Insurance Company of America and Northwestern Mutual Life Insurance Company
are cross-collateralized, having the effect of forming a "collateral pool"
for the underlying notes.

(E) During October 1999 the Company restructured approximately $219.9 million of
individual property-related debt with Northwestern Mutual Life Insurance
Company. The restructuring involved retiring the individual property-related
debt and creating a single $275.0 million term loan which is cross-
collateralized by six of the original seven properties. The loan has a ten
year term and bears interest at 7.23%. Upon closing the loan, the lien on 10
Almaden was released and the property was added to Cornerstone's
unencumbered pool.

(F) Weighted-average interest rate and maturity of the Company's long-term debt.

(G) On December 15, 1999, through an extension and modification agreement, the
maturity date of the $58.0 million variable rate debt held on Seaport Centre
was extended from December 31, 1999 to December 31, 2000. All other terms of
the note remain unchanged.

(H) The lender, Hines Colorado Limited, has the right to convert the note into
Common Stock at a conversion price of $14.30 per share. At maturity, the
Company is entitled to repay the principal of the note with Common Stock
priced at the lesser of $14.30 per share or the then existing share price.

(I) Lesser of 30-day LIBOR plus 0.5% or 8.11%.

(J) These 12 notes were prepaid as part of the Prudential Insurance Company of
America and Northwestern Mutual Life Insurance Company restructuring, see
note (D) above. All the notes had a mark to market interest rate of 6.9% and
maturity dates ranging from April 2000 to March 2003.

F-20
<PAGE>
(K) On January 4, 1999, in connection with the Wilson Acquisition, the Company
prepaid the notes on Two ADP Plaza and Two Corporate Centre.

(L) These notes were prepaid in conjunction with the sale of these properties.

(M) The note was assumed by the purchaser as of the date of closing, in
conjunction with the sale of this property during the fourth quarter.

(N) This note was prepaid as part of the Northwestern Mutual Life Insurance
Company restructuring, see note (E) above. This note had a mark to market
interest rate of 6.9% and a maturity of April 2004.

The combined aggregate amount of maturities for all long-term borrowings for
2000 through 2004 are $183,947,000, $12,926,000, $110,821,000, $16,066,000 and
$86,517,000, respectively.

Since most of the long-term debt is property-related, there are restrictive
covenants that limit the total amount of indebtedness that can be placed on
individual properties.

6. CREDIT FACILITY

The Company has a $550.0 million Revolving Credit Facility with a syndicate
of 17 banks led by Deutsche Bank, The Chase Manhattan Bank and Bank of America
for acquisitions and general working capital purposes as well as the issuance of
letters of credit (the "Revolving Credit Facility"). The interest rate on the
facility depends on the Company's ratio of total debt to asset value (as
defined) at the time of borrowing and will be at a spread of 1.10% to 1.40% over
the applicable LIBOR or Prime Rate at the borrower's option. The letters of
credit will be priced at the applicable Eurodollar credit spread. The Revolving
Credit Facility expires on November 3, 2001. As of December 31, 1999,
$329.0 million of the facility was outstanding at a rate of approximately 8.0%.
Of this amount, approximately $250.0 million is fixed with interest rate swaps,
which effectively fix the rate at 6.47%. Beginning January 2000, the rate will
be reduced to 5.41% through the expiration of the swaps in December 2000. The
Revolving Credit Facility contains certain restrictive covenants including:
(i) a limitation on the Company's dividend to 90.0% of funds from operations and
110.0% of funds available for distribution, both as defined in the agreement;
(ii) the percentage of total liabilities to total property asset value (as
defined) cannot exceed 55.0%; (iii) the ratio of adjusted EBITDA to interest
expense may not be less than 2.00 to 1.00 through July 1, 1999 and 2.25 to 1.00
thereafter; (iv) the fixed charge coverage ratio may not be less than 1.75 to
1.00; and (v) the ratio of total property asset value (as defined) to secured
indebtedness may not be less than 2.22 to 1.00. The above terms reflect an
amendment to the Revolving Credit Facility that occurred during 1999. The
amendment allowed the Company temporarily to increase its leverage from 55.0% to
60.0% in (ii) above for a short period, which has since expired. The Company
also increased its ability to enter into mortgage debt under (v) above by
decreasing the required ratio from 2.5 to 1.00 to 2.22 to 1.00.

7. COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Company is subject to tenant and
property related claims and other litigation. It is the opinion of management,
after consultation with outside counsel, that the resolution of these claims
will not have a material adverse effect on the financial position, results of
operations or cash flows of the Company.

In April 1998, the Company entered into a contract to acquire from the
developer the 928,857 square-foot Piper Jaffray building under construction in
Minneapolis. In November 1999, this contract was amended in connection with a
350,000 square-foot expansion lease with a major tenant of the building. The
contract was amended to provide for a purchase price equal to the costs incurred
in construction and development plus a fixed amount to the developer plus an
additional amount based on the leasing of the building. In addition, at the
Company's election, the closing of the acquisition may occur prior to the
completion of the building, but the developer will remain obligated to complete
the project. Through December 31, 1999, approximately $109.4 million has been
spent on the construction. The project is scheduled to be completed in the year
2000 and is approximately 75.0% pre-leased.

F-21
<PAGE>
8. STOCKHOLDERS' EQUITY

The 7% Cumulative Convertible Preferred Stock is convertible into Common
Stock at $16.50 per share at any time after August 4, 2000.

On February 6, 1998, Cornerstone completed a secondary public offering of
14,375,000 shares of Common Stock at a price of $18.25 per share. The shares
were placed in the U.S. through a syndicate of seven investment banks led by
Merrill Lynch & Co. Net proceeds to the Company were approximately
$247.9 million (approximately $262.3 million gross proceeds less an underwriting
discount of approximately $13.7 million and expenses of approximately
$0.7 million). The net proceeds were used to repay outstanding borrowings under
the Revolving Credit Facility and for working capital purposes.

On December 9, 1999, the Company's Board of Directors approved a stock
repurchase program ("Repurchase Program") under which the Company is permitted
to purchase up to $100.0 million of the Company's outstanding Common Stock. The
Company may make periodic purchases on or prior to December 31, 2000 using
available working capital on the open market at prevailing prices or in
privately negotiated transactions. As of December 31, 1999, the Company
repurchased 347,400 shares of its outstanding Common Stock for an aggregate cost
of approximately $4.9 million. The Repurchase Program has been discontinued as a
result of the merger with EOP.

The following tables summarize the stock options and restricted stock grants
for certain officers of the Company as of December 31, 1999:

STOCK OPTIONS

<TABLE>
<CAPTION>
OPTIONS GRANTED EXERCISE PRICE OPTIONS OPTIONS OPTIONS
DATE OF GRANT (NO. OF SHARES) (PER SHARE) VESTING EXERCISED FORFEITED EXERCISABLE
- ------------- --------------- -------------- ------------------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
August, 1995....................... 637,500 $14.30 33.3%/yr, 10yr term 75,000 0 562,500
October, 1995...................... 150,000 $14.30 33.3%/yr, 10yr term 10,500 0 139,500
March, 1997........................ 880,000 $14.50 33.3%/yr, 10yr term 52,000 0 534,666
November, 1997..................... 70,000 $18.44 33.3%/yr, 10yr term 0 0 46,667
February, 1998..................... 70,000 $18.13 33.3%/yr, 10yr term 0 46,667 23,333
February, 1998..................... 595,000 $18.25 33.3%/yr, 10yr term 0 26,668 198,333
March, 1998........................ 200,000 $18.25 33.3%/yr, 10yr term 0 133,334 66,666
December, 1998..................... 3,000,000 $17.25 33.3%/yr, 10yr term 0 34,533 978,800
January, 1999...................... 20,000 $17.25 33.3%/yr, 10yr term 0 0 0
February, 1999..................... 10,000 $17.25 33.3%/yr, 10yr term 0 10,000 0
June, 1999......................... 10,000 $17.25 33.3%/yr, 10yr term 0 0 0
</TABLE>

The weighted average fair value of options granted during 1999, 1998 and
1997 was $0.33 per share, $0.28 per share, and $2.00 per share, respectively.
The weighted average fair value of options exercised during 1999 and 1997 was
$4.55 and $2.45, respectively. There were no options exercised during 1998. The
weighted average life of options outstanding at December 31, 1999 was
approximately 8.1 years.

F-22
<PAGE>
RESTRICTED STOCK GRANTS
<TABLE>
<CAPTION>
VALUE AT GRANT SHARES INITIALLY SHARES FORFEITED SHARES OUTSTANDING SHARES VESTED
DATE OF GRANT DATE (PER SHARE) GRANTED (NO. OF SHARES) (NO. OF SHARES) (NO. OF SHARES) (NO. OF SHARES)
- ------------- ---------------- ----------------------- ---------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
August, 1995........... $14.30 186,713 19,091 167,622 89,396
March, 1997............ $16.40 100,000 0 100,000 26,666
November, 1997......... $18.44 12,500 0 12,500 3,333
March, 1998............ $18.13 12,500 10,833 1,667 1,667
March, 1998............ $18.25 19,178 0 19,178 19,178
February, 1999......... $15.50 113,500 1,700 111,800 1,400

<CAPTION>
VESTING (A)
DATE OF GRANT SEE NOTES
- ------------- -----------
<S> <C>
August, 1995........... (B)
March, 1997............ (C)
November, 1997......... (D)
March, 1998............ (E)
March, 1998............ (F)
February, 1999......... (G)
</TABLE>

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

(A) Deferred compensation of approximately $5,600,000 is being amortized
according to the respective amortization schedule for each vesting period
noted below, with the unamortized balance shown as a deduction from
stockholders' equity. Regular distributions are paid on restricted stock.

(B) The grant will fully vest with respect to 13.333% on June 30, 1996, 1997,
1998, 1999 and with respect to 46.668% on June 30, 2000.

(C) The grant will fully vest with respect to 13.333% on June 30, 1998, 1999,
2000, 2001 and with respect to 46.668% on June 30, 2002.

(D) The grant will fully vest with respect to 13.333% on June 30, 1998, 1999,
2000, 2001 and with respect to 46.668% on June 30, 2002.

(E) The grant will fully vest with respect to 13.333% on March 15, 1999, 2000,
2001, 2002 and with respect to 46.668% on March 15, 2003.

(F) The initial grant was to vest with respect to 13.333% on March 15, 1999,
2000, 2001, 2002 and with respect to 46.668% on March 15, 2003. Pursuant to
the terms of a separation agreement, the vesting with respect to 16,621
shares was accelerated to fully vest on December 31, 1999.

(G) The grant will fully vest on February 1, 2004. Pursuant to the terms of
certain separation agreements, the vesting with respect to 1,400 shares was
accelerated to fully vest on July 1, 1999.

The Company has adopted the disclosure-only provision of Statement of
Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"). Accordingly, no compensation cost has been recognized for the
options described above since the exercise price equaled the fair value at the
grant date. Had compensation cost for these options been determined based on the
fair value at the grant date consistent with the provisions of SFAS 123, the
Company's net income and net income per common share would have been reduced to
the following pro forma amounts (Dollar amounts in thousands, except per share
amounts):

<TABLE>
<CAPTION>
BASIC NET DILUTED NET
INCOME PER INCOME PER
NET INCOME COMMON SHARE COMMON SHARE
---------- ------------ ------------
<S> <C> <C> <C>
Year ended December 31, 1999........... $229,622 $ 1.76 $ 1.73
Year ended December 31, 1998........... $ 81,561 $ 0.78 $ 0.78
Year ended December 31, 1997........... $ 36,887 $ 0.61 $ 0.61
</TABLE>

F-23
<PAGE>
The Company has computed the value of all stock options using the
Black-Scholes option pricing model with the following weighted average
assumptions:

<TABLE>
<CAPTION>
ASSUMPTIONS 1999 1998 1997
- ----------- --------- ----------- -----------
<S> <C> <C> <C>
Risk-free interest rate................ 5.31% 5.31% 6.56%
Assumed dividend yield................. 7.50% 7.50% 7.50%
Expected term.......................... 6 years 6 years 6 years
Assumed volatility..................... 10.00% 10.00% 10.00%
</TABLE>

9. STOCKHOLDERS' AND UNITHOLDERS' DISTRIBUTIONS

On December 7, 1998, in connection with the Wilson Acquisition, the Company
declared a distribution of $0.15 per share/unit to Common Stockholders and
Unitholders of record as of December 15, 1998 and a distribution of $0.15 per
share/unit to Common Stockholders and Unitholders of record as of January 29,
1999. Both distributions were paid on February 26, 1999. A distribution of $0.30
per share/unit was declared for the second quarter of 1999 and paid on May 28,
1999, to Common Stockholders and Unitholders of record as of April 30, 1999. A
distribution of $0.30 per share/unit was declared for the third quarter of 1999
and paid on August 31, 1999, to Common Stockholders and Unitholders of record as
of July 30, 1999. A distribution of $0.30 per share/unit was declared on
September 28, 1999 for the fourth quarter of 1999 and paid on November 30, 1999,
to Common Stockholders and Unitholders of record as of October 29, 1999.

On August 4, 1999, the Company paid a dividend of $1.155 per share to all
preferred stockholders of record as of July 30, 1999.

10. EXTRAORDINARY LOSS

For the year ended December 31, 1999, the Company recorded extraordinary
loss of approximately $10.8 million. This amount represents the prepayment fees
paid in connection with the property debt restructurings that were completed
during June 1999 and October 1999, as well as the net write off of any remaining
unamortized premium/discount recorded by the Company related to the retired
debt. See Notes 5 and 16 for more information about the two restructurings.

F-24
<PAGE>
11. NET INCOME PER COMMON SHARE

The table below sets forth the calculation of income per common share for
1999, 1998 and 1997 (Dollar amounts in thousands, except per share amounts):

<TABLE>
<CAPTION>
1999 1998 1997
------------------- ------------------- -------------------
BASIC DILUTED BASIC DILUTED BASIC DILUTED
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Proceeds upon exercise of options......... -- $ 22,045 -- $23,871 -- $ 25,162
Market price of shares average for the
respective year......................... -- $ 15.28 -- $ 16.80 -- $ 17.13
Treasury shares that could be repurchased
(options)............................... -- 1,443 -- 1,421 -- 1,469
Option shares outstanding................. -- 1,530 -- 1,657 -- 1,727
Weighted common stock equivalent shares
(excess shares under option over
Treasury shares that could be
repurchased)............................ -- 87 -- 236 -- 236
Convertible preferred stock............... -- 3,030 -- -- -- --
Convertible debt shares................... -- 904 -- -- -- --
Weighted average common shares
outstanding............................. 128,817 128,817 100,319 100,319 43,572 43,572
-------- -------- ------- ------- -------- --------
Adjusted weighted average common Shares
outstanding............................. 128,817 132,838 100,319 100,555 43,572 43,808
Net income for the period................. $230,653 $230,653 $83,465 $83,465 $ 37,547 $ 37,547
Interest on convertible debt.............. -- $ 745 -- -- -- --
$(10,160)
Income applicable to preferred stock...... $ (3,500) $ -- $(3,500) $(3,500) $(10,
-------- -------- ------- ------- -------- --------
Net income applicable to common stock..... $227,153 $231,398 $79,965 $79,965 $ 27,387 $ 27,387
Net income per common share............... $ 1.76 $ 1.74 $ 0.80 $ 0.80 $ 0.63 $ 0.63
</TABLE>

The stock options issued in November 1997, February 1998, March 1998,
December 1998, January 1999, February 1999 and June 1999 were not included in
the calculation of diluted earnings per share as such options were anti-dilutive
during the period. In addition, the Company will be obligated to redeem each
UPREIT Unit held by such unitholder for one share of Common Stock or, at the
option of the Company, cash equal to the fair market value of one share of
Common Stock at the time of redemption. As of December 31, 1999, 1,125,175
UPREIT Units have been redeemed for shares of Common Stock on a one-for-one
basis and 76,647 UPREIT Units have been redeemed for approximately $1.2 million
in cash.

12. RETIREMENT PLANS

Effective July 1, 1995, the eligible employees of the Company participate in
a noncontributory age-weighted profit sharing plan. The Company's cash
contribution to such plan was approximately $134,000, $100,000, and $91,400 for
the years ended December 31, 1999, 1998, and 1997 respectively.

Effective July 1, 1995, the eligible employees of the Company also
participate in a 401(k) contributory savings plan. Under the plan, the Company
matches contributions made by eligible employees based on a percentage of the
employee's salary. The Company will match 100% of contributions up to 5.0% of
such employee's salary with an annual maximum matching contribution of $4,000
per employee. The Company's matching contribution was approximately $654,000,
$69,600, and $52,600 for the years ended December 31, 1999, 1998, and 1997
respectively.

The Company has adopted the Cornerstone Properties Inc. 1998 Long-Term
Incentive Plan (the "Incentive Plan") to provide incentives to attract and
retain officers and key employees. Under the Incentive Plan as amended and
restated on December 14, 1998, the number of shares available for option grant
are approximately 7,400,000. During 1999, options on approximately 40,000 shares
of Common Stock

F-25
<PAGE>
at an exercise price of $17.25 per share have been granted under the plan. As of
December 31, 1999, 10,000 of these shares have been forfeited. Refer to Note 8
for additional vesting information.

13. CONCENTRATION OF RISK

Approximately 5.8 million of the Company's 17 million rentable square feet
is located in the San Francisco metropolitan market, accounting for
approximately 29% of the Company's total assets at December 31, 1999. In
addition, five of the Company's 83 office Properties are located in the Downtown
Boston market, accounting for approximately 19.4% of the Company's office and
parking revenues for the year ended December 31, 1999. This concentration of
assets makes the Company particularly vulnerable to adverse changes in economic
conditions in the San Francisco and Boston metropolitan areas. A significant
decline in these economic conditions could have a material adverse effect on the
Company.

Norwest Corporation and its subsidiary, Norwest Bank Denver N.A., tenants of
the Company, provided approximately 6.2%, 9.5% and 20.0% of office and parking
rental income for the years ended December 31, 1999, 1998 and 1997,
respectively. Included in deferred tenant receivables is approximately
$34.8 million and $33.9 million due from Norwest Corporation at December 31,
1999 and 1998, respectively. As a result of the sale of the Company's property
located in Denver during the fourth quarter of 1999, the concentration of
revenue received from this tenant will be significantly reduced.

14. RELATED PARTY TRANSACTIONS

The Company has entered into $250.0 million of mortgage debt with one of its
major stockholders, PGGM, as further described in Note 5.

In connection with the Wilson Acquisition, certain third-party services
business of WW&A was acquired by WCP Services, Inc., a Delaware corporation
("WCP Services"). The Operating Partnership owns 100% of the non-voting common
stock and 1% of the voting common stock of WCP Services. Mr. Wilson and
Mr. Moody each own 49.5% of the voting common stock of WCP Services. To fund the
purchase of such shares of voting common stock, the Operating Partnership loaned
$178,750 to each of Mr. Wilson and Mr. Moody, all of which remained outstanding
as of December 31, 1999. The notes accrue interest at a rate equal to 140 basis
points plus the one-year London Interbank Offered Rate, which rate is adjusted
annually. The notes are due and payable on or before December 16, 2008. In
connection with the EOP Merger Agreement, Messrs. Wilson and Moody entered into
an agreement to sell their voting common stock of WCP Services to EOP at a
purchase price of $200,000 each.

15. FAIR VALUE OF FINANCIAL INSTRUMENTS

Cornerstone is required to disclose the fair value of financial instruments
for which it is practicable to estimate that value. The Company determines the
fair value based on discounting future cash flows at a rate that approximates
the Company's effective current borrowing rate (see also Note 5). For the year
ended December 31, 1999 and 1998, the fair value of the Company's long term debt
was approximately $1,183,000 and $1,555,000, respectively.

16. SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest was approximately $138,375,000, $60,992,000 and
$30,204,000 for the years ended December 31, 1999, 1998 and 1997, respectively.

NON-CASH INVESTING AND FINANCING ACTIVITIES

On October 27, 1997, the Company acquired the PGGM Portfolio for a purchase
price of approximately $1.06 billion, consisting of approximately 34.2 million
shares of Common Stock valued and

F-26
<PAGE>
recorded at $16.00 per share, approximately $260.0 million in cash and
$250.0 million in promissory notes. The Company also recorded a minority
interest of $33.2 million in connection with this acquisition.

On January 5, 1998, the Company purchased for approximately $5.5 million,
the participation rights in the cash flow and residual value of Tower 56 from
the former participants for 307,692 shares of Common Stock.

On January 28, 1998, the Company purchased Corporate 500 Centre. As part of
the total purchase price of approximately $150.0 million, the Company issued
822,794 UPREIT Units valued at $18.50 per unit.

On April 28, 1998, the Company purchased One Memorial Drive. As part of the
total purchase price of approximately $112.5 million, the Company issued
3,428,571 shares of common stock and 1,657,426 UPREIT Units, both valued at
$17.50.

On June 3, 1998, the Company purchased 201 California Street and Wilshire
Palisades. As part of the total purchase price for the Properties of
approximately $121.5 million, the Company assumed $64.6 million in debt and
issued 1,665,663 UPREIT Units valued at $17.50 per unit.

On September 25, 1998, in conjunction with the refinancing of the One
Norwest Center mortgage, the Company incurred an extraordinary loss of
approximately $2,269,000, which represents the unamortized deferred financing
costs and prepayment fees on the previous One Norwest Center mortgage at the
time of the refinancing.

On October 9, 1998, in conjunction with the refinancing of the Corporate 500
Centre mortgage, the Company incurred an extraordinary loss of $354,717, which
represents the unamortized deferred financing costs on the previous Corporate
500 Centre mortgage at the time of the refinancing.

On November 3, 1998, the Company obtained a $550.0 million Revolving Credit
Facility from a syndicate of 17 banks led by Deutsche Bank, The Chase Manhattan
Bank and Bank of America. In conjunction with obtaining this new Revolving
Credit Facility, the Company incurred an extraordinary loss of $1,680,016, which
represents the unamortized deferred financing costs related to the previous
$350.0 million facility, which was extinguished at the time that the new
Revolving Credit Facility was obtained.

On December 16, 1998, the Company consummated the Wilson Acquisition for a
purchase price of approximately $1.8 billion, consisting of approximately
14.9 million shares of Common Stock valued at $17.25 per share (recorded at
$16.25 per share for GAAP purposes), approximately 16.2 million UPREIT Units
valued at $17.25 per unit (recorded at $16.25 for GAAP purposes), approximately
$465.0 million in cash and the assumption of approximately $760.0 million of
property and construction related debt (recorded at $773.7 million for GAAP
purposes). The Company also recorded a minority interest of $241.0 million in
connection with this acquisition.

During the first quarter of 1999, pursuant to the requirements of SOP 98-5
(as defined in Note 1), the Company wrote off all unamortized organizational
costs and recorded a cumulative effect of a change in accounting principle of
$630,044.

On February 1, 1999, the Company issued 113,500 shares of restricted stock
valued at $15.50 per share to certain employees of the Company. Refer to Note 8
for the vesting of this grant.

On June 23, 1999, in conjunction with the restructuring of property-related
debt with Prudential Insurance Company of America and Northwestern Mutual Life
Insurance Company, the Company incurred an extraordinary loss of approximately
$3,355,000, of which approximately $1,560,000 represents the unamortized
premium/discounts associated with various debt instruments that were assumed as
part of the Wilson Acquisition. See Note 5 for more information about this
restructuring.

F-27
<PAGE>
During 1999, 1,700 shares of restricted Common Stock issued to certain
employees of the Company were forfeited as a result of their separation from the
Company.

On July 30, 1999, 562,588 UPREIT Units were redeemed for shares of Common
Stock on a one-for-one basis.

On August 3, 1999, 562,587 UPREIT Units were redeemed for shares of Common
Stock on a one-for-one basis.

On August 17, 1999, the Company reacquired 10,833 shares of restricted
Common Stock as a result of the forfeiture of these shares by a certain employee
of the Company.

On October 6, 1999, in conjunction with the restructuring of
property-related debt with Northwestern Mutual Life Insurance Company, the
Company incurred an extraordinary loss of approximately $7,432,000, of which
approximately $2,551,000 represents the unamortized premium/discounts associated
with various debt instruments. See Note 5 for more information about this
restructuring.

On December 10, 1999, in conjunction with the sale of One Norwest Center in
Denver, Colorado, $97.3 million of outstanding debt was assumed by the
purchaser.

17. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

(Dollar amounts in thousands except per share amounts):

<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
----------- ------------ -------- --------
<S> <C> <C> <C> <C>
1999
Revenues......................................... $155,515 $156,539 $153,629 $151,765
Income before cumulative effect of a change in
accounting principle and extraordinary loss.... 141,046 42,267 29,095 29,662
Cumulative effect of a change in accounting
principle...................................... -- -- -- (630)
Extraordinary loss............................... (7,432) -- (3,355) --
Net income....................................... 133,614 42,267 25,740 29,032
Per share data:
Income before cumulative effect of a change in
accounting principle and extraordinary
item......................................... 1.08 0.32 0.22 0.22
Basic net income per common share.............. 1.02 0.32 0.19 0.22
Diluted net income per common share............ 1.00 0.32 0.19 0.22

1998
Revenues......................................... $102,402 $ 89,038 $ 86,490 $ 81,556
Income before extraordinary item................. 24,535 21,227 19,252 22,754
Extraordinary loss............................... (2,034) (2,269) -- --
Net income....................................... 22,501 18,958 19,252 22,754
Per share data:
Income before extraordinary item............... 0.22 0.20 0.18 0.24
Basic and diluted net income per common
share........................................ 0.20 0.18 0.18 0.24
</TABLE>

F-28
<PAGE>
18. SEGMENT REPORTING

The Company has one reportable segment--real estate. The Company does not
have any foreign operations. The accounting policies of the segment are the same
as those described in Note 1. See Note 13 for information regarding
concentration of risk.

The Company evaluates performance based on net operating income from the
individual properties in the segment. (Dollar amounts in thousands)

<TABLE>
<CAPTION>
CORPORATE & COMPANY
TOTAL SEGMENT OTHER(A) TOTAL
------------- ----------- ----------
<S> <C> <C> <C>
Total revenues (B):
1999..................................... $ 611,657 $ 5,791 $ 617,448
1998..................................... 354,145 5,341 359,486
1997..................................... 160,490 13,421 173,911
Total operating and Interest expenses
(C):
1999..................................... $ 212,686 $ 156,263 $ 368,949
1998..................................... 122,423 80,472 202,895
1997..................................... 61,522 41,541 103,063
Net operating income (D):
1999..................................... $ 398,971 $(150,472) $ 248,499
1998..................................... 231,722 (75,131) 156,591
1997..................................... 98,968 (28,120) 70,848
Total long-lived assets (E):
1999..................................... $3,770,924 $ 66,064 $3,836,988
1998..................................... 4,137,302 54,782 4,192,084
1997..................................... 1,996,404 9,147 2,005,551
Total assets:
1999..................................... $3,776,765 $ 393,463 $4,170,228
1998..................................... 4,198,099 83,885 4,281,984
1997..................................... 1,757,372 294,109 2,051,481
</TABLE>

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

(A) Corporate and Other represents all corporate-level items (including interest
income, interest expense and general and administrative expenses) as well as
intercompany eliminations necessary to reconcile to consolidated Company
totals.

(B) Total revenues represents all revenues during the period (including the
Company's earnings in real estate joint ventures). All interest income is
excluded from the segment amounts and is classified in Corporate and Other
for all periods.

(C) Total operating and interest expenses represents the sum of building
operating expenses, real estate taxes, interest expense and general and
administrative expenses. All interest expense (including property level
mortgages) is excluded from the segment amounts and is classified in
Corporate and Other for all periods. Amounts presented exclude depreciation
and amortization of $96,726,000, $59,278,000 and $30,978,000 in 1999, 1998
and 1997, respectively.

(D) Net operating income represents total revenues (as defined in note (B)
above) less total operating and interest expense (as defined in note (C)
above) for the period.

(E) Long-lived assets is composed of total rentals property, investments in
joint ventures, other deferred costs, deferred tenant receivables and
certain other assets.

F-29
<PAGE>
19. SUBSEQUENT EVENTS

On January 20, 2000, the Company declared a distribution of $0.31 per
share/unit paid on February 29, 2000, to Common Stockholders and Unitholders of
record as of January 31, 2000.

On January 21, 2000, the Company purchased 400 Capitol Mall in Sacramento,
California. This property contains approximately 502,000 rentable square feet.
The total purchase price for the Property was approximately $130.0 million,
consisting of approximately $128.0 million in cash, of which $104.8 million was
Section 1031 exchange funds from the sale of One Norwest Center in Denver,
Colorado, and approximately $2.0 million of which was paid in UPREIT Units
valued at $17.25 per unit.

On March 8, 2000, as provided in the merger agreement with EOP, the Board of
Directors declared a distribution of $0.20 per share/unit, payable on April 14,
2000, to Common Stockholders and Unitholders of record as of March 31, 2000.
This distribution was declared to make Cornerstone's distribution schedule
consistent with that of EOP pending the merger (see above). Thereafter, it is
anticipated that Cornerstone's dividends will be paid as of the end of each
quarter until the completion of the EOP Merger.

On March 8, 2000, 9,200 UPREIT Units were redeemed for shares of Common
Stock on a one-for-one basis.

On March 15, 2000, the Company sold its interest in a Property located in
East Bay, California for gross proceeds of $14,425,000. The Property had been
acquired as part of the Wilson Acquisition in December 1998.

On March 23, 2000, the Company sold its interest in a Property located in
East Bay, California for gross proceeds of $12,800,000. The Property had been
acquired as part of the Wilson Acquisition in December 1998.

F-30
<PAGE>
CORNERSTONE PROPERTIES INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------------------------------------------------- ------------ ----------------------- ---------------- ----------------------
COST CAPITALIZED GROSS AMOUNT AT WHICH
SUBSEQUENT TO CARRIED AT CLOSE OF
INITIAL COST TO COMPANY ACQUISITION PERIOD
(DOLLAR AMOUNTS IN THOUSANDS) ----------------------- ---------------- ----------------------
BUILDING & LAND & BUILDING &
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS
- -------------------------------------------------- ------------ --------- ------------ ---------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Boston, Massachusetts
Sixty State Street.............................. $ 85,420 $ -- $ 221,568 $ 6,813 $ -- $ 228,381
500 Boylston Street............................. 45,132 181,574 (112) 45,132 181,462
222 Berkeley Street............................. 29,262 118,180 284 29,262 118,464
125 Summer Street............................... 78,844 15,750 89,250 7,867 15,750 97,117
One Memorial Drive.............................. 63,119 22,500 90,873 (6) 22,500 90,867

San Mateo County, California
Bayhill (4 buildings)........................... 57,764 26,353 105,412 2,166 26,353 107,578
Peninsula Office Park (7 buildings)............. 88,128 25,426 101,705 2,885 25,426 104,590
Seaport Centre.................................. 58,000 23,530 94,119 5,259 23,530 99,378
Bay Park Plaza (2 buildings).................... 13,139 52,556 244 13,139 52,800
One Bay Plaza................................... 9,125 36,499 1,165 9,125 37,664

East Bay, California
Corporate Centre (2 buildings).................. 9,808 39,233 637 9,808 39,870
ADP Plaza (2 buildings)......................... 10,278 41,110 502 10,278 41,612
PeopleSoft Plaza................................ 10,025 40,100 644 10,025 40,744
Norris Tech Center (3 buildings)................ 16,066 7,223 28,893 379 7,223 29,272
Golden Bear Center.............................. 20,477 6,426 25,705 250 6,426 25,955
2700 Ygnacio Valley Road........................ 2,375 9,498 192 2,375 9,690
Park Plaza...................................... 2,673 10,693 323 2,673 11,016
1600 South Main................................. 2,501 10,003 175 2,501 10,178

Atlanta, Georgia
191 Peachtree Street............................ 40,110 228,962 4,575 40,110 233,537
200 Galleria.................................... 120,000(B) 11,994 48,443 3,622 12,726 51,332

Seattle, Washington
Washington Mutual Tower (3 buildings)........... 79,100 21,167 43,153 150,354 21,173 193,501
110 Atrium Place................................ 21,517 7,810 31,242 357 7,810 31,599
Island Corporate Center......................... 13,170 3,751 15,004 325 3,751 15,329

<CAPTION>
COLUMN A COLUMN F COLUMN G COLUMN H COLUMN I
- -------------------------------------------------- ----------------- ----------------- ----------- ---------------

LIFE ON WHICH
DEPRECIATION IN
(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED) (UNAUDITED) LATEST INCOME
ACCUMULATED YEAR DATE STATEMENTS IS
DESCRIPTION TOTAL DEPRECIATION CONSTRUCTED ACQUIRED COMPUTED (A)
- -------------------------------------------------- ---------- ----------------- ----------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Boston, Massachusetts
Sixty State Street.............................. $ 228,381 $(11,312) 1979 12/31/97 40
500 Boylston Street............................. 226,594 (9,949) 1988 10/27/97 40
222 Berkeley Street............................. 147,726 (6,515) 1991 10/27/97 40
125 Summer Street............................... 112,867 (12,611) 1989 11/1/95 40
One Memorial Drive.............................. 113,367 (3,812) 1985 4/28/98 40
San Mateo County, California
Bayhill (4 buildings)........................... 133,931 (2,836) 1982--1987 12/16/98 40
Peninsula Office Park (7 buildings)............. 130,016 (2,759) 1971--1998 12/16/98 40
Seaport Centre.................................. 122,908 (2,772) 1988 12/16/98 40
Bay Park Plaza (2 buildings).................... 65,939 (1,403) 1985--1998 12/16/98 40
One Bay Plaza................................... 46,789 (997) 1979 12/16/98 40
East Bay, California
Corporate Centre (2 buildings).................. 49,678 (1,066) 1985--1987 12/16/98 40
ADP Plaza (2 buildings)......................... 51,890 (1,110) 1987--1989 12/16/98 40
PeopleSoft Plaza................................ 50,769 (1,069) 1984 12/16/98 40
Norris Tech Center (3 buildings)................ 36,495 (761) 1984--1998 12/16/98 40
Golden Bear Center.............................. 32,381 (702) 1986 12/16/98 40
2700 Ygnacio Valley Road........................ 12,065 (155) 1984 12/16/98 40
Park Plaza...................................... 13,689 (321) 1986 12/16/98 40
1600 South Main................................. 12,679 (271) 1983 12/16/98 40
Atlanta, Georgia
191 Peachtree Street............................ 273,647 (13,469) 1991 10/27/97 40
200 Galleria.................................... 64,058 (3,146) 1985 10/27/97 40
Seattle, Washington
Washington Mutual Tower (3 buildings)........... 214,674 (82,749) 1988 5/1/88 40
110 Atrium Place................................ 39,409 (839) 1981 12/16/98 40
Island Corporate Center......................... 19,080 (404) 1987 12/16/98 40
</TABLE>

F-31
<PAGE>
CORNERSTONE PROPERTIES INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------------------------------------------------- ------------ ----------------------- ---------------- ----------------------
COST CAPITALIZED GROSS AMOUNT AT WHICH
SUBSEQUENT TO CARRIED AT CLOSE OF
INITIAL COST TO COMPANY ACQUISITION PERIOD
(DOLLAR AMOUNTS IN THOUSANDS) ----------------------- ---------------- ----------------------
BUILDING & LAND & BUILDING &
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS
- -------------------------------------------------- ------------ --------- ------------ ---------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>

Santa Clara, California
Pruneyard Office (3 buildings).................. 60,947 11,896 47,583 13,162 11,896 60,745
10 Almaden...................................... 14,306 57,223 314 14,306 57,537
Pruneyard Shopping Center....................... 8,491 33,966 1,053 8,491 35,019
Embarcadero Place (4 buildings)................. 38,149 11,728 46,913 (63) 11,728 46,850
Pruneyard Inn (C)............................... 3,057 12,228 3,126 3,057 15,354

San Francisco, California
120 Montgomery Street........................... 48,160 16,427 65,709 2,958 16,427 68,667
201 California Street........................... 44,504 11,350 46,040 2,007 11,350 48,047
188 Embarcadero................................. 15,606 4,718 18,871 399 4,718 19,270

Minneapolis, Minnesota
Norwest Center.................................. 110,000 18,000 33,613 152,888 18,000 186,501

Washington, D.C./Alexandria, Virginia
Market Square (2 buildings)..................... (B) 50,199 201,084 2,964 50,199 204,048
99 Canal Center................................. 4,551 18,380 1,574 4,551 19,954
TransPotomac Plaza 5............................ 65,000(B) 2,124 8,577 1,000 2,124 9,577
11 Canal Center................................. 2,326 9,394 500 2,326 9,894

Suburban Chicago, Illinois
Corporate 500 Centre (4 buildings).............. 88,424 30,000 120,163 3,456 30,000 123,619
One Lincoln Centre.............................. 65,000(B) 2,192 47,758 4,302 2,192 52,060

Santa Monica/West Los Angeles, California
West Wilshire (2 buildings)..................... 16,926 7,492 29,970 629 7,492 30,599
Wilshire Palisades.............................. 29,047 12,650 52,247 1,291 12,650 53,538
Janss Court (D)................................. 18,357 7,274 29,098 147 7,274 29,245
Searise Office Tower............................ 11,607 6,043 24,172 347 6,043 24,519
Commerce Park................................... 2,653 10,613 149 -- 13,415
429 Santa Monica................................ 3,899 15,595 317 3,899 15,912

Orange County, California
Bixby Ranch..................................... 28,528 9,681 38,723 300 9,681 39,023
18301 Von Karman................................ 8,052 32,206 2,224 8,052 34,430
2677 South Main................................. 5,696 22,786 1,571 5,696 24,357

<CAPTION>
COLUMN A COLUMN F COLUMN G COLUMN H COLUMN I
- -------------------------------------------------- ------------ ----------------- ----------- ---------------

LIFE ON WHICH
DEPRECIATION IN
(DOLLAR AMOUNTS IN THOUSANDS) (UNAUDITED) (UNAUDITED) LATEST INCOME
ACCUMULATED YEAR DATE STATEMENTS IS
DESCRIPTION TOTAL DEPRECIATION CONSTRUCTED ACQUIRED COMPUTED (A)
- -------------------------------------------------- ---------- ------------ ----------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Santa Clara, California
Pruneyard Office (3 buildings).................. 72,641 (1,517) 1971--1999 12/16/98 40
10 Almaden...................................... 71,843 (1,510) 1989 12/16/98 40
Pruneyard Shopping Center....................... 43,510 (922) 1970s 12/16/98 40
Embarcadero Place (4 buildings)................. 58,578 (1,221) 1984 12/16/98 40
Pruneyard Inn (C)............................... 18,411 (339) 1989 12/16/98 40
San Francisco, California
120 Montgomery Street........................... 85,094 (1,846) 1955 12/16/98 40
201 California Street........................... 59,397 (1,845) 1969 6/3/98 40
188 Embarcadero................................. 23,988 (504) 1980 12/16/98 40
Minneapolis, Minnesota
Norwest Center.................................. 204,501 (84,164) 1988 7/1/88 40
Washington, D.C./Alexandria, Virginia
Market Square (2 buildings)..................... 254,247 (6,142) 1990 11/1/98 40
99 Canal Center................................. 24,505 (1,089) 1986 10/27/97 40
TransPotomac Plaza 5............................ 11,701 (544) 1983 10/27/97 40
11 Canal Center................................. 12,220 (573) 1986 10/27/97 40
Suburban Chicago, Illinois
Corporate 500 Centre (4 buildings).............. 153,619 (5,958) 1986/1990 1/28/98 40
One Lincoln Centre.............................. 54,252 (4,361) 1986 11/8/96 40
Santa Monica/West Los Angeles, California
West Wilshire (2 buildings)..................... 38,091 (411) 1960--1976 12/16/98 40
Wilshire Palisades.............................. 66,188 (2,155) 1981 6/3/98 40
Janss Court (D)................................. 36,519 (772) 1989 12/16/98 40
Searise Office Tower............................ 30,562 (657) 1975 12/16/98 40
Commerce Park................................... 13,415 (349) 1977 12/16/98 40
429 Santa Monica................................ 19,811 (411) 1982 12/16/98 40
Orange County, California
Bixby Ranch..................................... 48,704 (1,024) 1987 12/16/98 40
18301 Von Karman................................ 42,482 (971) 1991 12/16/98 40
2677 South Main................................. 30,053 (681) 1987 12/16/98 40
</TABLE>

F-32
<PAGE>
CORNERSTONE PROPERTIES INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III
DECEMBER 31, 1999
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------------------------------------------------- ------------ ----------------------- ---------------- ----------------------
COST CAPITALIZED GROSS AMOUNT AT WHICH
SUBSEQUENT TO CARRIED AT CLOSE OF
INITIAL COST TO COMPANY ACQUISITION PERIOD
(DOLLAR AMOUNTS IN THOUSANDS) ----------------------- ---------------- ----------------------
BUILDING & LAND & BUILDING &
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS
- -------------------------------------------------- ------------ --------- ------------ ---------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>

San Diego, California
Centerside II................................... 24,254 7,524 30,094 609 7,523 30,703
Crossroads...................................... 3,207 12,828 222 3,207 13,050

Los Angeles, California
700 North Brand................................. 26,938 8,112 32,450 145 8,112 32,595
Warner Park Center.............................. 1,746 6,986 123 1,746 7,109

New York City, New York
527 Madison Avenue.............................. (B) 21,440 46,643 2,627 21,440 49,270
Tower 56........................................ 25,024 5,528 25,203 9,434 5,528 34,637

Conejo Valley (Ventura), California
Westlake Spectrum (2 buildings)................. 3,510 14,038 177 3,510 14,215
Agoura Hills.................................... 12,003 3,821 15,284 241 3,821 15,525

Other
U.S. West (Murray, Utah)........................ 3,311 13,245 185 3,311 13,430
Exposition Centre (Sacramento, CA).............. 5,081 1,772 7,089 209 1,772 7,298

Projects under development...................... 46,720 10,103 6,309 46,132 17,000
---------- -------- ---------- -------- -------- ----------

Grand Total..................................... $1,435,160 $707,854 $2,900,650 $405,796 $705,350 $3,308,948
========== ======== ========== ======== ======== ==========

<CAPTION>
COLUMN A COLUMN F COLUMN G COLUMN H COLUMN I
- -------------------------------------------------- ------------ ----------------- ----------- ---------------

(A) The life to compute depreciation on Buildings is 40 years. The life to
compute depreciation on Building Improvements is 3 to 40 years.

(B) The three notes arising from the acquisition of several properties from PGGM
(a major stockholder and related party) are cross-collateralized, having the
effect of forming a "collateral pool" for the underlying notes. In addition,
the $181.0 million first mortgage loan on Market Square, which the Company
purchased from PGGM in 1997, has been pledged as collateral for the $120.0
million 200 Galleria loan.

(D) In addition to 92,000 square feet of retail and office space, Janss Court
contains 32 apartments comprising 33,000 rentable square feet of residential
space.

F-33
<PAGE>
CORNERSTONE PROPERTIES INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III
DECEMBER 31, 1999

(CONTINUED)

Reconciliation of "Real Estate and Accumulated Depreciation"

<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT IN REAL ESTATE

Balance, beginning of period................................ $4,340,449 $1,947,272 $ 799,662
Additions during period:
Acquisitions............................................ 38,437 2,410,427 1,135,629
Improvements............................................ 14,904 30,690 12,468
Deductions during period:
Properties disposed of.................................. (358,670) (47,940) --
Retirements and writeoffs............................... (20,822) -- (487)
---------- ---------- ----------
Balance, end of period...................................... $4,014,298 $4,340,449 $1,947,272
========== ========== ==========
ACCUMULATED DEPRECIATION

Balance, beginning of period................................ $ 288,448 $ 229,652 $ 198,686
Additions during period:
Depreciation............................................ 96,726 59,278 30,976
Deductions during period:
Properties disposed of.................................. (73,131) (478) --
Retirements and writeoffs............................... (20,209) (4) (12)
---------- ---------- ----------
Balance, end of period...................................... $ 291,834 $ 288,448 $ 229,652
========== ========== ==========
</TABLE>

F-34

<PAGE>
EXHIBIT 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the Cornerstone
Properties Inc. and Subsidiaries (the "Company") Registration Statements on
Form S-3 (Reg. No. 333-72449, 333-18303, 333-47149, 333-59259, 333-92989) and
the Company's Registration Statement on Form S-8 (Reg. No. 333-59923) of our
report dated March 3, 2000, on our audits of the consolidated financial
statements of the Company as of December 31, 1999 and 1998, and for the years
ended December 31, 1999, 1998 and 1997, which report is included in this Annual
Report on Form 10-K/A.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

New York, New York
April 21, 2000