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 ~~June~~September 30, 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 ~~June~~September 30, 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 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 ¨x

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 as of June 30, 2003 (unaudited) and December 31, 2002	4
	Consolidated Balance Sheets as of September 30, 2003 (unaudited) and December 31, 2002	4
	Consolidated Statements of Operations for the three and six months ended June 30, 2003 and 2002 (unaudited)	5
	Consolidated Statements of Operations for the three and nine months ended September 30, 2003 and 2002 (unaudited)	5
	Consolidated Statements of Cash Flows for the six months ended June 30, 2003 and 2002 (unaudited)	6
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2003 and 2002 (unaudited)	6
	Notes to Consolidated Financial Statements (unaudited)	7 - 10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11 -1920
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2021
Item 4.	Controls and Procedures	2021
Part II: Other Information
Item 1.	Legal Proceedings	2122
Item 6.	Exhibits and Reports on Form 8-K	2122

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 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 ~~six~~nine months ended ~~June~~September 30, 2003 are not necessarily indicative of the operating results to be expected for the full year.

CARRAMERICA REALTY, L.P. AND SUBSIDIARIES

Consolidated Balance Sheets

As of ~~June~~September 30, 2003 and December 31, 2002

	June 30, 2003			December 31,2002
	September 30,2003			December 31,2002
(In thousands)	(unaudited)
Assets
Rental property:
Land	$	129,091		$	129,091
Buildings		~~588~~589,~~883~~272			587,114
Tenant improvements		4851,~~939~~124			44,547
Furniture, fixtures, and equipment		~~774~~775			782
		767,687			761,534
		770,262			761,534
Less—accumulated depreciation		(118,927	)		(105,370	)
Less – accumulated depreciation		(125,897	)		(105,370	)
Total rental property		~~648~~644,~~760~~365			656,164
Land held for development		5,~~770~~819			5,660
Cash and cash equivalents		—			1,654
Restricted deposits		~~239~~344			—
Accounts and notes receivable, net		89,~~918~~008			10,180
Investments in unconsolidated entities		4441,~~874~~398			45,924
Accrued straight-line rents		1516,~~638~~328			13,816
Tenant leasing costs, net		8,~~525~~384			7,707
Prepaid expenses and other assets, net		9,~~820~~025			9,516
	$	~~742~~734,~~544~~671		$	750,621
Liabilities, Redeemable Partnership Units and Partners’ Capital
Liabilities:
Mortgages and notes payable	$	7674,~~834~~385		$	81,636
Notes payable to affiliates		38,~~638~~479			38,944
Accounts payable and accrued expenses		911,~~626~~213			12,095
Due to affiliates		4331,~~514~~849			56,423
Rents received in advance and security deposits		6,~~976~~766			6,400
Total liabilities		~~175~~162,~~588~~692			195,498
Mandatorily redeemable partnership units (at redemption value)		3537,~~017~~585			32,776
Partners’ capital:
General partner		5,~~809~~866			5,679
Limited partners		~~526~~528,~~130~~528			516,668
Total partners’ capital		~~531~~534,~~939~~394			522,347
Commitments and contingencies
	$	~~742~~734,~~544~~671		$	750,621

See accompanying notes to consolidated financial statements.

CARRAMERICA REALTY, L.P. AND SUBSIDIARIES

Consolidated Statements of Operations

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

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
(Unaudited and in thousands)	2003			2002			2003			2002
Operating revenues:
Rental revenues:
Minimum base rent	$	22,~~212~~058		$	1820,~~285~~011		$	4466,~~727~~785		$	3656,~~208~~219
Recoveries from tenants		3,~~820~~214			3,~~311~~944			710,~~431~~645			610,~~998~~942
Other tenant charges		~~1,000~~905			~~609~~1,035			12,~~806~~711			12,~~130~~165
Total rental revenues		2726,~~032~~177			2224,~~205~~990			5380,~~964~~141			4469,~~336~~326
Other revenue		~~177~~213			~~263~~201			~~505~~718			~~445~~646
Total operating revenues		2726,~~209~~390			2225,~~468~~191			5480,~~469~~859			4469,~~781~~972
Operating expenses:
Property expenses:
Operating expenses		7,~~242~~782			56,~~416~~643			1422,~~315~~097			1117,~~205~~760
Real estate taxes		21,~~477~~581			2,~~394~~403			56,~~035~~616			47,~~737~~140
Interest expense		3,064			3,788			4,987			7,931
General and administrative		1,142			598			3,426			3,058
General and administrative		1,189			1,049			2,284			2,460
Depreciation and amortization		8,495			7,224			24,513			19,720
Depreciation and amortization		8,413			5,959			16,018			12,496
Total operating expenses		19,000			16,868			56,652			47,678
Total operating expenses		22,385			18,606			42,639			38,829
Real estate operating income		7,390			8,323			24,207			22,294
Real estate operating income		4,824			3,862			11,830			5,952
Other (expense) income:
Other income:
Interest expense		(2,415	)		(3,602	)		(7,402	)		(11,533	)
Interest income		~~384~~226			~~202~~208			~~390~~616			~~410~~618
Equity in earnings of unconsolidated entities		~~762~~468			~~981~~635			1,~~257~~725			2,~~019~~654
Total other income		1,146			1,183			1,647			2,429
Total other expense		(1,721	)		(2,759	)		(5,061	)		(8,261	)
Income from continuing operations before loss on sales of assets and other provisions, net		5,~~970~~669			5,~~045~~564			1319,~~477~~146			814,~~381~~033
Loss on sales of assets and other provisions, net		(3	)		~~(149~~—	)		(~~442~~445	)		(1,009	)
Income from continuing operations		5,~~967~~666			45,~~896~~564			1318,~~035~~701			713,~~372~~024
Discontinued operations—net operations of sold properties		—			1,631			—			3,453
Discontinued operations - net operations of sold properties		—			1,017			—			4,376
Discontinued operations—gain on sale of property		—			3,340			—			3,340
Discontinued operations - gain on sale of property		—			19,085			—			22,425
Net income	$	5,~~967~~666		$	925,~~867~~666		$	1318,~~035~~701		$	1439,~~165~~825
Net income attributable to general partner	$	6057		$	99257		$	~~130~~187		$	~~142~~398
Net income attributable to limited partners	$	5,~~907~~609		$	925,~~768~~409		$	1218,~~905~~514		$	1439,~~023~~427

See accompanying notes to consolidated financial statements.

CARRAMERICA REALTY, L.P. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

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

(Unaudited and in thousands)	2003			2002
	2003			2002
(Unaudited and in thousands)
Cash flows from operating activities:
Net income	$	1318,~~035~~701		$	1439,~~165~~825
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		16,018			15,485
Depreciation and amortization (including discontinued operations)		24,513			23,358
Loss on sale of assets and other provisions, net		~~442~~445			1,009
Gain on sale of discontinued operations		—			(322,~~340~~425	)
Equity in earnings of unconsolidated entities		(1,~~257~~725	)		(2,~~019~~654	)
Other		—(132	)		(~~145~~143	)
Change in assets and liabilities:
Decrease in accounts and notes receivable, net		1,~~262~~172			2,~~308~~462
Increase in accrued straight-line rents		(12,~~822~~512	)		(~~912~~1,508	)
Additions to tenant leasing costs		(23,~~420~~175	)		(12,~~728~~659	)
(Increase) decrease in prepaid expenses and other assets		(1,194	)		524
Increase in prepaid expenses and other assets		(903	)		(1,123	)
Decrease in accounts payable and accrued expenses		(2,471	)		(2,215	)
(Decrease) increase in accounts payable and accrued expenses		(882	)		331
Decrease in due to affiliates		(12,909	)		(6,762	)
Increase (decrease) in rent received in advance and security deposits		366			(602	)
Increase (decrease) in rent received in advance and security deposits		576			(1,966	)
Total adjustments		17,167			(3,954	)
Total adjustments		(3,775	)		239
Net cash provided by operating activities		35,868			35,871
Net cash provided by operating activities		9,260			14,404
Cash flows from investing activities:
Acquisitions and additions to rental property		(68,~~141~~716	)		(22104,~~700~~743	)
Additions to land held for development		(~~110~~159	)		(~~230~~239	)
Distributions from unconsolidated entities		15,~~886~~832			2,~~573~~957
Contributions to unconsolidated entities		—			(74109	)
(Increase) decrease in restricted deposits		(239	)		355
Increase in restricted deposits		(344	)		(538	)
Proceeds from sale of property		—			10129,~~699~~418
Net cash used by investing activities		(4,604	)		(9,377	)
Net cash (used) provided by investing activities		(3,387	)		26,746
Cash flows from financing activities:
Distributions on mandatorily redeemable partnership units		(1,202	)		(1,331	)
Decrease in due to affiliates		(24,574	)		(54,058	)
Repayments on mortgages and notes payable		(5,108	)		(4,922	)
Distributions on mandatorily redeemable partnership units		(1,845	)		(1,946	)
Net cash used by financing activities		(6,310	)		(6,253	)
Repayments on mortgages and notes payable		(7,716	)		(7,454	)
Decrease in cash and cash equivalents		(1,654	)		(1,226	)
Net cash used by financing activities		(34,135	)		(63,458	)
Decrease in cash and cash equivalents		(1,654	)		(841	)
Cash and cash equivalents, beginning of the period		1,654			1,226
Cash and cash equivalents, end of the period	$	—		$	—385
Supplemental disclosure of cash flow information:
Cash paid for interest, net of capitalized interest of $186 for the six months ended June 30, 2002	$	5,013		$	7,951
Cash paid for interest, net of capitalized interest of $196 for the nine months ended September 30, 2002	$	6,924		$	11,714

See accompanying notes to consolidated financial statements.

CARRAMERICA REALTY, L.P. AND 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 on March 6, 1996 for the purpose of owning, acquiring, developing and operating office buildings across the United States. As of ~~June~~September 30, 2003, we owned a controlling interest in a portfolio of 55 operating office buildings. As of ~~June~~September 30, 2003, we also owned a minority interest in 3031 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.

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. Our General Partner owned a 1.0% interest in us at ~~June~~September 30, 2003. Our limited partners are CarrAmerica Realty LP Holdings, Inc., a wholly owned ~~subsidiary~~ subsidiary of CarrAmerica, which owned an approximate 90.0% interest in us at ~~June~~September 30, 2003, and various other individuals and entities, which collectively owned an approximate 9.0% aggregate interest in us at ~~June~~September 30, 2003.

(b)

Basis of Presentation

The financial statements have been prepared using the accounting policies described in our 2002 annual report on Form 10-K except that, effective January 1, 2003, we began using the fair value method to account for employee stock compensation awards. The effect of the change on the financial statements was immaterial.

Our accounts and those of our ~~wholly~~controlled ~~owned~~ subsidiaries and affiliates are consolidated in the ~~accompanying~~ financial statements. We consolidate ~~use~~all entities in which we own a direct or indirect majority voting interest and where the minority holders do not have rights to participate in significant decisions that are made in the ordinary course of business. If applicable, we would consolidate any variable interest entity of which we were the primary beneficiary. We use the equity method to account for our investments in and our share of the earnings or losses of unconsolidated entities. These entities are not ~~majority-owned~~controlled by us. If events or ~~controlled~~changes byin uscircumstances indicate that the fair value of an investment accounted for using the equity method has declined below its carrying value and we consider the decline to be “other than temporary,” the investment is written down to fair value and an impairment loss is recognized.

We operate as a unit of CarrAmerica. We utilize CarrAmerica’s employees and administrative services. Certain general and administrative costs are allocated to us based upon specific identification of individual costs or estimated levels of effort by its general and administrative departments and otherwise through allocations based upon our relative total assets. In the opinion of management, the methods for allocating general and administrative costs to us are 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.

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.

CARRAMERICA REALTY, L.P. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

(c)

Interim Financial Statements

(d)

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~~ 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~~ 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~~ 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 (“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~~initially applied 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~~applied to VIEs in which we acquired an interest before February 1, 2003. WeThe ~~may~~adoption ~~apply~~of ~~the~~ Interpretation ~~prospectively,~~No. ~~with~~46 ain ~~cumulative effect adjustment as of July 1,~~ 2003, orhad byno ~~restating previously issued financial statements with a cumulative~~ effect ~~adjustment as of the beginning of the first year restated. Based~~ on our ~~current~~financial ~~analysis,~~statements weas ~~are not associated with any VIEs and~~ we ~~believe~~concluded that we ~~will~~are 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.

(2e) ~~Mortgages and Notes Payable~~Reclassifications

~~Our~~Certain ~~mortgages~~reclassifications ~~and~~of ~~notes~~prior ~~payable~~period ~~are~~amounts ~~summarized~~have asbeen ~~follows:~~made to conform to the current period’s presentation.

(In thousands)	June 30,2003		December 31, 2002
Fixed rate mortgages	$	76,834	$	81,636
Fixed rate notes payable to affiliate		38,638		38,944
	$	115,472	$	120,580

Mortgages payable are collateralized by properties and generally require monthly principal and/or interest payments. Mortgages payable mature at various dates from December 2004 through May

CARRAMERICA REALTY, L.P. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

~~2017.~~(2) ~~The~~Mortgages ~~weighted average interest rate of fixed rate mortgages~~ and ~~notes~~Notes ~~payable was 7.91% at June 30, 2003. The weighted average interest rate of our fixed rate mortgages, excluding the notes payable to affiliate, was 7.61% as of June 30, 2003.~~ Payable

WeOur ~~have~~mortgages ~~two loans with CarrAmerica. The first is a $30.0 million loan that bears interest at 8.5%~~ and ~~requires~~notes ~~monthly~~payable ~~principal~~are ~~and~~summarized ~~interest~~as ~~payments~~follows: ~~of $242,000 and matures on 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.~~

Debt maturities at June 30, 2003 were as follows:

(In thousands)	September 30, 2003		December 31, 2002
Fixed rate mortgages	$	74,385	$	81,636
Fixed rate notes payable to affiliate		38,479		38,944

	$	112,864	$	120,580

(In thousands)
2003	$	5,306
2004		15,657
2005		12,367
2006		12,632
2007		13,888
2008 and thereafter		55,622
	$	115,472

Mortgages payable are collateralized by properties and generally require monthly principal and/or interest payments. Mortgages payable mature at various dates from December 2004 through May 2017. The weighted average interest rate of fixed rate mortgages and notes payable was 7.90% at September 30, 2003. The weighted average interest rate of our fixed rate mortgages, excluding the notes payable to affiliate, was 7.60% as of September 30, 2003.

We have ~~unconditionally~~ ~~guaranteed~~two ~~unsecured~~loans ~~notes~~with ~~issued by~~ CarrAmerica ~~to institutional and other investors~~. The ~~aggregate~~first ~~principal~~is ~~amount~~a ~~of the unsecured notes was~~ $130.10 ~~billion~~million asloan of(balance ~~June~~at September 30, 2003. ~~These notes are in the form~~ of $~~150~~26.05 million) ~~of 7.20%~~that ~~notes~~bears ~~due~~interest inat ~~2004, $100~~8.~~0 million of 6.625~~5% ~~notes~~and ~~due~~requires inmonthly ~~2005,~~principal ~~$125.0~~and ~~million~~interest payments of ~~7.375% notes due in 2007~~$242,000 ~~$100.0~~and ~~million~~matures ofon ~~6.875%~~May ~~notes due in 2008~~31, ~~$400~~2011.0 ~~million~~The ofsecond ~~7.125%~~is ~~notes~~a ~~due in 2012,~~ $5012.0 million ofloan ~~5.261%~~that ~~notes~~bears ~~due~~interest inat ~~2007 and $175~~8.~~0 million of~~ 5~~.250~~% ~~notes~~and ~~due~~requires inmonthly ~~2007.~~interest ~~CarrAmerica’s~~only ~~senior~~payments ~~unsecured~~of ~~notes~~$85,000 ~~contain~~and ~~various~~matures ~~covenants~~on March ~~with~~27, ~~which CarrAmerica must comply~~2007. ~~The covenants include:~~

Debt maturities at September 30, 2003 were as follows:

(In thousands)
2003	$	2,698
2004		15,657
2005		12,367
2006		12,632
2007		13,888
2008 and thereafter		55,622

	$	112,864

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 September 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, $50.0 million of 5.261% notes due in 2007, $175.0 million of 5.250% notes due in 2007, $100.0 million of 6.875% notes due in 2008, and $400.0 million of 7.125% notes due in 2012. 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~~September 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.

CARRAMERICA REALTY, L.P. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

(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 nine months ended September 30, 2003, we did not dispose of any operating properties, although we reduced a previously recognized gain $0.4 million for additional costs related to a sold property. During the three months ended September 30, 2002, we disposed of one operating property (Commons at Las Colinas), recognizing a gain of $19.1 million. For the nine months ended September 30, 2002, we disposed of two operating properties (Wasatch 17 and Commons at Las Colinas), recognizing a gain of $22.4 million. These gains have been classified as discontinued operations as we have no continuing involvement with the properties. We also recognized impairment losses of $1.0 million on two parcels of land held for development. These losses have been classified as loss on sale of assets and other provisions, net.

Operating results of the properties are summarized as follows:

(In thousands)	Three ~~MonthsEnded~~Months ~~June~~Ended September 30, 2002			~~Six MonthsEndedJune 30, 2002~~	Nine Months Ended September 30, 2002
Revenues	$	31,~~136~~617		$	~~6,655~~$	8,269
Property operating expenses		60(49	)		~~213~~	255
Depreciation and amortization		~~1,445~~649			~~2,989~~	3,638
Net operations of sold properties	$	1,~~631~~017		$	~~3,453~~$	4,376

Management’s Discussion and Analysis

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

The discussion that follows is based primarily on our consolidated financial statements as of ~~June~~September 30, 2003 and December 31, 2002 and for the three and ~~six~~nine months ended ~~June~~September 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.

During 2002, 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~~assumed 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.

During 2002, we sold two 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.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates 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 and estimates relate to evaluating the impairment of long-lived assets, ~~and~~allocating the ~~collectibility~~purchase cost of ~~accounts~~acquired properties, and ~~notes~~the collectibility of accounts 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 and related assets, such as tenant improvements and lease commissions, are written down to estimated fair value and an impairment loss is recognized. If we decide to sell rental properties or land ~~held for development~~holdings, 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. 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. Changes in estimated future cash flows due to changes in our plans or views of market and economic conditions could result in recognition of additional impairment losses that, under applicable accounting guidance, could be substantial.

~~Our~~We ~~allowance~~allocate ~~for~~the ~~doubtful~~purchase ~~accounts~~cost ~~receivable~~of isacquired ~~established~~properties ~~based~~to onthe ~~analysis~~related ofphysical ~~the~~assets ~~risk~~and ofin-place ~~loss~~leases based on ~~specific~~their ~~accounts~~fair values. The ~~analysis~~estimated ~~places~~fair ~~particular~~values ~~emphasis~~are based on ~~past-due~~a ~~accounts~~number ~~and~~of ~~considers~~factors ~~information~~and ~~such~~judgments asincluding ~~the~~estimates ~~nature and age~~ of ~~the~~future ~~receivable,~~cash ~~the~~flows ~~payment history~~ of ~~the tenant or other debtor~~properties, ~~the~~market ~~amount~~analysis of ~~security~~in-place ~~we hold, the financial condition of the~~ tenant leases and our assessment of ~~its ability to meet its lease obligations,~~ the ~~basis~~value ~~for any disputes and the status~~ of ~~related~~tenant ~~negotiations, etc~~relationships. ~~Our~~The ~~estimate~~estimated lives of the ~~required~~purchased ~~allowance,~~tangible ~~which~~and isintangible ~~reviewed~~assets onvary. aA ~~quarterly basis, is subject to revision as these factors~~ change ~~and~~in ~~is sensitive to~~ the ~~effects~~allocation of ~~economic and market conditions on~~ ~~our~~the ~~tenants,~~purchase ~~particularly~~cost inamong ~~our~~the ~~largest~~purchased ~~markets.~~assets ~~For~~would ~~example,~~affect ~~due~~the totiming ~~economic~~of ~~conditions~~recognition ~~and analysis~~ of ~~our~~the ~~accounts~~related ~~receivable,~~revenue ~~we increased our provision for uncollectible accounts (~~and ~~accrued straight-line rents) by approximately $0~~expenses.7 ~~million for the six months ended June 30, 2003.~~

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 amount of security we hold, 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 (and related accrued straight-line rents) by approximately $0.8 million for the nine months ended September 30, 2003.

Management’s Discussion and Analysis

RESULTS OF OPERATIONS

Operating results are summarized as follows:

	For the three months ended June 30,						Variance				For the six months ended June 30,								Variance
	For the three months endedSeptember 30,					Variance				For the nine months endedSeptember 30,								Variance
							2003 vs.												2003 vs.
(in millions)	2003		2002			2003 vs.2002				2003				2002				2003 vs.2002
(in millions)	2003		2002				2002				2003				2002				2002
Operating revenues	$	26.4	$	25.2		$	1.2			$	80.9			$	70.0			$	10.9
Operating revenues	$	27.2	$	22.5			$	4.7			$	54.5			$	44.8			$	9.7
Property operating expense		9.4		9.0			0.4				28.7				24.9				3.8
Property operating expense		9.7		7.8				1.9				19.3				15.9				3.4
General and administrative		1.1		0.6			0.5				3.4				3.1				0.3
General and administrative		1.2		1.0				0.2				2.3				2.5				(0.2	)
Depreciation and amortization		8.5		7.2			1.3				24.5				19.7				4.8
Depreciation and amortization		8.4		6.0				2.4				16.0				12.5				3.5
Interest expense		2.4		3.6			(1.2	)			7.4				11.5				(4.1	)
Interest expense		3.1		3.8				(0.7	)			5.0				7.9				(2.9	)
Loss on sales of assets and other provisions, net		—		—			—				(0.4	)			(1.0	)			0.6
Loss on sales of assets and other provisions, net		—		(0.1	)			0.1				(0.4	)			(1.0	)			0.6
Other income		0.7		0.8			(0.1	)			2.3				3.3				(1.0	)
Other income		1.1		1.2				(0.1	)			1.6				2.4				(0.8	)
Discontinued operations		—		20.1			(20.1	)			—				26.8				(26.8	)
Discontinued operations		—		5.0				(5.0	)			—				6.8				(6.8	)

Operating revenues increased $41.72 million (204.98%) for the ~~second~~third quarter of 2003 and $10.9 million (15.6%) for the nine months ended September 30, 2003 compared to the same ~~period~~periods in 2002. This increase was primarily due to higher minimum base rents ~~($3.9~~which ~~million)~~was partially offset by a decrease in recoveries from tenants. The increase in minimum base rents was principally due to base rents from the buildings we acquired in May and August of 2002 (see summary below), partially offset by higher vacancies in our other properties. WeDuring ~~expect~~2002 ~~minimum~~and ~~base~~in ~~rent~~some tocases becontinuing ~~under~~into ~~downward~~2003, ~~pressure~~our ~~during~~markets ~~the~~weakened ~~remainder~~substantially ofand ~~the~~our ~~year~~operations aswere aadversely ~~result~~impacted. Vacancy rates now appear to have peaked in many of ~~re-leasing~~our ~~space~~markets, atand ~~lower~~some positive net absorption of space ~~rates~~is ~~than~~occurring. ~~those~~However, because vacancy rates ~~that~~are ~~were~~still at high levels in ~~effect~~most ~~under~~markets, ~~expiring~~we ~~leases.~~do not expect any material improvement in leasing conditions until at least 2004

Operating ~~revenues~~results ~~increased~~of ~~$9.7 million (21.7%) for~~ the ~~six~~properties ~~months~~acquired ~~ended June 30, 2003 compared to the same period~~ in 2002 ~~for~~are ~~the~~summarized ~~same~~as ~~reasons~~follows: ~~described above.~~

Our lease rollover by square footage and rent at June 30, 2003 is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2003		2002		2003		2002
Revenue	$	4,983	$	2,554	$	15,306	$	2,869
Property operating expenses		1,531		815		4,422		881
Depreciation and amortization		2,261		661		4,787		661

Net operations of acquired properties	$	1,191	$	1,078	$	6,097	$	1,327

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	%

1 Does not included vacant space of 0.5 million sq. ft.

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).

Management’s Discussion and Analysis

~~For~~Our ~~the~~lease ~~six~~rollover ~~months~~by ~~ended~~square ~~June~~footage at September 30, 2003~~, property operating expenses increased $3.4 million (21.4%) in~~ ~~2003~~is ~~from~~as ~~2002~~follows: ~~for the same reasons described above.~~

General and administrative expense increased $0.2 million (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.

Year of Lease Expiration	Rented Sq. Footage ¹	Percent of Leased Square Footage Represented by Expiring Leases
2003	130,564	3.0	%
2004	893,694	20.3	%
2005	411,170	9.3	%
2006	293,590	6.7	%
2007	1,077,436	24.4	%
2008	543,056	12.3	%
2009	204,554	4.6	%
2010	152,423	3.5	%
2011	213,815	4.8	%
2012	417,847	9.5	%
2013 and thereafter	70,421	1.6	%

	4,408,570	100.0	%

~~Depreciation~~1 ~~and~~Does ~~amortization~~not ~~increased~~include ~~$2.4~~vacant ~~million~~space ~~(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~~0. ~~For the six months ended June 30, 2003 compared to 2002, depreciation and amortization increased $3.~~5 million ~~(28~~sq.~~0%)~~ ~~for the same reasons~~ft.

~~Interest~~Property ~~expense~~operating ~~decreased~~expenses increased $0.74 million (184.4%) in the ~~second~~third quarter of 2003 ~~compared~~from 2002 primarily as a result of expenses incurred related to the buildings ~~same~~we ~~period~~acquired in August 2002 ($1.4) ~~This~~partially ~~decrease~~offset ~~was~~by ~~primarily~~decreased ~~the~~real ~~result~~estate oftaxes ~~the~~($0.8 ~~repayment~~million). ofProperty ~~mortgage~~operating ~~debt.~~expenses ~~Interest~~increased ~~expense decreased~~ $23.98 million (3615.73%) for the ~~six~~nine months ended ~~June~~September 30, 2003 compared to ~~2002~~the same period for ~~the~~2002. The ~~same~~increase ~~reason~~is primarily due to general increases in insurance premiums ($0.5 ~~Mortgages~~million) and ~~notes~~increased ~~payable~~expenses ~~decreased~~related byto the buildings we acquired in May and August of 2002 ($~~20.~~3.9 million) ~~between~~partially ~~June~~offset ~~30,~~by decreased real estate taxes ($0.6 million). Our insurance expense increased as a result of increased insurance premiums from our June 2002 insurance renewal and ~~June~~the ~~30,~~cost ~~2003~~of terrorism coverage.

~~For~~General ~~the~~and ~~three~~administrative ~~months~~expense ~~ended~~increased ~~June~~$0.5 ~~30,~~million 2003, other income remained relatively flat compared to 2002 due primarily to decreased equity in earnings of unconsolidated entities offset by an increase in interest income on a note receivable from an affiliated company(83.3%) ~~Equity~~and ~~in earnings decreased~~ $0.23 million (229.37%) ~~as a result of increased vacancies~~ in ~~properties~~the ~~owned~~three bymonths ~~these~~and ~~entities.~~nine ~~For the six~~ months ended ~~June~~September 30, 2003, respectively ~~other~~compared ~~income~~to ~~decreased~~the ~~$0.7~~same ~~million~~periods ~~from 2002 primarily as a result of decreased equity~~ in ~~earnings of unconsolidated entities~~2002. ~~Equity~~The inincreases ~~earnings decreased~~were asdue aprimarily ~~result~~to of increased ~~vacancies~~allocations inof ~~properties~~expense ~~owned~~from ~~by these entities~~CarrAmerica.

WeDepreciation ~~dispose~~and ofamortization ~~assets~~increased ~~from~~$1.3 ~~time~~million to(18.1%) ~~time~~and ~~that~~$4.8 ~~are~~million ~~inconsistent with our long-term strategic or return objectives~~(24.4%) ~~During~~in the three months and ~~six~~nine months ended ~~June~~September 30, 2003, ~~we did not dispose of any operating properties,~~ ~~although~~respectively, wecompared ~~adjusted a previously recognized gain $0.4 million for additional costs related~~ to ~~a sold property. During~~ the ~~three~~same ~~months~~periods ~~ended~~in ~~June 30,~~ 2002~~, we disposed of one operating property, recognizing a gain of $3~~.3 ~~million.~~The Weincreases ~~had~~were ~~no continuing~~due ~~involvement~~primarily ~~with~~to the ~~property~~acquisitions ~~after~~of ~~the~~properties ~~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.~~

InInterest ~~May~~expense ~~2002,~~decreased we$1.2 ~~sold~~million ~~Wasatch~~(33.3%) ~~17,~~ and $4.1 million (35.7%) in ~~August~~the ~~2002~~three wemonths ~~sold~~and ~~Commons~~nine atmonths ~~Las~~ended ~~Colinas.~~September We30, ~~had~~2003, norespectively compared ~~continuing~~to ~~involvement~~the same periods in ~~either~~2002. The decreases were primarily the result of ~~these~~the ~~properties~~repayment ~~after their~~of ~~sale~~mortgage debt. Mortgages and ~~accordingly~~notes payable decreased by $83.9 million between September 30, ~~their~~2002 ~~results~~and ofSeptember ~~operations~~30, ~~are~~2003. ~~classified~~In as2002, ~~discontinued~~we ~~operations~~repaid intwo mortgages including one for $63.5 million associated with TransPotomac V Plaza and Canal Center and another for $10.9 million. The remainder of the ~~statements~~decrease was a result of ~~operations~~recurring inrepayments ~~2002~~on mortgages and notes payable.

~~Operating~~For ~~results~~the three months ended September 30, 2003, other income decreased $0.1 million (12.5%) compared to 2002 due primarily to decreased equity in earnings of ~~the~~unconsolidated entities. Equity in earnings decreased $0.2 million (26.3%) as a result of increased vacancies in properties ~~are~~owned ~~summarized:~~by these entities. For the nine months ended

(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

September 30, 2003, other income decreased $1.0 million from 2002 primarily as a result of decreased equity in earnings of unconsolidated entities. Equity in earnings decreased as a result of increased vacancies in properties owned by these entities.

Operating results of the properties are summarized as follows:

(In thousands)	Three Months Ended September 30, 2002			Nine Months Ended September 30, 2002
Revenues	$	1,617		$	8,269
Property operating expenses		(49	)		255
Depreciation and amortization		649			3,638

Net operations of sold properties	$	1,017		$	4,376

Consolidated Cash Flows

Consolidated cash flow information is summarized as follows:

	For the six months ended June 30,						Variance
	For the nine months ended September 30,						Variance
							2003 vs.
(in millions)	2003			2002			2003 vs. 2002
(in millions)	2003			2002			2002
Cash provided by operating activities	$	35.9		$	35.9		$	—
Cash provided by operating activities	$	9.3		$	14.4		$	(5.1	)
Cash (used) provided by investing activities		(3.4	)		26.7			(30.1	)
Cash used by investing activities		(4.6	)		(9.4	)		4.8
Cash used by financing activities		(34.1	)		(63.5	)		29.4
Cash used by financing activities		(6.3	)		(6.3	)		—

Operations generated $935.39 million of net cash for the first ~~six~~nine months of 2003 ~~compared~~and ~~to $14.4 million in~~ 2002. ~~The~~remaining ~~change in cash flow from operating activities was primarily the result of a decrease in accounts payable, accrued expenses and amounts due to affiliates ($6~~flat.1 million), decrease in accounts receivable and notes receivable collections ($1.0 million) and lower net income ($0.3 million). These decreases were partially offset by an increase in rents received in advance and security deposits ($2.6 million). The level of net cash provided by operating activities is ~~also~~ affected by the timing of receipt of revenues and payment of expenses.

Our investing activities used net cash of ($43.64) million in 2003 compared to generating $926.4 7 million in 2002. The ~~decrease~~net change in ~~net~~ cash ~~used~~flows byfrom investing activities in 2003 ~~compared to 2002~~ was ~~due~~ primarily due to a decrease in ~~additions~~proceeds tofrom ~~rental~~a sale of property ($16129.64 million), partially offset by a ~~reduction~~decrease in ~~proceeds~~acquisitions ~~from~~and ~~the~~additions ~~sales~~to ofproperty ~~properties~~($96.0 million) and an increase in distributions from unconsolidated subsidiaries ($102.79 million).

Our financing activities used net cash of ($34.1) million for the first nine months of 2003 and ($63.5) million for the same period in 2002. The net change in cash flows is a result of the timing of receipt and payment of amounts due to affiliates, primarily related to the properties we sold in 2002.

LIQUIDITY AND CAPITAL RESOURCES

General

Our liquidity and capital resources are dependent upon CarrAmerica and its affiliates. CarrAmerica, as a REIT, is required to distribute at least 90% of its taxable income to its stockholders on an annual basis. We and CarrAmerica require capital to invest in our existing portfolio of operating assets for capital projects. These capital projects can include such things as large-scale renovations, routine capital improvements, deferred maintenance on properties we have recently acquired and tenant related matters, including tenant improvements, allowances and leasing commissions. The amounts of the leasing 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.

Management’s Discussion and Analysis

projects can include such things as large-scale renovations, routine capital improvements, deferred maintenance on properties we have recently acquired and tenant related matters, including tenant improvements, allowances and leasing commissions. The amounts of the leasing 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 derive substantially all of our revenue from tenants under leases at our properties. Our operating cash flow therefore depends materially on the rents that we are able to charge to our tenants, and the ability of these tenants to make their rental payments. We believe that the diversity of our tenant base helps insulate us from the negative impact of tenant defaults and bankruptcies. However, general economic downturns, or economic downturns in one or more of our markets, could materially adversely impact the ability of our tenants to make lease payments and our ability to re-lease space on favorable terms as leases expire. In either of these cases, our cash flow and therefore our ability to meet our capital needs would be adversely affected.

As a result of the ongoing weak economic climate, the real estate markets have been materially affected. The contraction of office workforces has reduced demand for office space and overall vacancy rates have increased in all of our markets. During 2002 and in some cases continuing into 2003, our markets weakened substantially and our operations were adversely impacted. Vacancy rates now appear to have peaked in many of our markets, and some positive net absorption of space is occurring. However, because vacancy rates are still at high levels in most markets, we do not expect any material improvement in leasing conditions until at least 2004. The occupancy in our portfolio of stabilized operating properties decreased to approximately 89.4% at September 30, 2003 compared to 90.4% at December 31, 2002 and 89.6% at September 30, 2002. Market rental rates have declined in most markets from peak levels and we expect there will be additional declines in some markets in the remainder of 2003.

Debt Financing

CarrAmerica is our principal source of liquidity. CarrAmerica’s primary external source of liquidity is its unsecured credit facility. CarrAmerica has a three-year, $500.0 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 facility an additional year at its option. The facility carries an interest rate of 70 basis points over 30-day LIBOR, or 1.82% as of ~~June~~September 30, 2003. As of ~~June~~September 30, 2003, $~~188~~43.0 million was drawn on the credit facility, $4.68 million in letters of credit were outstanding and $~~307~~452.4 2 million was available for borrowing.

CarrAmerica’s unsecured credit facility contains financial and other covenants with which it must comply. Some of these covenants include:

•

A minimum ratio of annual EBITDA (earnings before interest, taxes, depreciation and amortization) to interest 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.

14Availability under the unsecured credit facility is also limited to a specified percentage of the fair value of unmortgaged properties. During 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. CarrAmerica is currently in compliance with all the financial covenants of its unsecured credit facility.

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.

Mortgages and notes payable decreased $7.7 million and $83.9 million as of September 30, 2003 as compared with December 31, 2002 and September 30, 2002, respectively. The decrease from December 31, 2002 was a result of recurring repayments on mortgages and notes payable. In 2002, we repaid two mortgages including one for $63.5 million associated with TransPotomac V Plaza and Canal Center and another for $10.9 million. The remainder of the decrease was a result of recurring repayments on mortgages and notes payable. We have debt maturities of $15.7 million in 2004. We expect that our operating cash flow in combination with borrowings from CarrAmerica will be adequate to meet this obligation.

Management’s Discussion and Analysis

Availability under the unsecured credit facility is also limited to a specified percentage of 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.

As a result of the ongoing weak economic climate, the real estate markets have been materially affected. The contraction of office workforces has reduced demand for office space and overall vacancy rates have increased in all of our markets. In reviewing various outlooks for the economy, we believe that the vacancy rates will not improve in any material fashion until at least 2004. During 2002 and into 2003, our markets weakened significantly and our operations were adversely impacted. The occupancy in our portfolio of stabilized operating properties decreased to 90.4% at June 30, 2003 and at December 31, 2002 and 90.9% at June 30, 2002. Market rental rates have declined in most markets from peak levels and we expect there will be additional declines in some markets in 2003.

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 lender could also attempt to foreclose on some of our assets in order to receive payment. In most cases, very little of the principal amount that we borrow is repaid prior to the maturity of the loan. We may refinance 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 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.

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);

•

otherwise impede our objectives; or

•

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~~September 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~~50.0 million of 65.~~875~~261% ~~notes~~ notes due in ~~2008~~2007, $~~400~~175.0 million of 75.~~125~~250% notes due in ~~2012~~2007, $50100.0 million of 56.~~261~~875% notes due in ~~2007~~2008, and $~~175~~400.0 million of 57.~~250~~125% notes due in ~~2007~~2012. CarrAmerica’s senior unsecured notes contain various covenants with which CarrAmerica ~~must~~ 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~~September 30, 2003., CarrAmerica was in compliance with its loan covenants.

Management’s Discussion and Analysis

CarrAmerica has $150.0 million in unsecured notes maturing July 1, 2004. CarrAmerica has notified us that they anticipate refinancing this debt with new unsecured debt rather than paying it down out of income from operations or from proceeds of an equity offering. If they are unable to issue unsecured notes, they expect to use their unsecured credit facility to repay the maturing notes. It is expected that we will guarantee any new debt.

Capital Commitments

~~We will require capital for development projects currently underway and in the future.~~ As of ~~June~~September 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.

16As 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 in the aggregate, with a deductible of $1.0 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 (“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 but there can be no assurance that such coverage will adequately compensate us for any loss, that our coverage would continue after a loss, or that a loss, even if covered, would not have a material adverse effect on our business, financial condition or results of operations.

Management’s Discussion and Analysis

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 in the aggregate, with a deductible of $1.0 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.

New Accounting Pronouncements

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation –- Transition and Disclosure.” SFAS No. 148 ~~provides~~ 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~~ is immaterial.

In January 2003, the FASB issued ~~Interpretation~~ 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~~initially applied to VIEs created after January 31, 2003 and to VIEs in which we ~~acquire~~acquired an interest after that date. Effective July 1, 2003, it also ~~applies~~applied to VIEs in which we acquired an interest before February 1, 2003. WeThe ~~may~~adoption ~~apply~~of ~~the~~ Interpretation ~~prospectively,~~No. ~~with a~~46 ~~cumulative~~in ~~effect adjustment as of July 1,~~ 2003, orhad byno ~~restating~~effect ~~previously~~on our ~~issued~~ financial statements ~~with a cumulative effect adjustment~~ as ~~of the beginning of the first year restated. Based on our current analysis,~~ we ~~are~~concluded ~~not associated with any VIEs and we believe~~ that we ~~will~~are not be required to consolidate any of our unconsolidated real estate ventures that we have accounted for using the equity method.

1718

Management’s Discussion and Analysis

Building and Lease Information

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

Consolidated Properties	Net ~~Rentable~~RentableArea ~~Area~~ (square feet)(1)	~~Percent Leased~~PercentLeased(2)		~~Number~~Numberof of Buildings
Southern California, Orange County/Los Angeles
South Coast Executive Center	~~161~~162,~~787~~504	9896.6		2
2600 W. Olive	144,831	100.0		1
Bay Technology Center	107,481	100.0		2
Southern California, San Diego
Jaycor	105,358	100.0		1
Towne Center Technology Park 4	105,358	100.0		1
11119 Torrey Pines Road	76,701	100.0		1
Northern California, San Francisco Bay Area
San Mateo I	7273,~~137~~240	28.62		1
San Mateo II and III	141,~~440~~427	7769.67		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	137,185	7476.27		3
Tower of the Hills	166,149	100.0		2
City View Center	128,716	100.0		1
Chicago, Illinois:
Bannockburn I & II	209,450	83.3		2
Bannockburn IV	108,801	93.0		1
Dallas, Texas:
Quorum North	~~116~~115,~~192~~723	7355.69		1
Quorum Place	178,684	8674.56		1
Cedar Maple Plaza	113,117	8385.57		3
Two Mission Park	77,593	73.8		1
5000 Quorum	~~162~~161,~~155~~338	8872.18		1
Denver, Colorado:
Harlequin Plaza	324,601	97.7		2
Quebec Court I & II	287,294	100.0		2
Quebec Center	106,~~865~~867	9395.96		3
Phoenix, Arizona:
Qwest Communications	532,506	100.0		4
Salt Lake City, Utah:
Sorenson Research Park	~~282~~281,~~944~~264	8390.98		5
Wasatch Corporate Center 18	49,566	62.1		1
Wasatch Corporate Center	178,231	7879.23		3
Sorensen X	41,288	100.0		1
Washington, DC:
TransPotomac V Plaza	97,006	98.1		1
Canal Center	492,001	84.09		4
TOTAL CONSOLIDATED PROPERTIES:	4,~~931~~930,~~769~~612			55
WEIGHTED AVERAGE		90.4	%
WEIGHTED AVERAGE AT SEPTEMBER 30, 2003		89.4	%

(1)	Includes office and retail space but excludes storage space.

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

1819

Management’s Discussion and Analysis

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 conditions,

•

The availability and creditworthiness of tenants,

•

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;

•

Ability to obtain insurance at a reasonable cost;

• Ability to maintain ~~our~~CarrAmerica’s status as a REIT 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 future results, performance, achievements or transactions, see the documents we file from time to time with the Securities and Exchange Commission, and in particular, the section titled “Risk Factors” in CarrAmerica’s Annual Report on Form 10-K.

1920

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Any significant changes in our market risk that have occurred since the filing of our Annual Report on Form 10-K for the year ended December 31, 2002 are summarized in the Liquidity and Capital Resources section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 4. Controls and Procedures

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~~September 30, 2003 of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15 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~~has been no ~~significant~~change ~~changes~~ in our internal ~~controls~~control orover financial reporting identified in ~~other~~connection with that evaluation that occurred during the three months ended ~~factors~~September 30, 2003 that ~~could~~has ~~significantly~~materially ~~affect~~affected, ~~these~~or ~~controls~~is ~~subsequent~~reasonably likely to ~~the~~materially ~~date~~affect, ofour ~~their~~internal ~~evaluation~~control over financial reporting.

2021

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. NoCarrAmerica’s ~~answer~~board of directors has ~~been~~determined ~~filed~~that, asbased on Maryland law and our charter, we or CarrAmerica are permitted to indemnify Mr. Hawkins in connection with these claims, and has authorized CarrAmerica or us to advance to or on behalf of ~~June~~Mr. 30Hawkins his costs and expenses incurred in defending this claim. Currently our legal counsel is also defending Mr. Hawkins in this matter and we are paying those legal fees directly. If it is later determined that Mr. Hawkins was not entitled to indemnification under Maryland law or CarrAmerica’s charter, Mr. Hawkins has agreed to reimburse CarrAmerica or us for any costs or expenses advanced to him or on his behalf. On October 29, 2003, we filed a motion to dismiss all claims asserted in the complaint. Due to the inherent uncertainties of the judicial process and the early stage of this action, we are unable to either predict the outcome of or estimate a range of potential loss associated with, this ~~matter~~litigation including our agreement to indemnify Mr. Hawkins. 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

1031.1 ~~Amendment~~Section ~~No.~~302 3Certification ~~Revolving~~from ~~Credit~~Mr. ~~Agreement~~Thomas ~~and Ratification and Reaffirmation of Guaranty dated May 31, 2003 (incorporated by reference to Exhibit 10~~A.1 ~~to CarrAmerica’s Quarterly Report on Form 10-Q~~Carr, ~~for~~dated ~~the~~November ~~quarter ended June 30~~6, 2003).

31.12 Section 302 Certification from Mr. ~~Thomas~~Stephen AE. ~~Carr~~Riffee, dated ~~August~~November 46, 2003

3132.21 Section ~~302~~906 Certification from Mr. Thomas A. Carr and Mr. Stephen E. Riffee, dated ~~August~~November 46, 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

2122

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

a/s/ ~~Delaware~~Kurt ~~Limited~~A. ~~Partnership~~Heister Kurt A. Heister, Treasurer (on behalf of registrant and as its principal accounting officer)

ByDate: ~~CarrAmerica~~ ~~Realty~~November ~~GP Holdings~~6, ~~Inc.,~~2003

~~its~~23 ~~general partner~~

/s/ Kurt A. Heister Kurt A. Heister, Controller and Treasurer (on behalf of registrant and as its principal accounting officer)

Date: August 4, 2003

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