SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR QUARTER ENDED ~~September~~June 30, ~~2002~~2003

COMMISSION FILE NO. 000-22741

CARRAMERICA REALTY, L.P.

(Exact name of registrant as specified in its charter)

Delaware

52-1976308

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

1850 K Street, N.W., Washington, D.C. 20006

(Address or principal executive office) (Zip code)

Registrant’s telephone number, including area code (202) 729-1700

N/A

(Former name, former address and former fiscal year, if changed since last report)

Number of Partnership Units outstanding of each of the registrant’s

classes of Partnership Units as of ~~September~~ June 30, ~~2002~~2003:

(# of shares) 14,362,972

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 twelve (12) months (or such shorter period that the Registrant was required to file such report) and (2) has been subject to such filing requirements for the past ninety (90) days.

YES X x NO ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES x NO ¨

Index

		Page
Part I: Financial Information
Item 1.	Financial Statements
	Consolidated balance sheets of CarrAmerica Realty, L.P. and subsidiary as of September 30, 2002 (unaudited) and December 31, 2001	4
	Consolidated Balance Sheets as of June 30, 2003 (unaudited) and December 31, 2002	4
	Consolidated statements of operations of CarrAmerica Realty, L.P. and subsidiary for the three and nine months ended September 30, 2002 and 2001 (unaudited)	5
	Consolidated Statements of Operations for the three and six months ended June 30, 2003 and 2002 (unaudited)	5
	Consolidated statements of cash flows of CarrAmerica Realty, L.P. and subsidiary for the nine months ended September 30, 2002 and 2001 (unaudited)	6
	Consolidated Statements of Cash Flows for the six months ended June 30, 2003 and 2002 (unaudited)	6
	Notes to consolidated financial statements (unaudited)	7 - 9
	Notes to Consolidated Financial Statements (unaudited)	7 - 10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1011 - 1719
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1820
Item 4.	Controls and Procedures	1820
Part II: Other Information
Item 6.	Exhibits and Reports on Form 8-K	19
Item 1.	Legal Proceedings	21
Item 6.	Exhibits and Reports on Form 8-K	21

Part I

Item 1.

Financial Information

The information furnished in our accompanying consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows ~~of CarrAmerica Realty, L.P. and subsidiary~~ reflects all adjustments which are, in our opinion, necessary for a fair presentation of the aforementioned financial statements for the interim periods.

The financial statements should be read in conjunction with the notes to the financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations. The results of operations for the ~~three~~six ~~and nine~~ months ended ~~September~~June 30, ~~2002~~2003 are not necessarily indicative of the operating results to be expected for the full year.

CARRAMERICA REALTY, L.P. AND ~~SUBSIDIARY~~SUBSIDIARIES

Consolidated Balance Sheets ~~As of September 30, 2002 and December 31, 2001~~

~~(In~~As ~~thousands)~~of June 30, 2003 and December 31, 2002

	September 30, 2002			December 31, 2001
	June 30, 2003			December 31,2002
	(unaudited)
(In thousands)	(unaudited)
Assets
Rental property:
Land	$	129,091		$	~~113~~129,~~583~~091
Buildings		~~594~~588,~~785~~883			~~533~~587,~~132~~114
Tenant improvements		4148,~~886~~939			6444,~~856~~547
Furniture, fixtures, and equipment		~~673~~774			~~591~~782
		766,435			712,162
		767,687			761,534
Less—accumulated depreciation		(98118,~~823~~927	)		(92105,~~025~~370	)
Total rental property		~~667~~648,~~612~~760			~~620~~656,~~137~~164
Land held for development or sale		5,642			6,412
Land held for development		5,770			5,660
Cash and cash equivalents		~~385~~—			1,~~226~~654
Restricted deposits		~~1,553~~239			~~1,015~~—
Accounts and notes receivable, net		108,~~203~~918			1210,~~665~~180
Due from affiliates		9,273			—
Investments in unconsolidated entities		44,874			45,924
Investments in unconsolidated entities		47,776			47,970
Accrued straight-line rents		15,638			13,816
Accrued straight-line rents		12,507			12,340
Tenant leasing costs, net		8,525			7,707
Tenant leasing costs, net		7,172			11,918
Prepaid expenses and other assets, net		9,820			9,516
Deferred financing costs, net		104			167
	$	742,544		$	750,621
Prepaid expenses and other assets, net		2,003			1,053
Liabilities, Redeemable Partnership Units and Partners’ Capital
	$	764,230		$	714,903
Liabilities, Mandatorily Redeemable Partnership Units and Partners’ Capital
Liabilities:
Mortgages and notes payable	$	~~196~~76,~~775~~834		$	~~140~~81,~~729~~636
Accounts payable and accrued expenses		13,049			12,119
Notes payable to affiliates		38,638			38,944
Due to affiliates		—			44,785
Accounts payable and accrued expenses		9,626			12,095
Rents received in advance and security deposits		5,675			6,277
Due to affiliates		43,514			56,423
Total liabilities		215,499			203,910
Rents received in advance and security deposits		6,976			6,400
Mandatorily redeemable partnership units		32,933			40,151
Total liabilities		175,588			195,498
Mandatorily redeemable partnership units (at redemption value)		35,017			32,776
Partners’ capital:
General partner		5,~~613~~809			5,~~215~~679
Limited partners		~~510~~526,~~185~~130			~~465~~516,~~627~~668
Total partners’ capital		~~515~~531,~~798~~939			~~470~~522,~~842~~347
Commitments and contingencies
	$	~~764~~742,~~230~~544		$	~~714~~750,~~903~~621

See accompanying notes to consolidated financial statements.

CARRAMERICA REALTY, L.P. AND ~~SUBSIDIARY~~SUBSIDIARIES

Consolidated Statements of Operations

For the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2002~~2003 and ~~2001~~2002

(Unaudited and in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended June 30,						Six Months Ended June 30,
(Unaudited and in thousands)	2003			2002			2003			2002
Operating revenues:
Rental revenues:
Minimum base rent	$	22,212		$	18,285		$	44,727		$	36,208
Recoveries from tenants		3,820			3,311			7,431			6,998
Other tenant charges		1,000			609			1,806			1,130

Total rental revenues		27,032			22,205			53,964			44,336
Other revenue		177			263			505			445

Total operating revenues		27,209			22,468			54,469			44,781

Operating expenses:
Property expenses:
Operating expenses		7,242			5,416			14,315			11,205
Real estate taxes		2,477			2,394			5,035			4,737
Interest expense		3,064			3,788			4,987			7,931
General and administrative		1,189			1,049			2,284			2,460
Depreciation and amortization		8,413			5,959			16,018			12,496

Total operating expenses		22,385			18,606			42,639			38,829

Real estate operating income		4,824			3,862			11,830			5,952

Other income:
Interest income		384			202			390			410
Equity in earnings of unconsolidated entities		762			981			1,257			2,019

Total other income		1,146			1,183			1,647			2,429

Income from continuing operations before loss on sales of assets and other provisions, net		5,970			5,045			13,477			8,381
Loss on sales of assets and other provisions, net		(3	)		(149	)		(442	)		(1,009	)

Income from continuing operations		5,967			4,896			13,035			7,372
Discontinued operations—net operations of sold properties		—			1,631			—			3,453
Discontinued operations—gain on sale of property		—			3,340			—			3,340

Net income	$	5,967		$	9,867		$	13,035		$	14,165

Net income attributable to general partner	$	60		$	99		$	130		$	142

Net income attributable to limited partners	$	5,907		$	9,768		$	12,905		$	14,023

	Three Months Ended September 30,				Nine Months Ended September 30,
	2002		2001		2002			2001
Operating revenues:
Rental revenue:
Base rent	$	20,011	$	18,187	$	56,219		$	55,096
Recoveries from tenants		3,944		3,039		10,942			8,878
Parking and other tenant charges		1,035		827		2,165			2,304
Total rental revenue		24,990		22,053		69,326			66,278
Other revenue		201		195		646			676
Total operating revenues		25,191		22,248		69,972			66,954
Operating expenses:
Property expenses:
Operating expenses		6,643		5,781		17,760			18,500
Real estate taxes		2,403		1,672		7,140			5,207
Interest expense		3,602		4,333		11,533			15,289
General and administrative		598		1,699		3,058			6,154
Depreciation and amortization		7,224		6,442		19,720			18,017
Total operating expenses		20,470		19,927		59,211			63,167
Real estate operating income		4,721		2,321		10,761			3,787
Other income:
Interest income		208		332		618			1,359
Equity in earnings of unconsolidated entities		635		363		2,654			3,400
Total other income		843		695		3,272			4,759
Income from continuing operations before gain (loss) on sale of assets and other provisions, net		5,564		3,016		14,033			8,546
Gain (loss) on sale of assets and other provisions, net		—		67		(1,009	)		(7,435	)
Income from continuing operations		5,564		3,083		13,024			1,111
Discontinued operations—Net operations of sold properties		1,017		1,872		4,376			5,744
Discontinued operations—Gain on sale of properties		19,085		—		22,425			—
Income from discontinued operations		20,102		1,872		26,801			5,744
Net income	$	25,666	$	4,955	$	39,825		$	6,855
Net income attributable to general partner	$	257	$	50	$	398		$	69
Net income attributable to limited partners	$	25,403	$	4,905	$	39,427		$	6,786

See accompanying notes to consolidated financial statements.

CARRAMERICA REALTY, L. P. AND ~~SUBSIDIARY~~SUBSIDIARIES

Consolidated Statements of Cash Flows

For the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2002~~2003 and ~~2001~~2002

(Unaudited and in thousands)	2003			2002
	2002			2001
Cash flows from operating activities:
Net income	$	3913,~~825~~035		$	614,~~855~~165
Adjustments to reconcile net income to net cash (used by) provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including discontinued operations)		23,358			22,606
Depreciation and amortization		16,018			15,485
Loss on sale of assets and other provisions, net		~~1,009~~442			71,~~435~~009
Gain on sale of discontinued operations		~~(22,425~~—	)		—(3,340	)
Equity in earnings of unconsolidated entities		(21,~~654~~257	)		(32,~~400~~019	)
Other		~~(143~~—	)		(67145	)
Changes in assets and liabilities:
Change in assets and liabilities:
Decrease in accounts and notes receivable		2,462			1,752
Decrease in accounts and notes receivable, net		1,262			2,308
Increase in accrued straight-line rents		(1,~~508~~822	)		(~~1,095~~912	)
Additions to tenant leasing costs		(2,~~659~~420	)		(1,~~486~~728	)
Increase in prepaid expenses and other assets		(1,123	)		(207	)
(Increase) decrease in prepaid expenses and other assets		(1,194	)		524
Increase (decrease) in accounts payable and accrued expenses		331			(1,727	)
Decrease in accounts payable and accrued expenses		(2,471	)		(2,215	)
Decrease in due to/from affiliates		(54,058	)		(16,069	)
Decrease in due to affiliates		(12,909	)		(6,762	)
Decrease in rents received in advance and security deposits		(602	)		(51	)
Increase (decrease) in rent received in advance and security deposits		576			(1,966	)
Total adjustments		(583,~~012~~775	)		~~(7,691~~239	)
Net cash (used by) provided by operating activities		(18,187	)		14,546
Net cash provided by operating activities		9,260			14,404
Cash flows from investing activities:
Acquisitions and additions to rental property		(~~104~~6,~~743~~141	)		(6322,~~896~~700	)
Additions to land held for development		(~~239~~110	)		(~~472~~230	)
Distributions from unconsolidated entities		21,~~957~~886			502,~~709~~573
Investments in unconsolidated entities		(109	)		(5,224	)
Contributions to unconsolidated entities		—			(74	)
(Increase) decrease in restricted deposits		(~~538~~239	)		~~22,510~~355
Proceeds from sales of properties		129,418			13,203
Proceeds from sale of property		—			10,699
Net cash provided by investing activities		26,746			16,830
Net cash used by investing activities		(4,604	)		(9,377	)
Cash flows from financing activities:
Capital distributions		(1,946	)		(2,032	)
Distributions on mandatorily redeemable partnership units		(1,202	)		(1,331	)
Repayments on notes and mortgages payable		(7,454	)		(32,031	)
Repayments on mortgages and notes payable		(5,108	)		(4,922	)
Net Cash used by financing activities		(9,400	)		(34,063	)
Net cash used by financing activities		(6,310	)		(6,253	)
Decrease in cash and cash equivalent		(841	)		(2,687	)
Decrease in cash and cash equivalents		(1,654	)		(1,226	)
Cash and cash equivalents, beginning of the period		1,~~226~~654			51,~~819~~226
Cash and cash equivalents, end of the period	$	~~385~~—		$	~~3,132~~—
Supplemental disclosure of cash flow information:
Cash paid for interest (net of capitalized interest of $196 and $594 for the nine months ended September 30, 2002 and 2001, respectively)	$	11,714		$	16,117
Cash paid for interest, net of capitalized interest of $186 for the six months ended June 30, 2002	$	5,013		$	7,951

See accompanying notes to consolidated financial statements.

CARRAMERICA REALTY, L.P. AND ~~SUBSIDIARY~~SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

(1)

Description of Business and Summary of Significant Accounting Policies

(a)

Business

We are a Delaware limited partnership formed inon March 6, 1996 for the purpose of owning, acquiring, developing and operating office buildings across the United States. AtAs ~~September~~of June 30, ~~2002~~2003, we owned a controlling interest in a portfolio of 55 operating office buildings. ~~with~~As noof ~~properties~~June ~~under~~30, ~~development~~2003, we also owned a minority interest in 30 operating office buildings. The properties are located in Austin, Chicago, Dallas, Denver, Orange County/Los Angeles, Phoenix, San Francisco Bay Area, Salt Lake City, San Diego, Seattle and Washington, D.C. ~~and Seattle.~~

Our general partner is CarrAmerica Realty GP Holdings, Inc. (the “General Partner”), a wholly- owned subsidiary of CarrAmerica Realty Corporation (“CarrAmerica”), a self-administered and self-managed real estate investment trust. ~~The~~Our General Partner owned a 1.0% interest in us at ~~September~~June 30, ~~2002~~2003. Our limited partners are CarrAmerica Realty LP Holdings, Inc., a wholly- owned subsidiary of CarrAmerica, which owned an approximate 8990.90% interest in us at ~~September~~June 30, ~~2002~~2003, and various other individuals and entities, which collectively owned an approximate 9.10% aggregate interest in us at ~~September~~June 30, ~~2002~~ 2003.

(b)

Basis of Presentation

~~Our~~The ~~accounts~~financial ~~and~~statements ~~those~~have ofbeen ~~our~~prepared ~~wholly-owned~~using ~~subsidiary~~the ~~are~~accounting ~~consolidated~~policies described in ~~the~~our ~~accompanying~~2002 ~~financial~~annual ~~statements.~~report Weon ~~use~~Form ~~the~~10-K ~~equity~~except ~~method~~that, ofeffective ~~accounting~~January 1, ~~for~~2003, ~~our~~we ~~investments in~~began ~~and~~using ~~our~~the ~~share~~fair ofvalue ~~earnings~~method ~~and~~to ~~losses~~account offor ~~unconsolidated~~employee ~~entities~~stock compensation awards. ~~These~~The ~~entities~~effect ~~are~~of ~~not~~the ~~majority-owned~~change oron ~~controlled~~the byfinancial usstatements was immaterial.

WeOur ~~have~~accounts ~~presented~~and ~~these~~those ~~financial~~of ~~statements~~our wholly owned subsidiaries are consolidated in ~~accordance~~the ~~with~~accompanying financial statements. We use the ~~requirements~~equity method to account for our investments in and our share of ~~Regulation~~earnings ~~S-X~~or losses of ~~the~~unconsolidated ~~Securities~~entities. ~~and~~These ~~Exchange~~entities ~~Commission~~are not majority-owned or controlled by us.

~~Management~~We ~~has~~operate ~~made~~as a ~~number~~unit of ~~estimates~~CarrAmerica. ~~and~~We ~~assumptions~~utilize ~~that~~CarrAmerica’s ~~affect~~employees ~~the reported amounts of assets, liabilities, revenues~~ and ~~expenses~~administrative inservices. ~~the~~Certain ~~financial statements, and the disclosure of contingent~~general ~~assets~~ and ~~liabilities.~~administrative ~~Estimates~~costs are ~~required~~allocated into ~~order for~~ us tobased ~~prepare~~upon ~~our~~specific ~~financial~~identification ~~statements~~of inindividual ~~conformity~~costs ~~with~~or ~~accounting~~estimated ~~principles~~levels ~~generally accepted in the United States~~ of ~~America.~~effort ~~Significant~~by ~~estimates~~its ~~are~~general ~~required~~and inadministrative adepartments ~~number~~and ofotherwise ~~areas, including~~through ~~the~~allocations ~~evaluation~~based ofupon ~~impairment~~our ofrelative ~~long-lived~~total assets. In ~~and~~the ~~evaluation~~opinion of management, the ~~collectibility~~methods offor ~~accounts~~allocating general and ~~notes~~administrative ~~receivable.~~costs ~~Actual~~to ~~results~~us ~~could~~are ~~differ from these estimates~~reasonable.

Management has made a number of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses in the financial statements, and the disclosure of contingent assets and liabilities. Estimates are required in order for us to prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. Significant estimates are required in a number of areas, including the evaluation of impairment of long-lived assets and equity method investments and evaluation of the collectibility of accounts and notes receivable. Actual results could differ from these estimates.

(c)

Interim Financial Statements

The financial statements reflect all adjustments, which are, in our opinion, necessary to reflect a fair presentation of results for the interim periods, and all adjustments are of a normal, recurring nature.

(d) New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 2001. SFAS No. 142 changes the accounting for goodwill and intangible assets with indefinite lives from an amortization approach to an impairment-only approach. Adoption of SFAS No. 142 in January 2002 did not have a material effect on our financial statements.

In October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” and APB Opinion No. 30, “Reporting the Results of Operations—Reporting the Effects of

CARRAMERICA REALTY, L.P. AND ~~SUBSIDIARY~~SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” The Statement does not change the fundamental provisions of SFAS No. 121; however, it resolves various implementation issues of SFAS No. 121 and establishes a single accounting model for long-lived assets to be disposed of by sale. It retains the requirement of Opinion No. 30 to report separately discontinued operations but extends that reporting to a component of an entity that either has been disposed of (~~by sale, abandonment, or in distribution to owners~~d) orNew isAccounting classified as held for sale. Adoption of SFAS No. 144 in January 2002 did not have a material effect on our financial statements. However, we are required to present assets held for sale and related liabilities separately in our consolidated balance sheets, if we meet the applicable criteria of SFAS No. 144. In addition, if we meet the applicable criteria of SFAS No. 144, we are required to report the operating results of properties sold or classified as held for sale and related gain (loss) on sale in discontinued operations and to reclassify operating results of such properties to discontinued operations for all prior periods presented. Pronouncements

In November 2002, the Financial Accounting Standards Board (eFASB) ~~Reclassifications~~issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” The Interpretation requires recognition of liabilities at their fair value for newly issued guarantees. The adoption of Interpretation No. 45 on January 1, 2003 did not have a material effect on our financial statements.

~~Certain~~In ~~reclassifications~~December of2002, ~~prior~~the ~~period~~FASB ~~amounts~~issued ~~have~~SFAS ~~been~~No. ~~made~~148, “Accounting for Stock-Based Compensation—Transition and Disclosure.” SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based ~~conform~~method of accounting for stock-based compensation and requires disclosure in both annual and interim financial statements about the method of accounting for stock-based compensation and the effect of the method used on reported results. Effective January 1, 2003, we adopted the fair value based method of accounting for stock-based compensation costs. We elected to use the ~~current~~prospective ~~period’s~~method ~~presentation~~of transition to the fair value method provided in SFAS No. 148 and, accordingly, the method is being applied for all employee stock compensation awards granted, modified or settled on or after January 1, 2003. The effect of the change on our financial statements is immaterial.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities.” This Interpretation addresses the consolidation of variable interest entities (2“VIEs”) ~~Mandatorily~~ ~~Redeemable~~in ~~Partnership~~which ~~Units~~the equity investors lack one or more of the essential characteristics of a controlling financial interest or where the equity investment at risk is not sufficient for the entity to finance its activities without subordinated financial support from other parties. The Interpretation applies to VIEs created after January 31, 2003 and to VIEs in which we acquire an interest after that date. Effective July 1, 2003, it also applies to VIEs in which we acquired an interest before February 1, 2003. We may apply the Interpretation prospectively, with a cumulative effect adjustment as of July 1, 2003, or by restating previously issued financial statements with a cumulative effect adjustment as of the beginning of the first year restated. Based on our current analysis, we are not associated with any VIEs and we believe that we will not be required to consolidate any of our unconsolidated real estate ventures that we have accounted for using the equity method.

~~Our~~In ~~ownership~~May is2003, ~~expressed~~the inFASB ~~partnership~~issued ~~units~~SFAS ~~(“Units”)~~No. ~~These~~150, ~~Units~~“Accounting ~~are redeemable at the option of the holder~~ for, asCertain ~~determined~~Financial byInstruments ~~CarrAmerica,~~with aCharacteristics ~~like number~~ of ~~shares~~both ofLiabilities ~~common~~and ~~stock~~Equity.” ofSFAS ~~CarrAmerica or cash~~No. ~~Since~~150 ~~these~~establishes ~~Units~~standards ~~are~~for ~~redeemable, at~~ the ~~option~~classification ~~of the holders, they are classified outside partners’ capital on the balance sheet as redeemable~~and ~~partnership~~measurement ~~units and measured at the redemption value as~~ of ~~the~~certain ~~end~~financial ofinstruments ~~the~~with ~~periods~~characteristics ~~presented. As~~ of ~~September~~both ~~30,~~liabilities ~~2002~~ and ~~December~~equity. ~~31,~~It ~~2001,~~requires ~~there~~that ~~were~~an ~~1,308,411~~issuer ~~and~~classify ~~1,333,920~~a ~~redeemable~~financial ~~Units~~instrument ~~outstanding,~~that ~~respectively. The value of the redeemable Units~~ is ~~based~~within onits ~~the~~scope ~~closing~~as ~~market~~a ~~price~~liability of(or ~~CarrAmerica~~an ~~common~~asset ~~stock,~~in ~~which~~some ~~was $25~~circumstances).17 ~~per~~Adoption ~~share as~~ of SFAS ~~September 30, 2002 and $30~~No.10 ~~per~~150 ~~share~~did asnot ofaffect ~~December~~our ~~31,~~financial ~~2001~~statements.

(32) Mortgages and Notes Payable

Our mortgages and notes payable are summarized as follows:

(In thousands)	~~September~~June 30, ~~2002~~2003		December 31, ~~2001~~2002
Mortgages payable	$	157,682	$	101,206
Fixed rate mortgages	$	76,834	$	81,636
Fixed rate notes payable to affiliate		3938,~~093~~638		3938,~~523~~944
	$	~~196~~115,~~775~~472	$	~~140~~120,~~729~~580

Mortgages payable are collateralized by properties and generally require monthly principal and/or interest payments. ~~The~~Mortgages ~~mortgages~~payable mature at various dates from ~~February~~December ~~2003~~2004 through May ~~2017. Our mortgages payable bore an effective weighted average interest rate of 5.77% at September 30, 2002. The weighted~~ ~~average term of these mortgages is 4.2 years.~~

In June 2001, CarrAmerica closed on a new three-year $500 million unsecured credit facility with J.P. Morgan Chase, as agent for a group of banks. We are an unconditional guarantor of borrowings under this facility. CarrAmerica can extend the life of the facility for one year at its option. The interest rate on the unsecured credit facility is 70 basis points over 30-day LIBOR.

We have two borrowing agreements with CarrAmerica. The first is a $12.0 million loan that bears interest at 8.5% and requires monthly interest only payments of $85,000. This note matures on March 27, 2007. The second is a $30.0 million loan that bears interest at 8.5% and requires monthly principal and interest payments of $242,000. This note matures on May 31, 2011. The outstanding

CARRAMERICA REALTY, L.P. AND ~~SUBSIDIARY~~SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

~~balance~~ 2017. onThe ~~this~~weighted ~~note~~average interest rate of fixed rate mortgages and notes payable was ~~$27~~7.191% ~~million~~ at ~~September~~June 30, ~~2002~~2003. ~~and~~The ~~$27.5~~weighted ~~million~~average atinterest ~~December~~rate 31of our fixed rate mortgages, ~~2001.~~excluding ~~Both~~the notes ~~are~~payable ~~secured~~to ~~by certain~~affiliate, ~~office~~was ~~properties~~7.61% ~~and~~as ~~other~~of ~~assets~~June 30, 2003.

~~Debt~~We ~~maturities~~have attwo ~~September~~loans with CarrAmerica. The first is a $30.0 million loan that bears interest at 8.5% and requires monthly principal and interest payments of $242,000 ~~2002~~and ~~were~~matures ason ~~follows:~~May 31, 2011. The second is a $12.0 million loan that bears interest at 8.5% and requires monthly interest only payments of $85,000 and matures on March 27, 2007.

(In thousands)
2002	$	2,770
2003		21,324
2004		16,506
2005		13,271
2006		62,879
2007 and thereafter		80,025
	$	196,775

Debt maturities at June 30, 2003 were as follows:

(4) Gain (Loss) on Sale of Assets and Other Provisions, Net and Discontinued Operations

(In thousands)
2003	$	5,306
2004		15,657
2005		12,367
2006		12,632
2007		13,888
2008 and thereafter		55,622

	$	115,472

We ~~dispose~~have unconditionally ofguaranteed ~~assets~~unsecured ~~that~~notes ~~are~~issued ~~inconsistent~~by ~~with~~CarrAmerica ~~our~~to ~~long-term~~institutional ~~strategic~~and orother ~~return objectives~~investors. orThe ~~where~~aggregate ~~market~~principal ~~conditions~~amount ~~for~~of ~~sale~~the ~~are~~unsecured ~~favorable.~~notes ~~During~~was ~~the~~$1.1 ~~three~~billion ~~months~~as ~~ended~~of ~~September~~June 30, ~~2002,~~2003. weThese ~~disposed~~notes are in the form of ~~one~~$150.0 ~~operating~~million ~~property~~of 7.20% notes due in 2004, ~~recognizing~~$100.0 amillion ~~gain~~of 6.625% notes due in 2005, $125.0 million of 7.375% notes due in 2007, $19100.10 million ~~which~~of is6.875% ~~classified~~notes asdue ~~discontinued~~in ~~operations~~2008, $400.0 ~~During~~million ~~the three~~of ~~months~~7.125% ~~ended~~notes ~~September~~due 30in 2012, ~~2001~~$50.0 wemillion ~~did~~of ~~not~~5.261% ~~dispose~~notes due in 2007 and $175.0 million of ~~any~~5.250% ~~operating~~notes ~~properties~~due in 2007. CarrAmerica’s senior unsecured notes contain various covenants with which CarrAmerica must comply. The covenants include:

~~During~~• ~~the~~Limits nine months ended September 30, 2002, we disposed of two operating properties, recognizing a gain of $22.4 million. These gains have been classified as discontinued operations. We also recognized impairment losses of $1.0 million on ~~two~~total ~~parcels~~indebtedness of land held for development. During the nine months ended September 30, 2001, we disposed of one operating property in connection with the sale of a group of properties by CarrAmerica. There was a net gain on ~~this transaction; however, we incurred~~ a ~~loss~~consolidated ~~of $6.6 million on our property. We also recognized an impairment loss of $0.9 million on a parcel of land held for development during the nine months ended September 30, 2001.~~ basis;

~~(5) Supplemental~~• ~~Cash~~Limits ~~Flow~~on ~~Information~~secured indebtedness on a consolidated basis;

In• ~~the~~Limits ~~third~~on ~~quarter~~required ~~of 2002, we assumed $63.5 million of~~ debt ~~related~~service topayments; ~~the purchase of two operating properties. The total purchase price of the properties was approximately $141.5 million.~~ and

•

Compliance with the financial covenants of its credit facility.

As of June 30, 2003. CarrAmerica was in compliance with its loan covenants.

(3)

Gain on Sale of Assets and Other Provisions, Net and Discontinued Operations

We dispose of assets from time to time that are inconsistent with our long-term strategic or return objectives. During the three and six months ended June 30, 2003, we did not dispose of any operating properties, although we adjusted a previously recognized gain $0.4 million for additional costs related to a sold property. During the three months ended June 30, 2002, we disposed of one operating property, recognizing a gain of $3.3 million. We had no continuing involvement with the property after the sale and accordingly, this gain was classified in discontinued operations. We also recognized an impairment loss of $0.1 million on a parcel of land held for development. For the six months ended June 30, 2002, we recognized the gain on the disposed property and impairment losses of $1.0 million on land holdings.

In May 2002, we sold Wasatch 17, and in August 2002 we sold Commons at Las Colinas. We had no continuing involvement in either of these properties after their sale and accordingly, their results of operations are classified as discontinued operations in the statements of operations in 2002.

~~Management’s~~CARRAMERICA ~~Discussion~~REALTY, ~~and~~L.P. ~~Analysis~~AND ofSUBSIDIARIES ~~Financial Condition~~

~~and~~Notes ~~Results~~to ofConsolidated ~~Operation~~Financial Statements

(Unaudited)

~~Item~~Operating ~~2. Management’s~~results ~~Discussion and Analysis~~ of ~~Financial~~the ~~Condition~~properties ~~and~~are ~~Results~~summarized ofas ~~Operations~~follows:

The discussion that follows is based primarily on our consolidated financial statements as of September 30, 2002 and December 31, 2001 and for the three and nine months ended September 30, 2002 and 2001 and should be read along with the consolidated financial statements and related notes. The ability to compare one period to another may be significantly affected by acquisitions completed, development properties placed in service and dispositions made during those periods.

(In thousands)	Three Months Ended June 30, 2002		Six Months Ended June 30, 2002
Revenues	$	3,136	$	6,655
Property operating expenses		60		213
Depreciation and amortization		1,445		2,989

Net operations of sold properties	$	1,631	$	3,453

General

During the nine months ended September 30, 2002 we completed, or were part of, the following significant transactions:

—CarrAmerica issued $400.0 million of 7.125% senior unsecured notes for which we are a guarantor.

—CarrAmerica entered into an interest rate swap against $150.0 million of their senior unsecured notes, which we guarantee, converting their fixed rate debt to variable rate debt.

—We acquired three operating properties for an aggregate purchase price of approximately $160.5 million.

—We disposed of two operating properties for aggregate net proceeds of approximately $130.4 million.

Critical Accounting Policies

Critical accounting policies are those that are both important to the presentation of our financial condition and results of operations and require management’s most difficult, complex or subjective judgments. Our critical accounting policies relate to the evaluation of impairment of long-lived assets and the evaluation of the collectibility of accounts and notes receivable.

If events or changes in circumstances indicate that the carrying value of a rental property to be held and used or land held for development may be impaired, we perform a recoverability analysis based on estimated undiscounted cash flows to be generated from the property in the future. If the analysis indicates that the carrying value is not recoverable from future cash flows, the property is written down to estimated fair value and an impairment loss is recognized. If we decide to sell rental properties or land held for development, we evaluate the recoverability of the carrying amounts of the assets. If the evaluation indicates that the carrying value is not recoverable from estimated net sales proceeds, the property is written down to estimated fair value less costs to sell and an impairment loss is recognized within income from continuing operations. Our estimates of cash flows and fair values of the properties are based on current market conditions and consider matters such as rental rates and occupancies for comparable properties, recent sales data for comparable properties and, where applicable, contracts or the results of negotiations with purchasers or prospective purchasers. Our estimates are subject to revision as market conditions and our assessments of them change.

Our allowance for doubtful accounts receivable is established based on analysis of the risk of loss on specific accounts. The analysis places particular emphasis on past-due accounts and considers information such as the nature and age of the receivable, the payment history of the tenant or other debtor, the financial condition of the tenant and our assessment of its ability to meet its lease obligations, the basis for any disputes and the status of related negotiations, etc. Our estimate of the required allowance, which is reviewed on a quarterly basis, is subject to revision as these factors change and is sensitive to the effects of economic and market conditions on our tenants, particularly in our largest markets. For example, due to economic conditions and analysis of our accounts receivable, we increased our provision for uncollectible accounts by approximately $1.8 million in 2001 and by an additional $0.8 million in the first three quarters of 2002.

Management’s Discussion and Analysis ~~of Financial Condition~~

Item 2. Management’s Discussion and ~~Results~~Analysis of ~~Operation~~Financial Condition and Results of Operations

~~(Unaudited)~~The discussion that follows is based primarily on our consolidated financial statements as of June 30, 2003 and December 31, 2002 and for the three and six months ended June 30, 2003 and 2002 and should be read along with the consolidated financial statements and related notes. The ability to compare one period to another may be significantly affected by acquisitions completed, development properties placed in service and dispositions made during those periods.

~~RESULTS~~During OF2002, ~~OPERATIONS~~we acquired three operating properties totaling approximately 666,000 rentable square feet for approximately $160.5 million including assumed debt. Our building purchases in 2002 were acquired from unrelated third parties. Canal Center was purchased in August 2002 from Canal Center Properties LLC, TransPotomac V Plaza was purchased in August 2002 from TransPotomac V LLC and 11119 Torrey Pines Road was purchased in May 2002 from USAA Real Estate Company. The purchases were funded from the sale of other properties and through acquired debt. Canal Center and TransPotomac V Plaza were acquired subject to $63.5 million of 3.06% debt held by Morgan Stanley Dean Witter. We repaid this debt in full in December 2002.

~~Operating~~During ~~results~~2002, ~~are~~we ~~summarized~~sold astwo ~~follows:~~operating properties totaling approximately 676,000 rentable square feet for approximately $130.4 million to unrelated third parties. Of these, we sold our Commons at Las Colinas property in August 2002 for $119.6 million to Wells Operating Partnership, L.P.

	For the three months ended September 30,				Variance			For the nine months ended September 30,				Variance
(in millions)	2002		2001		2002 vs. 2001			2002		2001		2002 vs. 2001
Operating revenue	$	25.2	$	22.2	$	3.0		$	70.0	$	67.0	$	3.0
Property operating expense		9.0		7.5		1.5			24.9		23.7		1.2
General and administrative		0.6		1.7		(1.1	)		3.1		6.2		(3.1	)
Depreciation and amortization		7.2		6.4		0.8			19.7		18.0		1.7
Interest expense		3.6		4.3		(0.7	)		11.5		15.3		(3.8	)
Other operating income, net		0.8		0.7		0.1			3.3		4.8		(1.5	)

Critical Accounting Policies and Estimates

~~Operating revenues~~Critical ~~increased~~accounting ~~13.5%~~policies ~~($3.0~~and ~~million)~~estimates ~~for~~are ~~the~~those ~~third~~that ~~quarter~~are ofboth ~~2002~~important ~~from~~to the ~~same~~presentation ~~period~~of inour ~~2001.~~financial ~~This~~condition ~~increase primarily resulted from higher expense recoveries from tenants~~ and ~~the~~results ~~acquisition~~ of ~~two~~operations ~~properties in August 2002, partially offset by the sale of one property in August 2002~~ and ~~increased~~require ~~vacancy~~management’s ~~rates.~~most ~~Same~~difficult, ~~store~~complex ~~rental~~or ~~revenues~~subjective ~~increased by approximately 1~~judgments.7% ~~(approximately $0.4 million) due to higher expense recoveries. For the nine months ended September 30, 2002, revenues~~Our ~~increased~~critical ~~4.5%~~accounting ~~($3.0~~policies ~~million)~~and asestimates ~~compared~~relate to ~~the~~evaluating ~~nine months ended September 30, 2001 for~~ the ~~same~~impairment ~~reasons discussed above. Same store rental revenues decreased 4.0% primarily as a result~~ of ~~declining~~long-lived ~~occupancy,~~assets ~~partially~~and ~~offset by increased expense recoveries. Same store average occupancy decreased from 94.4% for~~ the ~~nine~~collectibility ~~months~~of ~~ended~~accounts ~~September~~and ~~30,~~notes ~~2001 to 89~~receivable.0% ~~for the nine months ended September 30, 2002.~~

~~Property~~If ~~operating~~events ~~expenses~~or ~~increased~~changes ~~$1.5~~in ~~million~~circumstances ~~(20.0%)~~indicate ~~for~~that the ~~third~~carrying ~~quarter~~value of ~~2002~~a asrental ~~compared~~property to ~~the~~be ~~same~~held ~~period~~and inused ~~2001.~~or ~~This~~land ~~increase~~held ~~primarily~~for ~~resulted~~development ~~from~~may be ~~higher~~impaired, ~~real~~we ~~estate~~perform ~~taxes~~a ~~and~~recoverability ~~rate~~analysis ~~increases~~based ~~for~~on estimated undiscounted cash flows to be generated from the property ~~insurance~~in the future. ~~Same~~If ~~store~~the ~~operating~~analysis ~~expenses~~indicates ~~for~~that the ~~quarter~~carrying ~~also~~value ~~increased~~is ~~due~~not torecoverable ~~higher~~from ~~taxes~~future cash flows, the property and related ~~insurance.~~assets, ~~For~~such ~~the~~as ~~nine~~tenant ~~months~~improvements ~~ended~~and ~~September~~lease 30commissions, ~~2002,~~are ~~property~~written ~~operating~~down ~~expenses~~to ~~increased $1.2~~estimated ~~million~~fair (5value and an impairment loss is recognized.~~1%)~~ ~~compared~~If we decide to ~~the~~sell ~~nine~~rental ~~months~~properties ~~ended~~or ~~September~~land 30held for development, ~~2001.~~we ~~Much~~evaluate the recoverability of the ~~this~~carrying ~~increase~~amounts ~~was~~of ~~due~~the toassets. ~~higher~~If ~~real~~the ~~estate~~evaluation ~~taxes~~indicates that the carrying value is not recoverable from estimated net sales proceeds, ~~increases~~the property is written down to ~~property~~estimated ~~insurance~~fair value less costs to sell and ~~additional~~an ~~property~~impairment ~~expenses~~loss ~~associated~~is recognized. ~~with~~Our ~~the~~estimates ~~operating~~of cash flows and fair values of the properties ~~acquired in~~are ~~April~~based ~~2001~~on current market conditions and ~~August~~consider ~~2002~~matters such as rental rates and occupancies for comparable properties, ~~partially~~recent ~~offset~~sales bydata ~~property~~for ~~dispositions.~~comparable ~~Same~~properties ~~store~~and, where ~~property~~applicable, ~~operating~~contracts ~~expenses~~or ~~increased~~the byresults ~~approximately~~of ~~$0.3~~negotiations ~~million~~with ~~(approximately~~purchasers 1or prospective purchasers.~~5%)~~ ~~primarily~~Changes in estimated future cash flows due to ~~taxes~~changes in our plans or views of market and ~~insurance~~economic conditions could result in recognition of additional impairment losses that, under applicable accounting guidance, could be substantial.

~~For~~Our ~~the~~allowance ~~third~~for ~~quarter~~doubtful accounts receivable is established based on analysis of ~~2002,~~the ~~general~~risk ~~and~~of ~~administrative~~loss ~~expenses~~on ~~decreased~~specific $1accounts.1 ~~million~~The ~~(64.7%)~~analysis asplaces ~~compared~~particular toemphasis ~~2001.~~on ~~This~~past-due ~~decrease~~accounts and considers information such as ~~resulted~~the ~~primarily~~nature ~~from~~and aage ~~reduction~~of inthe ~~allocated~~receivable, ~~costs~~the ~~from~~payment ~~CarrAmerica~~history ~~due~~of tothe tenant or other debtor, the ~~completion~~amount of ~~portions~~security we hold, the financial condition of the tenant and our assessment of its ~~internal~~ability ~~process~~to ~~improvement~~meet ~~efforts.~~its ~~For~~lease obligations, the ~~nine~~basis ~~months~~for ~~ended~~any disputes ~~September~~and 30the status of related negotiations, ~~2002~~etc. Our estimate of the required allowance, ~~general~~which is reviewed on a quarterly basis, is subject to revision as these factors change and ~~administrative~~is ~~expenses~~sensitive ~~decreased~~to ~~$3.1~~the effects of economic and market conditions on ~~million~~our ~~(50~~tenants, particularly in our largest markets.~~0%)~~ ~~compared~~For example, due to ~~the~~economic ~~nine~~conditions ~~months~~and ~~ended~~analysis ~~September~~of 30our accounts receivable, ~~2001~~we increased our provision for uncollectible accounts (and accrued straight-line rents) by approximately $0.7 million for the ~~same~~six ~~reason~~months ended June 30, 2003.

Depreciation and amortization increased $0.8 million (12.5%) in the third quarter of 2002 compared to the same period in 2001. For the nine months ended September 30, 2002, depreciation and amortization increased $1.7 million (9.4%) compared to the nine months ended September 30, 2001. These increases were due primarily to the acquisitions of properties discussed above partially offset by property dispositions.

Interest expense decreased $0.7 million (16.3%) in the third quarter of 2002 as compared to the same period in 2001. This decrease was principally the result of the retirement of certain mortgages due to maturities, partially offset by debt assumed in connection with property acquisitions. Interest expense decreased $3.8 million (24.8%) for the nine months ended September 30, 2002 compared to the nine months ended September 30, 2001. This decrease was principally the result of the repayment of mortgages due to maturities or property dispositions in 2001.

Management’s Discussion and Analysis ~~of Financial Condition~~

~~and~~RESULTS ~~Results~~OF ofOPERATIONS ~~Operation~~

~~(Unaudited)~~Operating results are summarized as follows:

For the three months ended September 30, 2002 other operating income increased $0.1 million as compared to the same period in 2001 due primarily to higher equity in earnings of unconsolidated entities, primarily due to one investment property becoming operational in 2002 which was offset by lower interest income. For the nine months ended September 30, 2002, other operating income decreased $1.5 million from the nine months ended September 30, 2001. This was due to lower interest income and decreased equity in earnings of unconsolidated entities. In June 2001, Carr Office Park, L.L.C., a significant investee, obtained third party financing on its properties which increased its interest expense and reduced our equity in earnings.

	For the three months ended June 30,					Variance			For the six months ended June 30,						Variance
	For the three months ended June 30,					2003 vs.			For the six months ended June 30,						2003 vs.
(in millions)	2003		2002			2002			2003			2002			2002
Operating revenues	$	27.2	$	22.5		$	4.7		$	54.5		$	44.8		$	9.7
Property operating expense		9.7		7.8			1.9			19.3			15.9			3.4
General and administrative		1.2		1.0			0.2			2.3			2.5			(0.2	)
Depreciation and amortization		8.4		6.0			2.4			16.0			12.5			3.5
Interest expense		3.1		3.8			(0.7	)		5.0			7.9			(2.9	)
Loss on sales of assets and other provisions, net		—		(0.1	)		0.1			(0.4	)		(1.0	)		0.6
Other income		1.1		1.2			(0.1	)		1.6			2.4			(0.8	)
Discontinued operations		—		5.0			(5.0	)		—			6.8			(6.8	)

~~Gain~~Operating revenues increased $4.7 million (~~Loss~~20.9%) onfor ~~Sale~~the second quarter of ~~Assets~~2003 compared to the same period in 2002. This increase was primarily due to higher minimum base rents ($3.9 million). The increase in minimum base rents was principally due to base rents from the buildings we acquired in May and ~~Other~~August ~~Provisions~~of 2002, ~~Net~~partially ~~and~~offset ~~Discontinued~~by ~~Operations~~higher vacancies in our other properties. We expect minimum base rent to be under downward pressure during the remainder of the year as a result of re-leasing space at lower rates than those rates that were in effect under expiring leases.

InOperating ~~accordance~~revenues ~~with~~increased Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” we have classified the operating results of properties we sold in 2002 as discontinued operations for all periods presented in the consolidated statements of operations. The operating results of the properties decreased $0.9.7 million ~~and $1~~(21.47%) ~~million~~ for the ~~three~~six ~~and nine~~ months ended ~~September~~June 30, ~~2002~~2003 incompared ~~comparison~~ to ~~the~~ ~~corresponding periods in 2001 due to~~ the ~~sale~~same ofperiod ~~a property early~~ in ~~the second quarter of~~ 2002 ~~and~~for ~~another~~the ~~property~~same ~~sale~~reasons indescribed ~~August 2002~~above.

~~During~~Our ~~the~~lease ~~three~~rollover ~~months~~by ~~ended~~square ~~September~~footage ~~30,~~and ~~2002~~rent weat ~~disposed~~June ~~of one operating property~~30, ~~recognizing~~2003 ~~a gain of $19.1 million which~~ is ~~classified~~ as ~~discontinued~~follows: operations. No properties were sold during the three months ended September 30, 2001. During the nine months ended September 30, 2002, we disposed of two operating properties, recognizing a gain of $22.4 million. These gains have been classified as discontinued operations. We also recognized impairment losses of $1.0 million on two parcels of land held for development. During the nine months ended September 30, 2001, we disposed of one operating property in connection with the sale of a group of properties by CarrAmerica. There was a net gain on this transaction; however, we incurred a loss of $6.6 million on our property. We also recognized an impairment loss of $0.9 million on a parcel of land held for development during the nine months ended September 30, 2001.

Consolidated Cash Flows

Year of Lease Expiration	Rented Sq. Footage ¹	Percent of Leased Square Footage Represented by Expiring Leases
2003	236,320	5.3	%
2004	880,030	19.7	%
2005	404,080	9.1	%
2006	285,868	6.4	%
2007	1,143,488	25.7	%
2008	539,873	12.1	%
2009	194,995	4.4	%
2010	152,423	3.4	%
2011	150,240	3.4	%
2012	417,847	9.4	%
2013 and thereafter	52,330	1.1	%

	4,457,494	100.0	%

~~Consolidated~~1 ~~cash~~Does ~~flow~~not ~~information~~included isvacant ~~summarized~~space asof ~~follows:~~0.5 million sq. ft.

	For the nine months ended September 30,						Variance
(in millions)	2002			2001			2002 vs. 2001
Cash provided by (used by) operating activities	$	(18.2	)	$	14.5		$	(32.7	)
Cash provided by investing activities		26.7			16.8			9.9
Cash used by financing activities		(9.4	)		(34.1	)		24.7

Property operating expenses increased $1.9 million (24.3%) in the second quarter of 2003 from 2002 primarily as a result of higher insurance expense and real estate taxes. The increase in insurance expense was due primarily to general increases in insurance premiums from our June 2002 insurance renewal and the cost of terrorism coverage. In addition, operating expenses increased due to expenses of the buildings we acquired in May and August of 2002 ($0.9 million).

Operations used net cash of $18.2 million in 2002 compared to generating net cash of $14.5 million in 2001. The changes in cash flow from operating activities were partially the result of factors discussed above in the analysis of operating results. The level of net cash provided by operating activities was also significantly affected by the timing of receipt of revenues and payment of expenses and operating advances from affiliates.

Our investing activities generated net cash of $26.7 million in 2002 compared to $16.8 million in 2001. The change in net cash provided by investing activities in 2002 is due primarily to an increase in proceeds from the sale of properties ($116.2 million) and reduced investment in unconsolidated entities ($5.1 million). The effect of these changes was partially offset by increased acquisitions and additions to rental properties ($40.8 million), lower distributions from unconsolidated entities primarily from Carr Office Park, L.L.C. ($47.8 million) and releases of restricted deposits in 2001 ($23.0 million).

Financing activities used net cash of $9.4 million in 2002 compared to $34.1 million in 2001. This decrease is due primarily to a $16.9 million repayment of a mortgage that matured in the third quarter of 2001. Additionally, there was a $7.4 million repayment of a mortgage balance in 2001 related to the sale of a property.

Management’s Discussion and Analysis ~~of Financial Condition~~

~~and~~For ~~Results~~the ofsix ~~Operations~~months ended June 30, 2003, property operating expenses increased $3.4 million (21.4%) in 2003 from 2002 for the same reasons described above.

General and administrative expense increased $0.2 million (~~Unaudited~~20.0%) in the second quarter of 2003 from 2002. This increase was due primarily increased allocations of expenses from CarrAmerica. For the six months ended June 30, 2003, general and administrative expense decreased $0.2 million (8.0%) from 2002 due primarily to cost containment efforts and lower consulting fees, partially offset by the higher allocation from CarrAmerica.

~~Liquidity~~Depreciation and ~~Capital~~amortization ~~Resources~~increased $2.4 million (40.0%) in the three months ended June 30, 2003 compared to the same period in 2002. This increase was due primarily to the acquisitions of properties in 2002 and the depreciation of tenant improvement costs of terminating tenants partially offset by dispositions. For the six months ended June 30, 2003 compared to 2002, depreciation and amortization increased $3.5 million (28.0%) for the same reasons.

~~Our~~Interest ~~liquidity~~expense ~~and~~decreased ~~capital~~$0.7 ~~resources~~million ~~are dependent upon CarrAmerica and its affiliates~~(18.4%) ~~CarrAmerica,~~in asthe asecond ~~REIT,~~quarter ~~is required to distribute at least 90%~~ of ~~its~~2003 ~~taxable~~compared ~~income~~ to ~~its~~the ~~stockholders~~same ~~on an~~period ~~annual~~in ~~basis~~2002. WeThis ~~and~~decrease ~~CarrAmerica~~was ~~require~~primarily ~~capital~~the toresult ~~invest~~of inthe ~~our~~repayment ~~existing portfolio~~ of ~~operating~~mortgage ~~assets~~debt. ~~for~~Interest ~~capital~~expense ~~projects~~decreased $2.9 ~~These~~million ~~capital~~(36.7%) ~~projects~~for ~~can~~the ~~include~~six ~~such~~months ~~things~~ended asJune ~~large-scale renovations~~30, ~~routine~~2003 ~~capital~~compared ~~improvements,~~to ~~deferred maintenance~~2002 onfor ~~properties~~the wesame ~~have~~reason. ~~recently~~Mortgages ~~acquired~~ and ~~tenant~~notes ~~related~~payable ~~matters,~~decreased ~~including~~by ~~tenant improvements, allowances and leasing commissions~~$20.3 ~~Therefore,~~million asbetween aJune ~~general matter~~30, it2002 isand ~~unlikely~~June ~~our cash balances would satisfy our liquidity needs. Instead~~30, ~~these needs must be met from cash generated from rental revenue and external sources of capital~~2003.

~~We derive~~For ~~substantially~~the ~~all~~three ofmonths ~~our~~ended ~~revenue~~June ~~from~~30, ~~tenants~~2003, ~~under~~other ~~existing~~income ~~leases~~remained atrelatively flat ~~our~~compared ~~properties.~~to ~~Our~~2002 ~~operating~~due ~~cash~~primarily ~~flow therefore depends materially on the rents that we are able~~ to ~~charge~~decreased toequity ~~our~~in ~~tenants,~~earnings ~~and the ability~~ of ~~these~~unconsolidated ~~tenants~~entities tooffset ~~make~~by ~~their rental~~an ~~payments.~~increase Wein ~~believe~~interest ~~that~~income ~~the~~on ~~diversity~~a ofnote ~~our~~receivable ~~tenant base helps insulate us~~ from ~~the~~an ~~negative~~affiliated ~~impact~~company. ofEquity ~~tenant~~in ~~defaults~~earnings ~~and~~decreased ~~bankruptcies~~$0.2 ~~However,~~million ~~general~~(22.3%) ~~economic~~as ~~downturns,~~a orresult ~~economic~~of increased ~~downturns~~vacancies in ~~one~~properties orowned ~~more~~by ofthese ~~our~~entities. ~~markets,~~For ~~still may adversely impact~~ the ~~ability~~six ofmonths ~~our~~ended ~~tenants~~June to30, ~~make~~2003, ~~lease~~other ~~payments~~income ~~and~~decreased ~~our~~$0.7 ~~ability~~million tofrom ~~re-lease~~2002 ~~space~~primarily onas ~~favorable~~a ~~terms~~result asof ~~leases~~decreased ~~expire.~~equity Inin ~~either~~earnings of ~~these~~unconsolidated ~~cases,~~entities. ~~our~~Equity ~~cash~~in ~~flow~~earnings decreased ~~and~~as ~~therefore~~a ~~our~~result ~~ability~~of toincreased ~~meet~~vacancies ~~our~~in ~~capital~~properties ~~needs~~owned ~~would~~by bethese ~~adversely affected~~entities.

AsWe adispose ~~result~~ of ~~the~~assets ~~ongoing~~from ~~economic~~time ~~climate,~~to ~~the~~time ~~real~~that ~~estate~~are ~~markets~~inconsistent ~~have~~with ~~been~~our ~~materially~~long-term ~~affected.~~strategic ~~The sustained~~or ~~lack~~return ofobjectives. ~~job~~During ~~growth~~the ~~has~~three ~~reduced~~and ~~any~~six ~~demand~~months ~~for~~ended ~~office~~June ~~space~~30, ~~and~~2003, ~~vacancy~~we ~~rates~~did ~~have~~not ~~increased~~dispose inof ~~each~~any ofoperating ~~our~~properties, although ~~core~~we ~~markets~~adjusted ~~except~~a ~~for~~previously ~~Washington,~~recognized Dgain $0.C.4 Inmillion ~~reviewing~~for ~~various~~additional ~~outlooks~~costs ~~for~~related ~~the~~to ~~economy,~~a wesold ~~believe~~property. ~~that~~During the ~~vacancy~~three ~~rates~~months ~~will~~ended ~~not improve~~June in30, ~~any~~2002, ~~material~~we ~~fashion~~disposed ~~until~~of ~~2004.~~one ~~For~~operating ~~the~~property, ~~first~~recognizing ~~nine~~a ~~months~~gain of ~~2002,~~$3.3 ~~our~~million. ~~core~~We ~~markets~~had ~~weakened~~no continuing ~~significantly~~involvement ~~and~~with ~~our~~the ~~operations~~property inafter ~~those~~the ~~markets~~sale ~~were~~and ~~impacted.~~accordingly, ~~The~~this ~~occupancy~~gain inwas ~~our~~classified ~~portfolio~~in ofdiscontinued ~~operating~~operations. ~~properties~~We ~~decreased~~also torecognized ~~89.6%~~an ~~at September~~impairment ~~30,~~loss ~~2002~~of ~~compared to 92~~$0.2%1 atmillion ~~December~~on ~~31,~~a ~~2001~~parcel ~~and~~of ~~92.3%~~land atheld ~~September~~for ~~30, 2001~~development. ~~Market~~For ~~rental~~the ~~rates~~six ~~have~~months ~~declined~~ended June in30, ~~most~~2002, ~~markets~~we ~~from~~recognized ~~peak~~the ~~levels~~gain ~~and~~on wethe ~~believe~~disposed ~~there~~property ~~will~~and beimpairment ~~additional~~losses ~~declines~~of in$1.0 ~~some~~million ~~markets~~on ~~over~~land ~~the next 12 months~~holdings.

~~CarrAmerica~~In isMay ~~our~~2002, ~~principal~~we ~~source~~sold ofWasatch ~~liquidity.~~17, ~~CarrAmerica’s~~and ~~primary external source of liquidity is its credit facility. It has a three-year $500 million unsecured credit facility expiring~~ in ~~June~~August ~~2004~~2002 ~~with~~we ~~J.P.~~sold ~~Morgan~~Commons ~~Chase, as agent for a group of banks. CarrAmerica can extend the life of the line an additional year~~ at ~~its~~Las ~~option~~Colinas. The line carries an interest rate of 70 basis points over 30-day LIBOR. The unsecured facility contains financial and other covenants with which CarrAmerica must comply and availability is limited to a specified percentage of the fair value of unmortgaged properties. We ~~unconditionally~~had ~~guarantee~~no ~~this~~continuing ~~credit~~involvement ~~facility. As of September 30, 2002, $198.0 million was drawn on the credit facility, $5.2 million~~ in ~~letters~~either of ~~credit~~these ~~were~~properties ~~outstanding and $296.8 million was available for borrowing. An uncured~~after ~~default~~their bysale ~~CarrAmerica~~and onaccordingly, ~~its~~their ~~line~~results of ~~credit~~operations ~~could~~are ~~cause~~classified usas todiscontinued beoperations ~~required~~in ~~by lenders to make payments under~~ the ~~guarantee~~statements of ~~the~~operations ~~facility~~in 2002.

~~Our~~Operating ~~long-term~~results ~~liquidity requirements consist primarily~~ of ~~funds necessary to pay for~~ the ~~principal amount of our long-term debt as it matures, significant non-recurring capital expenditures that need to be made periodically at our~~ properties, ~~development~~are ~~projects~~summarized: ~~that we undertake and the costs associated with acquisitions of properties.~~

In the future, if, as a result of general economic downturns, our or CarrAmerica’s properties do not perform as expected, or we cannot raise the expected funds from the sale of properties and/or if we are unable to obtain capital from other sources, such as CarrAmerica, we may not be able to make required principal and interest payments or make necessary routine capital improvements with respect to our existing portfolio of operating assets. While we believe that we would continue to have sufficient funds to pay our operating expenses and debt service and our regular quarterly distributions, our ability to perform development activity or to fund additional development in our joint ventures could be adversely affected. In addition, if a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, the holder of the mortgage or lender could foreclose on the property, resulting in loss of income and asset value. An unsecured

(In thousands)	Three Months Ended June 30, 2002		Six Months Ended June 30, 2002
Revenue	$	3,136	$	6,655
Property operating expenses		60		213
Depreciation and amortization		1,445		2,989

Net operations of sold properties	$	1,631	$	3,453

Management’s Discussion and Analysis ~~of Financial Condition~~

~~and~~Consolidated ~~Results~~Cash ofFlows ~~Operations~~

~~(Unaudited)~~Consolidated cash flow information is summarized as follows:

lender could also attempt to foreclose on some of our assets in order to receive payment. In many cases, very little of the principal amount that we borrow is repaid prior to the maturity of the loan. We generally expect to refinance that debt when it matures, although in some cases we may pay off the loan. If principal amounts due at maturity cannot be refinanced, extended or paid with proceeds of other capital transactions, such as new equity capital, our cash flow may be insufficient to repay all maturing debt. Prevailing interest rates or other factors at the time of a refinancing (such as possible reluctance of lenders to make commercial real estate loans) may result in higher interest rates and increased interest expense.

	For the six months ended June 30,						Variance
	For the six months ended June 30,						2003 vs.
(in millions)	2003			2002			2002
Cash provided by operating activities	$	9.3		$	14.4		$	(5.1	)
Cash used by investing activities		(4.6	)		(9.4	)		4.8
Cash used by financing activities		(6.3	)		(6.3	)		—

WeOperations ~~have~~generated $9.3 ~~unconditionally~~million ~~guaranteed~~of ~~unsecured~~net ~~notes~~cash ~~issued~~for bythe ~~CarrAmerica~~first six months of 2003 compared to ~~institutional~~$14.4 ~~and~~million ~~other~~in ~~investors~~2002. The ~~aggregate~~change ~~principal~~in ~~amount~~cash offlow ~~the~~from ~~unsecured~~operating ~~notes~~activities was ~~$875.0~~primarily ~~million~~the asresult of ~~September~~a ~~30,~~decrease ~~2002.~~in ~~These~~accounts ~~notes~~payable, ~~are~~accrued inexpenses ~~the form~~and ofamounts due to affiliates ($~~150~~6.01 million), ofdecrease ~~7.20%~~in ~~notes~~accounts ~~due~~receivable inand ~~2004,~~notes receivable collections ($~~100~~1.0 million) ofand ~~6.625%~~lower ~~notes~~net ~~due~~income ~~in 2005,~~ ($~~125.~~0.3 million ~~of 7~~).~~375%~~ ~~notes~~These ~~due~~decreases inwere ~~2007,~~partially ~~$100.0~~offset ~~million~~by ofan ~~6.875%~~increase ~~notes~~in ~~due~~rents received in ~~2008~~advance and security deposits ($~~400~~2.0 6 million). The level of ~~7.125%~~net ~~notes~~cash ~~due~~provided inby ~~2012.~~operating ~~CarrAmerica’s senior~~activities ~~unsecured~~is ~~notes~~also ~~contain~~affected ~~various~~by ~~covenants~~the ~~with~~timing ~~which~~of ~~CarrAmerica~~receipt ~~must~~of ~~comply.~~revenues ~~The~~and ~~covenants~~payment ~~include:~~of expenses.

•Our ~~Limits~~investing onactivities ~~CarrAmerica’s~~used ~~total~~net ~~indebtedness~~cash onof $4.6 million in 2003 compared to $9.4 million in 2002. The decrease in net cash used by investing activities in 2003 compared to 2002 was due primarily to a ~~consolidated~~decrease ~~basis;~~in additions to rental property ($16.6 million) partially offset by a reduction in proceeds from the sales of properties ($10.7 million).

•LIQUIDITY ~~Limits~~AND onCAPITAL ~~CarrAmerica’s~~RESOURCES ~~secured indebtedness on a consolidated basis; and~~

•General ~~Limits on CarrAmerica’s required debt service payments.~~

WeOur ~~will~~liquidity ~~require~~and capital ~~for~~resources ~~development~~are ~~projects~~dependent ~~currently~~upon ~~underway~~CarrAmerica and inits ~~the future~~affiliates. AsCarrAmerica, ofas ~~September~~a 30REIT, ~~2002,~~is werequired to ~~had~~distribute ~~266,000~~at ~~square~~least ~~feet~~90% of ~~office~~its ~~space~~taxable ~~under construction~~income into ~~two~~its ~~projects~~stockholders inon ~~which~~an weannual ~~own minority interests~~basis. ~~These~~We ~~projects~~and ~~are~~CarrAmerica ~~expected~~require capital to ~~cost~~invest ~~$49.6~~in ~~million, of which~~ our ~~total~~existing ~~investment~~portfolio isof ~~expected~~operating toassets befor ~~approximately~~capital ~~$10~~projects.5 ~~million.~~These ~~Through~~capital ~~September~~projects ~~30,~~can ~~2002,~~include ~~approximately~~such ~~$21.2 million~~things oras ~~42.7%~~large-scale ofrenovations, ~~the~~routine ~~total~~capital ~~project~~improvements, ~~costs~~deferred ~~had~~maintenance ~~been expended~~ on ~~these~~properties ~~projects.~~we We have ~~funded~~recently ~~our~~acquired ~~investment~~and intenant ~~projects~~related ~~under~~matters, ~~construction~~including attenant ~~September 30~~improvements, ~~2002,~~allowances ~~primarily from the proceeds of asset dispositions~~ and ~~loans~~leasing ~~from CarrAmerica~~commissions. WeThe ~~expect~~amounts ~~that these sources and project-specific financing~~ of ~~selected~~the ~~assets~~leasing expenditures ~~will~~can ~~provide~~vary ~~additional~~significantly ~~funds~~depending ~~required~~on tonegotiations ~~complete~~with ~~the~~tenants ~~development~~ and ~~to finance~~ the ~~costs~~willingness of ~~additional~~tenants ~~projects we may undertake. As a result of market conditions, we believe we will be limiting our development activities in the near future and expect~~ to ~~concentrate~~pay ~~our~~higher ~~growth~~base ~~efforts~~rents onover the ~~acquisition~~life of ~~properties~~the leases.

WeDebt ~~also~~Financing regularly incur expenditures in connection with the re-leasing of office space, principally in the form of tenant improvements and leasing commissions. The amounts of these expenditures can vary significantly, depending on negotiations with tenants and the willingness of tenants to pay higher base rents over the life of the leases. We expect to pay for these capital expenditures out of cash from operations or, to the extent necessary, borrowings from CarrAmerica. We believe that these expenditures are recouped in the form of continuing lease payments.

~~Although we~~CarrAmerica ~~believe~~is our ~~properties~~principal ~~are~~source ~~adequately~~of ~~covered~~liquidity. byCarrAmerica’s ~~insurance,~~primary weexternal ~~cannot~~source ~~predict~~of atliquidity ~~this~~is ~~time~~its ifcredit wefacility. ~~will~~CarrAmerica behas ~~able~~a three-year, to$500.0 ~~obtain~~million ~~full~~unsecured ~~coverage~~credit atfacility aexpiring ~~reasonable~~in ~~cost~~June in2004 ~~the~~with ~~future~~J.P. ~~The~~Morgan ~~costs~~Chase, ~~associated~~as ~~with~~agent ~~our~~for ~~June~~a ~~30,~~group ~~2002~~of ~~property~~banks. ~~and~~CarrAmerica ~~casualty~~can ~~insurance renewals~~extend ~~were~~the ~~higher~~life ~~than~~of ~~anticipated.~~the ~~Although~~facility wean ~~have~~additional anyear ~~excellent~~at ~~claims~~its ~~history~~option. ~~and~~The ~~safety~~facility ~~record,~~carries ~~all~~an ~~lines~~interest rate of ~~coverage~~70 ~~were~~basis ~~affected~~points byover ~~higher~~30-day ~~premiums~~LIBOR, inor ~~part~~1.82% ~~because~~as ~~insurance~~of ~~companies~~June ~~have~~30, ~~experienced~~2003. aAs ~~loss~~ of ~~income~~June on30, ~~their investments~~2003, ~~underwriting~~$188.0 ~~results~~million ~~have~~was ~~been~~drawn ~~poor~~on ~~and~~the ~~also~~credit asfacility, a$4.6 ~~result~~million in letters of ~~the~~credit ~~events~~were ofoutstanding ~~September~~and ~~11,~~$307.4 ~~2001~~million was available for borrowing.

~~Our insurance~~CarrAmerica’s ~~renewal~~unsecured oncredit ~~June~~facility ~~30,~~contains ~~2002~~financial ~~increased premiums from last year approximately 155%. The property insurance deductible increased from $5,000 to $10,000 per claim. Since reinsurance treaties renew twice each year (January~~ and ~~July), our property~~other ~~and~~covenants ~~casualty~~with ~~insurance~~which ~~renewal~~it ~~date~~must ~~has~~comply. ~~been~~Some ~~changed from June 30 to May 15 to enable underwriters to concentrate on the insurance proposals well ahead~~ of ~~treaty~~these ~~renewal.~~covenants include:

~~Prior~~• toA ~~year~~minimum ~~end,~~ratio ~~three~~of ~~policies,~~annual ~~the~~EBITDA ~~Directors~~(earnings ~~and~~before ~~Officers~~interest, ~~Liability~~taxes, ~~Employment~~depreciation ~~Practices Liability~~ and ~~Professional Liability (Errors and Omissions~~amortization) ~~will renew. Directors and Officers Liability insurance premiums are expected~~ to ~~increase~~interest ~~50% to 125%. Employment Practices and Professional Liability insurance premiums are also expected to increase.~~ expense;

•

A minimum ratio of annual EBITDA to fixed charges;

•

A maximum ratio of aggregate unsecured debt to unencumbered assets;

•

A maximum ratio of total debt to tangible fair market value of assets; and

•

Restrictions on CarrAmerica’s ability to make dividend distributions in excess of 90% of funds from operations.

Management’s Discussion and Analysis ~~of Financial Condition~~

~~and~~Availability ~~Results~~under the unsecured credit facility is also limited to a specified percentage of ~~Operations~~the fair value of unmortgaged properties. CarrAmerica is currently in compliance with all the financial covenants of its credit facility. During the second quarter of 2003, CarrAmerica amended its credit agreement to change the maximum ratio of aggregate unsecured debt to unencumbered assets covenant to allow for continuing compliance. Failure to comply with any of the other covenants under the unsecured credit facility or other debt instruments could result in a default under one or more debt instruments. This could cause the lenders to accelerate the timing of payments and would therefore have a material adverse effect on our business, operations, financial condition or liquidity.

~~(Unaudited)~~Our long-term liquidity requirements consist primarily of funds necessary to pay for the principal amount of our long-term debt as it matures, significant capital expenditures that need to be made periodically at our properties, development projects that we undertake and the costs associated with acquisitions of properties.

~~Early~~We ~~this~~derive ~~year,~~substantially all ~~risk~~of ~~property~~our ~~insurers~~revenue from ~~began~~tenants ~~attaching~~under ~~terrorism~~leases ~~exclusions~~at our properties. Our operating cash flow therefore depends materially on the rents that we are able to ~~insurance~~charge ~~policies~~to our tenants, and the ability of these tenants to make their rental payments. We believe that the diversity ~~Terrorism~~of ~~insurance~~our ~~must~~tenant ~~now~~base behelps ~~purchased~~insulate ~~separately~~us from the negative impact of tenant defaults and bankruptcies. ~~Unlike~~However, ~~earthquake~~general ~~exposure~~economic downturns, ~~insurers~~or doeconomic ~~not~~downturns ~~yet~~in ~~have~~one aor ~~means~~more of ~~modeling~~our ~~the~~markets, ~~terrorism~~could ~~risk.~~materially Aadversely ~~limited~~impact ~~number~~the ability of ~~companies~~our ~~are~~tenants to ~~currently~~make ~~underwriting~~lease ~~terrorism~~payments ~~insurance~~and our ability to re-lease space on favorable terms as leases expire. In either of these cases, ~~with~~our ~~limited~~cash ~~capacity~~ flow and attherefore anour ~~extremely~~ability ~~high~~to ~~cost~~meet our capital needs would be adversely affected.

WeAs ~~have~~a ~~completed~~result anof ~~in-depth~~the ~~asset~~ongoing ~~evaluation~~weak ofeconomic ~~our~~climate, ~~terrorism~~the ~~exposure~~real asestate ~~well~~markets ashave ~~our~~been ~~lender~~materially ~~requirements~~affected. ~~Upon~~The ~~our~~contraction ~~renewal~~of ~~date~~office workforces has reduced demand for ~~insurance~~office space and overall vacancy rates have increased in all of ~~June~~our ~~30,~~markets. ~~2002~~In reviewing various outlooks for the economy, we, believe that the vacancy rates will not improve in ~~conjunction~~any ~~with~~material ~~CarrAmerica,~~fashion ~~purchased~~until ~~terrorism~~at ~~limits~~least of2004. ~~$200~~During ~~million~~2002 ~~per~~and ~~occurrence~~into 2003, our markets weakened significantly and inour ~~the~~operations ~~aggregate~~were ~~with~~adversely aimpacted. ~~deductible~~The occupancy in our portfolio of $1stabilized operating properties decreased to 90.04% ~~million~~at ~~per~~June ~~claim~~30, 2003 and at ~~a cost~~December of31, ~~approximately~~2002 $2and 90.29% ~~million~~at June 30, 2002. ~~The~~Market ~~policy~~rental ~~only~~rates ~~covers~~have ~~physical~~declined ~~damage.~~in ~~Coverage~~most ~~does~~markets ~~not~~from ~~include~~peak ~~biological,~~levels ~~chemical~~and orwe ~~radioactive~~expect ~~contamination~~there will be additional declines in some markets in 2003.

WeIn ~~have~~the ~~investments~~future, inif, ~~real~~as ~~estate~~a ~~joint~~result ~~ventures~~of ingeneral ~~which~~economic downturns, our or CarrAmerica’s properties do not perform as expected, or we ~~hold~~cannot ~~21.2%~~raise tothe ~~49.0%~~expected ~~interests.~~funds ~~These~~from ~~investments~~the sale of properties and/or if we are ~~accounted~~unable ~~for~~to ~~using~~obtain ~~the~~capital ~~equity~~from ~~method~~other sources, ~~and~~such ~~therefore~~as CarrAmerica, ~~the~~we ~~assets~~may not be able to make required principal and ~~liabilities~~interest payments or make necessary routine capital improvements with respect to our existing portfolio of operating assets. While we believe that we would continue to have sufficient funds to pay our operating expenses and debt ~~the~~service ~~joint~~and ~~ventures~~our ~~are~~regular ~~not~~quarterly ~~included~~distributions, our ability to perform development activity or to fund additional development in our ~~financial~~joint ~~statements~~ventures could be adversely affected. ~~Most~~In ofaddition, ~~these~~if ~~joint~~a ~~ventures~~property ~~own~~is mortgaged to secure payment of indebtedness and ~~operate~~we ~~office~~are ~~buildings~~unable ~~financed~~to bymeet ~~non-recourse~~mortgage ~~debt~~payments, ~~obligations~~the ~~that~~holder ~~are~~of ~~secured~~the ~~only~~mortgage byor lender could foreclose on the ~~real~~property, ~~estate~~resulting in loss of income and ~~other~~asset value. An unsecured lender could also attempt to foreclose on some of our assets in order to receive payment. In most cases, very little of the ~~joint~~principal ~~ventures~~amount that we borrow is repaid prior to the maturity of the loan. We ~~have~~may norefinance ~~obligation~~that debt when it matures or we may pay off the loan. If principal amounts due at maturity cannot be refinanced, extended or paid with proceeds of other capital transactions, such as new equity capital, our cash flow may be insufficient to repay ~~this~~all maturing debt. ~~and~~Prevailing interest rates or other factors at the ~~lenders~~time ~~have~~of noa ~~recourse~~refinancing (such as possible reluctance of lenders to ~~our~~make ~~other~~commercial ~~assets~~real estate loans) may result in higher interest rates and increased interest expense.

Unconsolidated Investments and Joint Ventures

We have investments in real estate joint ventures in which we hold 21.2% to 49.0% interests. These investments are accounted for using the equity method, and therefore, the assets and liabilities of the joint ventures are not included in our financial statements. Most of these joint ventures own and operate office buildings financed by non-recourse debt obligations that are secured only by the real estate and other assets of the joint ventures. We have no obligation to repay these non-recourse debt obligations and the lenders have no recourse to our other assets.

Our investments in these joint ventures are subject to risks not inherent in our majority owned properties, including:

•

Absence of exclusive control over the development, financing, leasing, management and other aspects of the project;

Management’s Discussion and Analysis

•

Possibility that our co-venturer or partner might:

•

become bankrupt;

•

have interests or goals that are inconsistent with ours;

• take action contrary to our instructions, requests or interests (including those related to CarrAmerica’s qualification as a REIT for tax purposes); or

• otherwise impede our objectives.; or

15• Possibility that we, together with our partners may be required to fund losses of the investee.

Guarantee Obligations

We have unconditionally guaranteed unsecured notes issued by CarrAmerica to institutional and other investors. The aggregate principal amount of the unsecured notes was $1.1 billion as of June 30, 2003. These notes are in the form of $150.0 million of 7.20% notes due in 2004, $100.0 million of 6.625% notes due in 2005, $125.0 million of 7.375% notes due in 2007, $100.0 million of 6.875% notes due in 2008, $400.0 million of 7.125% notes due in 2012, $50.0 million of 5.261% notes due in 2007 and $175.0 million of 5.250% notes due in 2007. CarrAmerica’s senior unsecured notes contain various covenants with which CarrAmerica must comply. The covenants include:

•

Limits on total indebtedness on a consolidated basis;

•

Limits on secured indebtedness on a consolidated basis;

•

Limits on required debt service payments; and

•

Compliance with the financial covenants of its credit facility.

As of June 30, 2003. CarrAmerica was in compliance with its loan covenants.

Capital Commitments

We will require capital for development projects currently underway and in the future. As of June 30, 2003 we had no office space under construction. Generally, we fund our investments in projects under construction from the proceeds of asset dispositions and loans from CarrAmerica. We expect that these sources and project-specific financing of selected assets will provide additional funds required to finance the costs of additional projects we may undertake. As a result of market conditions, we believe we will be limiting our development activities in the near future and expect to concentrate our growth efforts on the acquisition of properties.

We also regularly incur expenditures in connection with the re-leasing of office space, principally in the form of tenant improvements and leasing commissions. The amounts of these expenditures can vary significantly, depending on negotiations with tenants and the willingness of tenants to pay higher base rents over the life of the leases. We expect to pay for these capital expenditures out of cash from operations or, to the extent necessary, borrowings from CarrAmerica. We believe that these expenditures are generally recouped in the form of continuing lease payments.

Insurance

Although we believe our properties are adequately covered by insurance, we cannot predict at this time if we will be able to obtain full coverage at a reasonable cost in the future. The costs associated with our June 30, 2002 property and casualty insurance renewals were higher than anticipated. Although we have an excellent claims history and safety record, all lines of coverage were affected by higher premiums, in part because insurance companies have experienced a loss of income on their investments, underwriting results have been poor and also as a result of the events of September 11, 2001.

Our insurance renewal on June 30, 2002 increased premiums from the prior year approximately 155%. The property insurance deductible increased from $5,000 to $10,000 per claim. Since reinsurance treaties renew twice each year (January and July), our property and casualty insurance renewal date has been changed from June 30 to May 15 to enable underwriters to concentrate on the insurance proposals well ahead of treaty renewal.

In anticipation of the scheduled renewal on May 15, 2003, CarrAmerica provided updated data to its insurance broker to enable the broker to market our insurance with various insurers. We received insurance coverage and cost proposals in April 2003 and our final costs in May. Our premiums for the 2003-2004 renewal period were relatively unchanged from the 2002-2003 period.

Management’s Discussion and Analysis ~~of Financial Condition~~

As a result of the Terrorism Risk Insurance Act of 2002 (“TRIA”), CarrAmerica elected to purchase the TRIA coverage upon its 2003 insurance renewal rather than stand alone coverage. In June 2002, CarrAmerica purchased stand alone terrorism coverage with limits of $200 million per occurrence and ~~Results~~in the aggregate, with a deductible of $1.0 ~~Operations~~million per claim, at a cost of approximately $2.2 million per year. The TRIA insurance increases CarrAmerica’s coverage to $500 million for foreign certified terrorist acts but also includes $25 million of coverage for domestic terrorism. Coverage, either under TRIA or a stand alone policy, includes only physical damage and does not include losses due to biological, chemical or radioactive contamination. The lack of coverage for such contamination could have a material adverse effect on our financial results if a building we own becomes uninhabitable as a result of a biological, chemical, radioactive or other contamination.

Due to the rising cost of California earthquake insurance, CarrAmerica reviewed its probable maximum loss (~~Unaudited~~“PML”) and industry practice related to earthquake coverage for various factors. As a result of this review, CarrAmerica determined that it was possible to lower its earthquake coverage from $200 million to $150 million. We believe this will be sufficient coverage.

New Accounting Pronouncements

In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” The Interpretation requires recognition of liabilities at their fair value for newly issued guarantees. The adoption of Interpretation No. 45 on January 1, 2003 did not have a material effect on our financial statements.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.” SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based compensation and requires disclosure in both annual and interim financial statements about the method of accounting for stock-based compensation and the effect of the method used on reported results. Effective January 1, 2003, we adopted the fair value based method of accounting for stock-based compensation costs. We elected to use the prospective method of transition to the fair value method provided in SFAS No. 148 and, accordingly, the method is being applied for all employee stock compensation awards granted, modified or settled on or after January 1, 2003. The effect of the change on our financial statements was immaterial.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities.” This Interpretation addresses the consolidation of variable interest entities (“VIEs”) in which the equity investors lack one or more of the essential characteristics of a controlling financial interest or where the equity investment at risk is not sufficient for the entity to finance its activities without subordinated financial support from other parties. The Interpretation applies to VIEs created after January 31, 2003 and to VIEs in which we acquire an interest after that date. Effective July 1, 2003, it also applies to VIEs in which we acquired an interest before February 1, 2003. We may apply the Interpretation prospectively, with a cumulative effect adjustment as of July 1, 2003, or by restating previously issued financial statements with a cumulative effect adjustment as of the beginning of the first year restated. Based on our current analysis, we are not associated with any VIEs and we believe that we will not be required to consolidate any of our unconsolidated real estate ventures that we have accounted for using the equity method.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Adoption of SFAS No. 150 did not affect our financial statements.

Management’s Discussion and Analysis

Building and Lease Information

The following table sets forth ~~certain~~ information about each wholly-owned ~~operating~~ property as of ~~September~~June 30, ~~2002~~2003:

	Net Rentable
Consolidated Properties	Net Rentable Area (square feet)(1)	Percent Leased(2)		Number of Buildings
	Area	Percent		Number
Southern California, Orange County/Los Angeles
Consolidated Properties	(square feet) (1)	Leased (2)		of Buildings
South Coast Executive Center	161,787	98.6		2
Southern California, Orange County/Los Angeles:
South Coast Executive Center	161,787	61.0	%	2
2600 W. Olive	144,831	100.0		1
Bay Technology Center	107,481	84100.60		2
Southern California, San Diego:
Southern California, San Diego
Jaycor	105,358	100.0		1
11119 Torrey Pines Road	76,701	100.0		1
Northern California, San Francisco Bay Area:
Northern California, San Francisco Bay Area
San Mateo I	72,137	28.6		1
San Mateo II and III	141,~~731~~440	8177.26		2
Mountain View Gateway Center	236,400	100.0		2
Seattle, Washington:
Canyon Park Commons	95,290	100.0		1
Austin, Texas:
City View Centre	137,~~218~~185	5674.32		3
Tower of the Hills	166,149	100.0		2
City View Center	128,716	100.0		1
Chicago, Illinois:
Bannockburn I & II	209,~~969~~450	9283.63		2
Bannockburn IV	~~110~~108,~~319~~801	9593.20		1
Dallas, Texas:
Quorum North	116,~~194~~192	9473.36		1
Quorum Place	178,~~399~~684	6286.75		1
Cedar Maple Plaza	113,~~045~~117	9283.95		3
Two Mission Park	77,593	4873.48		1
5000 Quorum	162,~~186~~155	8588.51		1
Denver, Colorado:
Harlequin Plaza	~~328~~324,~~623~~601	9297.47		2
Quebec Court I & II	287,294	100.0		2
Quebec Center	106,865	93.69		3
Phoenix, Arizona:
Qwest Communications	532,506	100.0		4
Salt Lake City, Utah:
Sorenson Research Park	282,944	~~100~~83.09		5
Wasatch Corporate Center 18	49,566	7262.61		1
Wasatch Corporate Center	178,231	8178.72		3
Sorensen X	41,288	89100.80		1
Washington, DC:
Canal Center	492,001	90.0		4
TransPotomac V Plaza	97,006	98.1		1
TransPotomac V Plaza	96,419	100.0		1
Canal Center	492,001	84.0		4
TOTAL CONSOLIDATED PROPERTIES:	4,931,769			55
WEIGHTED AVERAGE	~~4,937,241~~	90.4	%	55
		89.6	%

(1)

Includes office and retail space but excludes storage space.

(2) Includes space for leases that have been executed and have commenced as of ~~September~~June 30, ~~2002~~2003.

1618

Management’s Discussion and Analysis ~~of Financial Condition~~

and Results of Operations

(Unaudited)

The following table sets outs a schedule of the lease expirations as of September 30, 2002:

	Approximate Net	Percent of Leased
	Rentable Area Subject	Square Footage
	to Expiring Lease	Represented by
Year of Lease Expiration	(square feet) (1)	Expiring Leases
2002	170,233	3.8	%
2003	361,059	8.2	%
2004	862,967	19.5	%
2005	486,690	11.0	%
2006	242,468	5.5	%
2007	1,009,789	22.9	%
2008	424,003	9.6	%
2009	173,472	3.9	%
2010	97,844	2.2	%
2011	155,203	3.5	%
2012 and thereafter	441,012	9.9	%
	4,424,740	100.0	%

(1) Excludes 512,501 square feet of vacant space.

FORWARD-LOOKING STATEMENTS

Certain statements contained herein constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our and our affiliates, or the industry’s actual results, performance, achievements or transactions to be materially different from any future results, performance, achievements or transactions expressed or implied by such forward-looking statements. Such factors include, among others, the following:

• National and local economic, business and real estate conditions that will, among other things, affect:

• Demand for office properties,

• The ability of the general economy to recover timely from the current economic ~~downturn~~conditions,

• The availability and creditworthiness of tenants,

• ~~Level~~The level of lease rents, and

•

The availability of financing for both tenants and us;

•

Adverse changes in the real estate markets, including, among other things:

•

Competition with other companies, and

• Risks of real estate acquisition and development (including the failure of pending acquisitions to close and pending developments to be completed on time and within budget);

•

Actions, strategies and performance of affiliates that we may not control or companies in which we have made investments;

• ~~The~~Ability ~~ability of CarrAmerica~~ to ~~maintain~~obtain ~~its~~insurance ~~status~~at as a ~~REIT~~reasonable ~~for federal income tax purposes~~cost;

• ~~The~~Ability ~~ability~~ to ~~obtain~~maintain ~~insurance~~our atstatus as a ~~reasonable~~REIT ~~cost~~for federal and state income tax purposes;

•

Ability to raise capital;

•

Governmental actions and initiatives; and

•

Environmental/safety requirements.

For further discussion of these and other factors that could impact our ~~or CarrAmerica’s~~ future results, performance, achievements or transactions, see the documents ~~that~~ we ~~and CarrAmerica file~~ file from time to time with the Securities and Exchange Commission, and in particular, the section titled “~~The Company –~~ Risk Factors” in CarrAmerica’s Annual Report on Form 10-K.

1719

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

~~CarrAmerica~~Any ~~uses~~significant ~~derivative financial~~changes ~~instruments~~in ~~from~~our ~~time to time to limit~~ market risk. ~~Interest~~that ~~rate~~have ~~exchange~~occurred ~~agreements~~since ~~may~~the befiling ~~used~~of toour ~~convert~~Annual ~~floating~~Report ~~rate~~on ~~debt~~Form to10-K ~~a fixed rate basis, to convert fixed rate debt to a floating rate basis or to hedge anticipated financing transactions. CarrAmerica uses derivative financial instruments only~~ for ~~hedging~~the ~~purposes,~~year ~~and~~ended ~~not~~December ~~for speculation or trading purposes. On May 8~~31, 2002, ~~CarrAmerica entered into an interest rate swap, which we guarantee, with J.P. Morgan Chase and~~are ~~Bank~~summarized ofin ~~America, hedging $150.0 million of senior unsecured notes due July 2004. The interest rate swap matures at~~ the ~~same~~Liquidity ~~time~~and ~~the~~Capital ~~notes~~Resources ~~are~~section ~~due. The swap qualifies as a fair value hedge. Net semi-annual settlement payments are recognized as an increase or decrease to CarrAmerica’s interest expense. The fair value~~ of the ~~interest rate swap is recognized on CarrAmerica~~Management’s ~~balance~~Discussion ~~sheet~~ and ~~the~~Analysis ~~carrying value~~ of ~~the~~Financial ~~senior~~Condition unsecured notes is increased or decreased by an offsetting amount. As of September 30, 2002, the fair value of the interest rate swap was approximately $5.4 million. CarrAmerica recognized a reduction of interest expense for the three and ~~nine~~Results ~~months ended September 30, 2002~~ of ~~approximately $1~~Operations.0 ~~million and $1.5 million related to the swap.~~

As part of the assumption of $63.5 million of debt associated with the purchase of two operating properties in August 2002, we also purchased interest rate caps. As of September 30, 2002, the fair market value of these interest rate caps was $35,600.

CarrAmerica is our principal source of liquidity. CarrAmerica’s primary external source of liquidity is its credit facility of which CarrAmerica Realty, L.P. is an unconditional guarantor. The line of credit is a three-year $500 million unsecured credit facility expiring in June 2004 with J.P. Morgan Chase, as agent for a group of banks. CarrAmerica can extend the life of the line an additional year at its option. The line carries an interest rate of 70 basis points over 30-day LIBOR. This exposes us to the risk of higher interest costs if LIBOR should increase above its current low levels. A 10% increase in the current interest rate would have increased interest expense on the line of credit $134,000 for the third quarter of 2002. The unsecured facility contains financial and other covenants with which CarrAmerica must comply and availability is limited to a specified percentage of the fair value of unmortgaged properties. As of September 30, 2002, $198.0 million was drawn on the credit facility, $5.2 million in letters of credit were outstanding and $296.8 million was available for borrowing.

Item 4.

Controls and Procedures

~~Within~~Evaluation ~~the 90-day period prior to the filing of this quarterly report, an evaluation~~ was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness as of June 30, 2003 of the design and operation of our disclosure controls and procedures as defined in Rule 13a-1415 of the rules promulgated under the Securities and Exchange Act of 1934, as amended. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

1820

Part II

OTHER INFORMATION

Item 1.

Legal Proceedings

On May 8, 2003, Broadband Office, Inc. and the official committee of unsecured creditors of Broadband Office Inc., filed a complaint in the United States Bankruptcy Court for the District of Delaware against a group of REITs, real estate operating companies and individuals, including CarrAmerica, its subsidiaries, including us, and Philip Hawkins, CarrAmerica’s President and Chief Operating Officer, relating to the formation, management and capitalization of Broadband Office. CarrAmerica was an equity investor and customer of Broadband Office, and Mr. Hawkins was a member of the board of directors of Broadband Office until his resignation from the board of Broadband Office on May 2, 2001. Broadband Office filed for bankruptcy protection on May 9, 2001. The complaint alleges, among other things, breaches of fiduciary duties by us and CarrAmerica and Mr. Hawkins as a member of the Broadband Office board, seeks to recharacterize CarrAmerica’s investment as a holder of common stock to be one as a general unsecured creditor and/or as a general partner responsible jointly with all other alleged general partners for the outstanding debts of the corporation, and also seeks recovery of alleged preference payments made to CarrAmerica or its subsidiaries, including us. The plaintiffs seek relief in an amount in excess of $300 million jointly and severally from all defendants. No answer has been filed as of June 30, 2003. Due to the inherent uncertainties of the judicial process and the early stage of this action, we are unable to predict the outcome of this matter. While we and CarrAmerica intend to vigorously defend this matter and believe we and CarrAmerica have meritorious defenses available to us, there can be no assurance that we or CarrAmerica would prevail in this matter. If this matter is not resolved in our favor, it could have a material adverse effect on our financial condition and results of operations.

We are party to a variety of other legal proceedings arising in the ordinary course of business. All of these matters, taken together, are not expected to have a material adverse impact on us.

Item 6.

Exhibits and Reports on Form 8-K.

(a)

Exhibits

10.1 ~~Third~~Amendment ~~Amended~~No. ~~and~~3 ~~Restated~~Revolving Credit Agreement ofand ~~Limited~~Ratification ~~Partnership~~and Reaffirmation of ~~CarrAmerica~~Guaranty ~~Realty, L.P.~~ dated ~~July~~May 31, ~~2002,~~2003 (incorporated by reference to Exhibit 10.1 to CarrAmerica’s Quarterly Report on Form ~~10Q~~10-Q, for the quarter ended ~~September~~June 30, ~~2002~~2003).

31.1

Section 302 Certification from Mr. Thomas A. Carr, dated August 4, 2003

31.2

Section 302 Certification from Mr. Stephen E. Riffee, dated August 4, 2003

32.1

Section 906 Certification from Mr. Thomas A. Carr and Mr. Stephen E. Riffee, dated August 4, 2003

(b)

Reports on Form 8-K

None.

1921

SIGNATURES

Pursuant to the requirements 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.

CARRAMERICA REALTY, L.P.

a Delaware Limited Partnership

By: CarrAmerica Realty GP Holdings, Inc.,

its general partner

/s/ ~~Stephen~~Kurt EA. ~~Riffee~~Heister ~~Stephen~~Kurt EA. ~~Riffee~~Heister, ~~Chief~~Controller ~~Financial~~and ~~Officer~~Treasurer (on behalf of ~~the~~ registrant and as ~~the~~its ~~registrant’s~~ principal ~~financial~~accounting officer)

Date: ~~November~~August 84, ~~2002~~2003

CERTIFICATION

I, Thomas A. Carr, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CarrAmerica Realty, L.P.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

/s/ Thomas A. Carr Thomas A. Carr Chief Executive Officer

Date: November 8, 2002

CERTIFICATION

I, Stephen E. Riffee, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CarrAmerica Realty, L.P.;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

/s/ Stephen E. Riffee Stephen E. Riffee Chief Financial Officer

Date: November 8, 2002

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Filing Compare · CARRAMERICA REALTY L P