##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 001-32649
 COGDELL SPENCER INC.
  Maryland
    
    20-3126457(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)4401 Barclay Downs Drive, Suite 300Charlotte, North Carolina
    
    28209(Address of principal executive offices)
    
    (Zip code)
 (704) 940-2900
 
 þ o
  o þ o
 o þ




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##### 



TABLE OF CONTENTS
 PagePART I
    
    FINANCIAL INFORMATIONItem 1
    
    Condensed Consolidated Financial Statements (Unaudited)
    
    1Item 2
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    10Item 3
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    18Item 4
    
    Controls and Procedures
    
    18PART II
    
    Other InformationItem 1
    
    Legal Proceedings
    
    18Item 1A
    
    Risk Factors
    
    19Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    19Item 3
    
    Defaults Upon Senior Securities
    
    19Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    19Item 5
    
    Other Information
    
    19Item 6
    
    Exhibits
    
    20Exhibit 31.1Exhibit 31.2Exhibit 32.1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 COGDELL SPENCER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 As of
    
    
    As ofMarch 31, 2007
    
    
    December 31, 2006AssetsReal estate properties:Land
    
    $
    22,768
    
    
    $
    22,768Buildings and improvements
    
    
    341,329
    
    
    
    339,214Less: Accumulated depreciation
    
    
    (28,489
    )
    
    
    (23,664
    )Total operating real estate properties, net
    
    
    335,608
    
    
    
    338,318Construction in progress
    
    
    20,449
    
    
    
    12,854Total real estate properties, net
    
    
    356,057
    
    
    
    351,172Cash and cash equivalents
    
    
    4,985
    
    
    
    1,029Restricted cash
    
    
    874
    
    
    
    982Investment in capital lease
    
    
    6,117
    
    
    
    6,193Acquired above market leases, net of accumulated
amortization of $346 in 2007 and $290 in 2006
    
    
    910
    
    
    
    966Acquired in place lease value and deferred leasing
costs, net of accumulated amortization of $12,951
in 2007 and $11,184 in 2006
    
    
    16,411
    
    
    
    18,205Acquired ground leases, net of accumulated
amortization of $120 in 2007 and $146 in 2006
    
    
    3,111
    
    
    
    3,092Deferred financing costs, net of accumulated
amortization of $447 in 2007 and $342 in 2006
    
    
    1,122
    
    
    
    1,018Goodwill
    
    
    5,335
    
    
    
    5,326Other assets
    
    
    5,683
    
    
    
    5,075Total assets
    
    $
    400,605
    
    
    $
    393,058Liabilities and stockholders equityNotes payable under line of credit
    
    $
    11,500
    
    
    $
    77,487Mortgage loans
    
    
    182,820
    
    
    
    184,544Accounts payable and other liabilities
    
    
    14,401
    
    
    
    9,851Accrued dividends and distributions
    
    
    5,787
    
    
    
    4,404Acquired below market leases, net of accumulated
amortization of $1,620 in 2007 and $1,384 in 2006
    
    
    2,855
    
    
    
    3,096Total liabilities
    
    
    217,363
    
    
    
    279,382Commitments and contingenciesMinority interests
    
    
    51,307
    
    
    
    54,001Stockholders equity:Preferred stock, $0.01 par value; 50,000 shares
authorized, none issued or outstanding
    
    
    
    
    
    
    Common Stock; $0.01 par value; 200,000 shares
authorized, 11,949 and 8,000 shares issued and
outstanding in 2007 and 2006, respectively
    
    
    119
    
    
    
    80Additional paid-in capital
    
    
    165,703
    
    
    
    87,224Accumulated other comprehensive income (loss)
    
    
    (90
    )
    
    
    73Accumulated deficit
    
    
    (33,797
    )
    
    
    (27,702
    )Total stockholders equity
    
    
    131,935
    
    
    
    59,675Total liabilities and stockholders equity
    
    $
    400,605
    
    
    $
    393,058
  1




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COGDELL SPENCER INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended March 31,2007
    
    
    2006Revenues:Rental
    
    $
    14,315
    
    
    $
    11,718Management fee revenue
    
    
    598
    
    
    
    343Expense reimbursements
    
    
    346
    
    
    
    174Development fee revenue
    
    
    230
    
    
    
    86Interest and other income
    
    
    409
    
    
    
    292Total revenues
    
    
    15,898
    
    
    
    12,613Expenses:Property operating and management
    
    
    5,905
    
    
    
    4,094General and administrative
    
    
    2,251
    
    
    
    1,995Depreciation
    
    
    4,851
    
    
    
    4,309Amortization
    
    
    1,791
    
    
    
    2,152Interest
    
    
    4,035
    
    
    
    2,391Total expenses
    
    
    18,833
    
    
    
    14,941Loss from continuing operations before equity in earnings (loss)
of unconsolidated real estate partnerships, minority interest in
real estate partnership, minority interests in operating partnership
and discontinued operations
    
    
    (2,935
    )
    
    
    (2,328
    )Equity in earnings (loss) of unconsolidated real estate partnerships
    
    
    (9
    )
    
    
    5Minority interests in real estate partnership
    
    
    (17
    )
    
    
    (31
    )Minority interests in operating partnership
    
    
    1,048
    
    
    
    831Loss from continuing operations
    
    
    (1,913
    )
    
    
    (1,523
    )Discontinued operations:Loss from discontinued operations
    
    
    
    
    
    
    (4
    )Minority interests in operating partnership
    
    
    
    
    
    
    2Total discontinued operations
    
    
    
    
    
    
    (2
    )Net loss
    
    $
    (1,913
    )
    
    $
    (1,525
    )Per share data  basic and dilutedLoss from continuing operations
    
    $
    (0.23
    )
    
    $
    (0.19
    )Loss from discontinued operations
    
    
    
    
    
    
    Net loss
    
    $
    (0.23
    )
    
    $
    (0.19
    )Weighted average common shares  basic and diluted
    
    
    8,334
    
    
    
    7,973
  2




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COGDELL SPENCER INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 AccumulatedNumber of
    
    
    
    
    
    
    Additional
    
    
    OtherCommon
    
    
    Common
    
    
    Paid-in
    
    
    Comprehensive
    
    
    AccumulatedShares
    
    
    Stock
    
    
    Capital
    
    
    Income
    
    
    Deficit
    
    
    TotalBalance at December 31, 2006
    
    
    8,000
    
    
    $
    80
    
    
    $
    87,224
    
    
    $
    73
    
    
    $
    (27,702
    )
    
    $
    59,675Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,913
    )
    
    
    (1,913
    )Unrealized loss on interest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (163
    )
    
    
    
    
    
    
    (163
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,076
    )Issuance of common stock, net of costs
    
    
    3,949
    
    
    
    39
    
    
    
    78,460
    
    
    
    
    
    
    
    
    
    
    
    78,499Amortization of restricted stock grants
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    19Dividends to common stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,182
    )
    
    
    (4,182
    )Balance at March 31, 2007
    
    
    11,949
    
    
    $
    119
    
    
    $
    165,703
    
    
    $
    (90
    )
    
    $
    (33,797
    )
    
    $
    131,935
  3




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COGDELL SPENCER INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months Ended
    
    
    Three Months EndedMarch 31, 2007
    
    
    March 31, 2006Operating activities:Net loss
    
    $
    (1,913
    )
    
    $
    (1,525
    )Adjustments to reconcile net loss to cash
provided by operating activities:Minority interests
    
    
    (1,031
    )
    
    
    (802
    )Depreciation and amortization (including amounts in
discontinued operations)
    
    
    6,642
    
    
    
    6,486Amortization of acquired above market leases and
acquired below market leases, net (including amounts in
discontinued operations)
    
    
    (180
    )
    
    
    (201
    )Straight line rent revenue
    
    
    (60
    )
    
    
    (19
    )Amortization of deferred finance costs and debt premium
    
    
    56
    
    
    
    (3
    )Equity-based compensation
    
    
    29
    
    
    
    28Equity in (earnings) loss of unconsolidated
real estate partnerships
    
    
    9
    
    
    
    (5
    )Change in fair value of interest rate swap agreements
    
    
    
    
    
    
    (309
    )Changes in operating assets and liabilities:Other assets
    
    
    94
    
    
    
    (68
    )Accounts payable and other liabilities
    
    
    1,877
    
    
    
    893Net cash provided by operating activities
    
    
    5,523
    
    
    
    4,475Investing activities:Investment in real estate properties
    
    
    (8,059
    )
    
    
    (71,689
    )Proceeds from capital lease
    
    
    76
    
    
    
    51Purchase of corporate equipment
    
    
    (237
    )
    
    
    Distributions received from real estate partnerships
    
    
    
    
    
    
    2Decrease (increase) in restricted cash
    
    
    108
    
    
    
    (38
    )Net cash used in investing activities
    
    
    (8,112
    )
    
    
    (71,674
    )Financing activities:Repayments of mortgage notes payable
    
    
    (1,675
    )
    
    
    (4,829
    )Proceeds from line of credit
    
    
    11,200
    
    
    
    68,250Repayments to line of credit
    
    
    (77,187
    )
    
    
    (2,000
    )Net proceeds from sale of common stock
    
    
    78,875
    
    
    
    Dividends and distributions
    
    
    (4,404
    )
    
    
    Distributions to minority interests in real estate partnership
    
    
    (68
    )
    
    
    (85
    )Payment of deferred financing costs
    
    
    (196
    )
    
    
    (24
    )Net cash provided by financing activities
    
    
    6,545
    
    
    
    61,312Increase (decrease) in cash and cash equivalents
    
    
    3,956
    
    
    
    (5,887
    )Balance at beginning of period
    
    
    1,029
    
    
    
    9,571Cumulative effect adjustment associated with the
implementation of EITF 04-5
    
    
    
    
    
    
    213Balance at end of period
    
    $
    4,985
    
    
    $
    3,897Supplemental disclosure of cash flow information:Cash paid for interest, net of capitalized interest
    
    $
    3,654
    
    
    $
    2,539Supplemental cash flow information  noncash
investing and financing activities:Debt assumed with purchase of property
    
    
    
    
    
    
    5,178Accrued dividends and distributions
    
    
    5,787
    
    
    
    4,328
  4




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COGDELL SPENCER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Business Description
  2. Summary of Significant Accounting Policies
 Basis of Presentation
   Interim Financial Information
  Use of Estimates in Financial Statements
  Reclassifications
  Recent Accounting Pronouncements
 5




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3. Investments in Real Estate Partnerships
  
    
    McLeod Medical Partners, LLC, a South Carolina limited liability company, founded in
1982, 1.1% owned by the Company, and owns three medical office buildings;
    
    Shannon Health/MOB Limited Partnership No. 1, a Delaware limited partnership, founded in
2001, 2.0% owned by the Company, and owns ten medical office buildings
    
    BSB Health/MOB Limited Partnership No. 2, a Delaware limited partnership, founded in
2002, 2.0% owned by the Company, and owns nine medical office buildings; and
    
    Rocky Mount MOB, LLC, a North Carolina limited liability company, founded in 2002, 34.5%
owned by the Company, and owns one medical office building.
   6




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March 31, 2007
    

December 31, 2006Financial position:Total assets
    
    $
    58,868
    
    
    $
    58,267Total liabilities
    
    
    52,353
    
    
    
    51,441Members equity
    
    
    6,515
    
    
    
    6,826
 Three Months
    
    Three MonthsEnded
    
    EndedMarch 31, 2007
    
    March 31, 2006Results of operations:Revenues
    
    $
    2,848
    
    
    $
    1,359Operating and general and administrative expenses
    
    
    1,119
    
    
    
    675Net income
    
    
    299
    
    
    
    143
 4. Mortgages, Notes Payable and Guarantees
    5. Minority Interests
   6. Dividends and Distributions
  7




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7. Loss per Share
  Three months ended
    
    
    Three months endedMarch 31, 2007
    
    
    March 31, 2006Loss from continuing operations
    
    $
    (1,913
    )
    
    $
    (1,523
    )Loss from discontinued operations
    
    
    
    
    
    
    (2
    )Net loss
    
    $
    (1,913
    )
    
    $
    (1,525
    )Per share data  basic and diluted:Loss from continuing operations
    
    $
    (0.23
    )
    
    $
    (0.19
    )Income (loss) from discontinued operations
    
    
    
    
    
    
    Net loss
    
    $
    (0.23
    )
    
    $
    (0.19
    )Weighted average shares outstanding  basic and diluted
    
    
    8,334
    
    
    
    7,973
  March 31, 2007
    
    March 31, 2006Operating Partnership units
    
    
    4,584
    
    
    
    4,365Unvested restricted stock
    
    
    19
    
    
    
    254,603
    
    
    
    4,390
 8. Related Party Transactions
  9. Segment Reporting
  8




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Three Months EndedMarch 31, 2007
    
    
    March 31, 2006Property operations:Rental revenues
    
    $
    14,315
    
    
    $
    11,718Interest and other income
    
    
    194
    
    
    
    205Property operating expenses
    
    
    (4,245
    )
    
    
    (3,181
    )Intersegment expenses
    
    
    (997
    )
    
    
    (843
    )Net operating income
    
    $
    9,267
    
    
    $
    7,899Total segment assets, end of period
    
    $
    391,812
    
    
    $
    370,556Real estate services:Fee revenue
    
    $
    828
    
    
    $
    429Expense reimbursements
    
    
    348
    
    
    
    174Interest and other income
    
    
    213
    
    
    
    85Intersegment revenues
    
    
    997
    
    
    
    843Real estate operating expenses
    
    
    (1,955
    )
    
    
    (1,033
    )Net operating income
    
    $
    431
    
    
    $
    498Total segment assets, end of period
    
    $
    8,793
    
    
    $
    6,325Reconciliations:Total segment revenues
    
    $
    16,895
    
    
    $
    13,454Elimination of intersegment revenues
    
    
    (997
    )
    
    
    (843
    )Total revenues
    
    $
    15,898
    
    
    $
    12,611Total segment net operating income
    
    $
    9,698
    
    
    $
    8,397Corporate general and administrative expenses
    
    
    (1,956
    )
    
    
    (1,873
    )Depreciation and amortization expense
    
    
    (6,642
    )
    
    
    (6,461
    )Interest expense
    
    
    (4,035
    )
    
    
    (2,391
    )Equity in earnings (loss) of unconsolidated real estate partnerships
    
    
    (9
    )
    
    
    5Minority interests
    
    
    1,031
    
    
    
    800Total discontinued operations
    
    
    
    
    
    
    (2
    )Net loss
    
    $
    (1,913
    )
    
    $
    (1,525
    )Total segment assets
    
    $
    400,605
    
    
    $
    376,881Total discontinued operations
    
    
    
    
    
    
    1,504Total assets, end of period
    
    $
    400,605
    
    
    $
    378,385
 9




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 When used in this discussion and elsewhere in this Quarterly Report on Form 10-Q , the words
believes, anticipates, projects, should, estimates, expects, and similar expressions
are intended to identify forward-looking statements with the meaning of that term in Section 27A of
the Securities Act of 1933, as amended, and in Section 21F of the Securities and Exchange Act of
1934, as amended. Actual results may differ materially due to uncertainties including:
 
    
    the Companys business strategy;
    
    the Companys ability to obtain future financing arrangements;
    
    estimates relating to the Companys future distributions;
    
    the Companys understanding of the Companys competition;
    
    the Companys ability to renew the Companys ground leases;
    
    changes in the reimbursement available to the Companys tenants by government or private payors;
    
    the Companys tenants ability to make rent payments;
    
    defaults by tenants;
    
    market trends; and
    
    projected capital expenditures.
  Overview
    
    
    50 wholly owned properties;
    
    four joint venture properties; and
    
    58 properties owned by third parties.
 10




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Factors Which May Influence Future Results of Operations
   Critical Accounting Policies
   Investments in Real Estate
 Acquisition of real estate.
 11




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Useful lives of assets.
 Asset impairment valuation.
 Revenue Recognition
   12




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REIT Qualification Requirements
  Changes in Financial Condition
  Results of Operations
  Property Summary
  Three Months EndedMarch 31, 2007
    
    March 31, 2006Properties at January 1
    
    
    50
    
    
    
    44Consolidation of Rocky Mount
MOB LLC
    
    
    
    
    
    
    1Acquisitions
    
    
    
    
    
    
    4Dispositions
    
    
    
    
    
    
    Properties at March 31
    
    
    50
    
    
    
    49
 Year EndedDecember 31, 2006Properties at January 1
    
    
    44Consolidation of Rocky Mount MOB LLC
    
    
    1Acquisitions
    
    
    6Dispositions
    
    
    (1
    )Properties at December 31
    
    
    50
  Comparison of the three months ended March 31, 2007 and March 31, 2006
 Revenue.
 13




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##### Table of Contents



Property operating and management expenses.
 Interest expense.
  General and administrative expenses.
 Cash Flows
 Comparison of the three months ended March 31, 2007 and March 31, 2006
    Construction in Progress
  14




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Estimated
    
    Net
    
    
    
    
    
    
    EstimatedCompletion
    
    Rentable
    
    
    Investment
    
    
    TotalProperty
    
    Location
    
    Date
    
    Square Feet
    
    
    to Date
    
    
    InvestmentCarolina Forest Medical Plaza
    
    Horry County, SC
    
    2Q 2007
    
    
    39,000
    
    
    $
    5,840
    
    
    $
    7,400Lancaster Rehabilitation Hospital
    
    Lancaster, PA
    
    2Q 2007
    
    
    52,800
    
    
    
    8,867
    
    
    
    12,300Lancaster General Health Campus MOB
    
    Lancaster, PA
    
    4Q 2007
    
    
    64,070
    
    
    
    3,837
    
    
    
    13,500Mebane Medical Office Building
    
    Mebane, NC
    
    2Q 2008
    
    
    60,000
    
    
    
    898
    
    
    
    16,200Land and pre-construction developments
    
    
    
    
    
    
    
    
    
    
    1,007
    
    
    
    215,870
    
    
    $
    20,449
    
    
    $
    49,400
  Liquidity and Capital Resources
       15




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Long-Term Liquidity Needs
   Contractual Obligations
  ThroughRemainderof 2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    TotalObligation:Long-term debt principal
payments and maturities (1)
    
    $
    48,720
    
    
    $
    50,657
    
    
    $
    46,438
    
    
    $
    1,456
    
    
    $
    3,562
    
    
    $
    43,035
    
    
    $
    193,868Standby letters of credit (2)
    
    
    2,199
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,199Interest payments (3)
    
    
    8,965
    
    
    
    8,235
    
    
    
    5,258
    
    
    
    2,938
    
    
    
    2,692
    
    
    
    1,316
    
    
    
    29,404Ground leases (4)
    
    
    146
    
    
    
    195
    
    
    
    195
    
    
    
    195
    
    
    
    195
    
    
    
    6,781
    
    
    
    7,707Operating leases (5)
    
    
    251
    
    
    
    403
    
    
    
    406
    
    
    
    350
    
    
    
    354
    
    
    
    30
    
    
    
    1,794Total
    
    $
    60,281
    
    
    $
    59,490
    
    
    $
    52,297
    
    
    $
    4,939
    
    
    $
    6,803
    
    
    $
    51,162
    
    
    $
    234,972
 
 (1)
    
    Includes notes payable under the Companys Credit Facility(2)
    
    As collateral for performance on a mortgage note payable, the Company is
contingently liable under a standby letter of credit, which also reduces the availability
under the Credit Facility(3)
    
    Assumes one-month LIBOR 5.20% and Prime Rate of 8.25% 16




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(4)
    
    Substantially all of the ground leases effectively limit our control over various
aspects of the operation of the applicable property, restrict our ability to transfer the
property and allow the lessor the right of first refusal to purchase the building and
improvements. All of the ground leases provide for the property to revert to the lessor for no
consideration upon the expiration or earlier termination of the ground lease.(5)
    
    Payments under operating lease agreements relate to various of our properties
equipment and office space leases. The future minimum lease commitments under these leases are
as indicated. Off-Balance Sheet Arrangements
   Real Estate Taxes
  Inflation
  Seasonality
  Recent Accounting Pronouncements
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
 ITEM 4. CONTROLS AND PROCEDURES
    
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
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ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
  
 ITEM 5. OTHER INFORMATION
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ITEM 6. EXHIBITS
 31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of
2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of
2002.32.1
    
    Certification of Chief Executive and Chief Financial Officer pursuant to 18 U.S.C. Section
1350 as adapted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
  COGDELL SPENCER INC.RegistrantDate: May 10, 2007
    /s/Frank C. SpencerFrank C. SpencerPresident and Chief Executive OfficerDate: May 10, 2007
    /s/Charles M. HandyCharles M. HandySenior Vice President and Chief Financial Officer 21