Los Angeles is a leading international gateway city with a large, dynamic and diverse economy. As of December 31, 2005, the Los Angeles region had the largest metropolitan economy in California, the second largest metropolitan economy in the nation and accounted for more jobs than any U.S. region other than the New York metropolitan area.

Los Angeles County is the second largest market for office space in the United States and has a total inventory of approximately 368 million rentable square feet of office space. The Los Angeles County office market is comprised of seven distinct markets which attract different types of tenants and investors.

The Los Angeles County multifamily market is one of the strongest in the United States. Limited new construction of multifamily buildings and continued regional economic expansion and job growth have contributed to the overall strength of the Los Angeles County multifamily market, helping place Los Angeles County as the third most expensive multifamily market in the nation.

The State of Hawaii is located in the mid-Pacific Ocean approximately 2,400 miles from the west coast of the mainland United States.

Total economic output for Hawaii has shown consistent growth since 1985. According to the State of Hawaii Department of Business, Economic Development and Tourism, or DBEDT, Hawaii\\\\\\\\\\\\\\\'s economy performed well in the first quarter of 2006 with the outlook remaining positive for the balance of the year. The DBEDT projects growth in Hawaii\\\\\\\\\\\\\\\'s gross state product of 6.0% in 2006, following robust growth rates of 6.5% and 7.8% in 2005 and 2004, respectively.

The Company’s office portfolio contributed approximately 84.7% of its annualized rent as of June 30, 2006, while the Company’s multifamily portfolio contributed approximately 15.3%.

As of June 30, 2006, the Company’s Los Angeles County office and multifamily portfolio contributed approximately 90.8% of its annualized rent, and the Company’s Honolulu, Hawaii office and multifamily portfolio contributed approximately 9.2%.

Most of the Company’s office properties are located in superior locations in premier Los Angeles County submarkets which benefit from supply constraints and generally enjoy higher rents and lower vacancy rates than other Los Angeles County office submarkets.

Additionally, the Company expects that its West Los Angeles multifamily properties will provide significant growth opportunities due to their superior locations, supply constraints in its submarkets and the potential for rent increases as rent-controlled units are re-leased at market levels.

The Company believes that the Honolulu market provides many of the same positive characteristics as its submarkets in Los Angeles County.

As of June 30, 2006, the Company’s average asking rents in its Los Angeles County office portfolio were at a 14.6% premium to the Company’s average in-place rents. Excluding the Warner Center/Woodland Hills submarket, where the Company acquired properties with significant vacancies in recent years, its occupancy rate was 96.1%, which reflects a 2.5 percentage point premium to that of its submarkets.

The Company’s office and multifamily portfolio is located in nine premier Los Angeles County submarkets and Honolulu, Hawaii.

Total operating expenses decreased by $0.6 million, or 0.5%, to $126.6 million for the six months ended June 30, 2006 compared to $127.2 million for the six months ended June 30, 2005.

Gain on investments in interest rate contracts, net increased $53.7 million, or 851.9%, to $60.0 million for the six months ended June 30, 2006 compared to $6.3 million for the six months ended June 30, 2005.

Interest and other income increased $1.8 million, or 241.6%, to $2.5 million for the six months ended June 30, 2006 compared to $0.7 million for the six months ended June 30, 2005.

Interest expense increased $5.7 million, or 10.9%, to $58.1 million for the six months ended June 30, 2006 compared to $52.4 million for the six months ended June 30, 2005.