##### 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 June 30, 2006
 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 o þ
 o þ




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##### 



TABLE OF CONTENTS
 PagePART I FINANCIAL INFORMATIONItem 1 Consolidated and Combined Financial Statements (Unaudited)
    
    
    1Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3 Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4 Controls and Procedures
    
    
    21PART II Other InformationItem 1 Legal Proceedings
    
    
    22Item 1A Risk Factors
    
    
    22Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3 Defaults Upon Senior Securities
    
    
    22Item 4 Submission of Matters to a Vote of Security Holders
    
    
    22Item 5 Other Information
    
    
    22Item 6 Exhibits
    
    
    23EX-31.1EX-31.2EX-32.1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 COGDELL SPENCER INC.
CONSOLIDATED BALANCE SHEETS
 As of
    
    
    As ofJune 30, 2006
    
    
    December 31, 2005AssetsReal estate properties:Land
    
    $
    22,744
    
    
    $
    16,798Buildings and improvements
    
    
    314,489
    
    
    
    241,946Construction in progress
    
    
    2,603
    
    
    
    1,099Less: Accumulated depreciation
    
    
    (12,666
    )
    
    
    (2,699
    )Total operating real estate properties, net
    
    
    327,170
    
    
    
    257,144Real estate properties, net  held for sale
    
    
    1,337
    
    
    
    1,379Total real estate properties
    
    
    328,507
    
    
    
    258,523Cash and cash equivalents
    
    
    870
    
    
    
    9,571Restricted cash
    
    
    899
    
    
    
    779Investment in capital lease
    
    
    6,346
    
    
    
    6,499Acquired above market leases, net of accumulated
amortization of $141 in 2006 and $25 in 2005
    
    
    1,024
    
    
    
    852Acquired in place lease value and deferred leasing
costs, net of accumulated amortization of $6,087
in 2006 and $1,399 in 2005
    
    
    21,624
    
    
    
    21,220Acquired ground leases, net of accumulated
amortization of $63 in 2006 and $15 in 2005
    
    
    2,992
    
    
    
    2,768Deferred financing costs, net of accumulated
amortization of $138 in 2006 and $31 in 2005
    
    
    829
    
    
    
    913Goodwill
    
    
    2,875
    
    
    
    2,875Other assets
    
    
    4,134
    
    
    
    4,331Other assets  held for sale
    
    
    142
    
    
    
    151Total assets
    
    $
    370,242
    
    
    $
    308,482Liabilities and stockholders equityNotes payable under line of credit
    
    $
    85,850
    
    
    $
    19,600Mortgage loans
    
    
    143,119
    
    
    
    139,374Accounts payable and accrued liabilities
    
    
    6,653
    
    
    
    4,857Accrued dividends and distributions
    
    
    4,326
    
    
    
    Acquired below market leases, net of accumulated
amortization of $728 in 2006 and $164 in 2005
    
    
    3,455
    
    
    
    2,893Other liabilities  held for sale
    
    
    1,256
    
    
    
    1,272Total liabilities
    
    
    244,659
    
    
    
    167,996Commitments and contingenciesMinority interests
    
    
    57,100
    
    
    
    62,018Stockholders 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, 7,996 shares issued and outstanding in 2006
and 8,000 shares issued and outstanding in 2005
    
    
    80
    
    
    
    80Additional paid-in capital
    
    
    85,105
    
    
    
    85,855Accumulated deficit
    
    
    (16,702
    )
    
    
    (7,467
    )Total stockholders equity
    
    
    68,483
    
    
    
    78,468Total liabilities and stockholders equity
    
    $
    370,242
    
    
    $
    308,482
  1




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COGDELL SPENCER INC. AND COGDELL SPENCER INC. PREDECESSOR
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
 Company
    
    
    Predecessor
    
    
    Company
    
    
    PredecessorThree Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues:Rental
    
    $
    13,381
    
    
    $
    4,259
    
    
    $
    25,098
    
    
    $
    8,397Rental  related party
    
    
    
    
    
    
    6,494
    
    
    
    
    
    
    
    12,951Fee revenue
    
    
    240
    
    
    
    310
    
    
    
    669
    
    
    
    848Expense reimbursements
    
    
    135
    
    
    
    165
    
    
    
    310
    
    
    
    329Interest and other income
    
    
    222
    
    
    
    241
    
    
    
    513
    
    
    
    465Total revenues
    
    
    13,978
    
    
    
    11,469
    
    
    
    26,590
    
    
    
    22,990Expenses:Property operating
    
    
    4,855
    
    
    
    3,848
    
    
    
    9,089
    
    
    
    7,696General and administrative
    
    
    1,580
    
    
    
    1,745
    
    
    
    3,435
    
    
    
    2,708Depreciation
    
    
    4,855
    
    
    
    2,532
    
    
    
    9,158
    
    
    
    5,026Amortization
    
    
    2,611
    
    
    
    15
    
    
    
    4,768
    
    
    
    39Interest
    
    
    3,393
    
    
    
    3,374
    
    
    
    5,784
    
    
    
    5,091Total expenses
    
    
    17,294
    
    
    
    11,514
    
    
    
    32,234
    
    
    
    20,560Income (loss) 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
    
    
    (3,316
    )
    
    
    (45
    )
    
    
    (5,644
    )
    
    
    2,430Equity in earnings (loss) of unconsolidated
real estate partnerships
    
    
    
    
    
    
    (24
    )
    
    
    5
    
    
    
    (40
    )Minority interests in real estate partnership
    
    
    (22
    )
    
    
    
    
    
    
    (53
    )
    
    
    Minority interests in operating partnership
    
    
    1,177
    
    
    
    
    
    
    
    2,008
    
    
    
    Income (loss) from continuing operations
    
    
    (2,161
    )
    
    
    (69
    )
    
    
    (3,684
    )
    
    
    2,390Discontinued operations:Income (loss) from discontinued operations
    
    
    (7
    )
    
    
    15
    
    
    
    (11
    )
    
    
    31Minority interests in operating partnership
    
    
    2
    
    
    
    
    
    
    
    4
    
    
    
    Total discontinued operations
    
    
    (5
    )
    
    
    15
    
    
    
    (7
    )
    
    
    31Net income (loss)
    
    $
    (2,166
    )
    
    $
    (54
    )
    
    $
    (3,691
    )
    
    $
    2,421Basic and diluted loss per share
    
    $
    (0.27
    )
    
    
    
    
    
    $
    (0.46
    )Weighted average common shares -
basic and diluted
    
    
    7,975
    
    
    
    
    
    
    
    7,974
  2




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COGDELL SPENCER INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 Number of
    
    
    
    
    
    
    AdditionalCommon
    
    
    Common
    
    
    Paid-in
    
    
    AccumulatedShares
    
    
    Stock
    
    
    Capital
    
    
    Deficit
    
    
    TotalBalance at December 31, 2005
    
    
    8,000
    
    
    $
    80
    
    
    $
    85,855
    
    
    $
    (7,467
    )
    
    $
    78,468Cumulative effect adjustment
associated with the implementation
of EITF 04-5
    
    
    
    
    
    
    
    
    
    
    (785
    )
    
    
    53
    
    
    
    (732
    )Forfeiture of restricted shares
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of restricted stock
compensation, net of minority interests
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    35Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,597
    )
    
    
    (5,597
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,691
    )
    
    
    (3,691
    )Balance at June 30, 2006
    
    
    7,996
    
    
    $
    80
    
    
    $
    85,105
    
    
    $
    (16,702
    )
    
    $
    68,483
  3




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COGDELL SPENCER INC. AND COGDELL SPENCER INC. PREDECESSOR
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
 Company
    
    
    PredecessorSix Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2005Operating activities:Net income (loss)
    
    $
    (3,691
    )
    
    $
    2,421Adjustments to reconcile net income (loss) to cash
provided by operating activities:Minority interests in operating partnership
    
    
    (2,011
    )
    
    
    Minority interests in real estate partnership
    
    
    53
    
    
    
    Depreciation of real estate properties
    
    
    9,154
    
    
    
    4,997Corporate depreciation and amortization
    
    
    84
    
    
    
    49Amortization of acquired ground leases, acquired
in place lease value and deferred leasing costs
    
    
    4,736
    
    
    
    48Amortization of acquired above market leases and
acquired below market leases, net
    
    
    (448
    )
    
    
    Amortization of debt premium
    
    
    (100
    )
    
    
    (6
    )Amortization of deferred finance costs
    
    
    108
    
    
    
    253Amortization of restricted stock compensation
    
    
    55
    
    
    
    Equity in (earnings) loss of unconsolidated
real estate partnerships
    
    
    (5
    )
    
    
    40Change in fair value of interest rate swap agreements
    
    
    (472
    )
    
    
    (1,210
    )Changes in operating assets and liabilities:Other assets
    
    
    (475
    )
    
    
    (2,533
    )Accounts payable and accrued expenses
    
    
    1,901
    
    
    
    2,635Net cash provided by operating activities
    
    
    8,889
    
    
    
    6,694Investing activities:Acquisition and development of real estate properties
    
    
    (73,966
    )
    
    
    (2,292
    )Proceeds from sale of real estate properties and capital lease
    
    
    153
    
    
    
    36Advances to unconsolidated real estate joint ventures
    
    
    
    
    
    
    (17
    )Distributions received from real estate partnerships
    
    
    2
    
    
    
    Increase in restricted cash
    
    
    (120
    )
    
    
    (136
    )Net cash used in investing activities
    
    
    (73,931
    )
    
    
    (2,409
    )Financing activities:Proceeds from mortgage notes payable
    
    
    
    
    
    
    1,678Repayments of mortgage notes payable
    
    
    (5,685
    )
    
    
    (2,504
    )Proceeds from line of credit
    
    
    70,750
    
    
    
    400Repayments to line of credit
    
    
    (4,500
    )
    
    
    Equity contributions
    
    
    
    
    
    
    141Dividends and distributions
    
    
    (4,328
    )
    
    
    (4,234
    )Distributions to minority interests in real estate partnership
    
    
    (85
    )
    
    
    Payment of deferred financing costs
    
    
    (24
    )
    
    
    (59
    )Net cash provided by (used in) financing activities
    
    
    56,128
    
    
    
    (4,578
    )Decrease in cash and cash equivalents
    
    
    (8,914
    )
    
    
    (293
    )Balance at beginning of period
    
    
    9,571
    
    
    
    13,459Cumulative effect adjustment associated with the
implementation of EITF 04-5
    
    
    213
    
    
    
    Balance at end of period
    
    $
    870
    
    
    $
    13,166Supplemental disclosure of cash flow information:Cash paid for interest, net of capitalized interest
    
    $
    6,017
    
    
    $
    6,641Supplemental cash flow information  noncash
investing and financing activities:Debt assumed with purchase of property
    
    
    5,178
    
    
    
    Accrued dividends and distributions
    
    
    4,326
    
    
    
    
  4




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##### Table of Contents



COGDELL SPENCER INC. AND COGDELL SPENCER INC. PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
 1. Organization and Ownership
   2. Summary of Significant Accounting Policies
 Basis of Presentation
  Interim Financial Information
  5




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Use of Estimates in Financial Statements
  Adoption of Recent Accounting Pronouncement
   AssetsReal estate property:Land
    
    $
    229Buildings and improvements
    
    
    4,992Less: Accumulated depreciation
    
    
    (856
    )Total real estate property, net
    
    
    4,365Cash and cash equivalents
    
    
    213Other assets
    
    
    8Total assets
    
    $
    4,586Liabilities and members equityMortgage loans
    
    
    4,340Accounts payable and accrued liabilities
    
    
    128Total liabilities
    
    
    4,468Members equity
    
    
    118Total liabilities and members equity
    
    $
    4,586
 6




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##### Table of Contents



3. Property acquisitions and disposition
  Building and improvements
    
    $
    37,754Acquired in place lease value and deferred leasing costs
    
    
    1,690Acquired ground lease
    
    
    120Acquired above market leases
    
    
    180Acquired below market leases
    
    
    (297
    )Total purchase price allocated
    
    $
    39,447
  Land
    
    $
    5,638Building and improvements
    
    
    26,729Acquired in place lease value and deferred leasing costs
    
    
    3,745Acquired above market leases
    
    
    105Acquired below market leases
    
    
    (813
    )Total purchase price allocated
    
    $
    35,404
  Company
    
    
    PredecessorSix Months EndedJune 30, 2006
    
    
    June 30, 2005Total revenues
    
    $
    28,084
    
    
    $
    27,838Net loss
    
    $
    (3,729
    )
    
    $
    (2,039
    )Per share information:Basic and diluted loss per share
    
    $
    (0.47
    )
 4. Mortgages and Notes Payable Under Line of Credit
  7




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5. Derivative Financial Instruments  Interest Rate Swap Agreements
   Notional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    June 30, 2006Amount as of
    
    
    
    
    
    
    
    
    
    
    Effective
    
    
    ExpirationEntity
    
    June 30, 2006
    
    
    Receive Rate
    
    
    Pay Rate
    
    
    Date
    
    
    Date
    
    
    Asset
    
    
    LiabilityBeaufort Medical Plaza, LLC
    
    $
    5,108
    
    
    1 Month LIBOR
    
    
    5.81
    %
    
    
    10/25/1999
    
    
    
    7/25/2008
    
    
    $
    
    
    
    $
    33Gaston MOB, LLC
    
    
    16,962
    
    
    1 Month LIBOR
    
    
    3.25
    %
    
    
    1/23/2003
    
    
    
    11/22/2007
    
    
    
    524
    
    
    
    Medical Investors I, LLC
    
    
    8,884
    
    
    1 Month LIBOR
    
    
    4.82
    %
    
    
    2/10/2003
    
    
    
    12/10/2007
    
    
    
    53
    
    
    
    River Hills Medical Associates, LLC
    
    
    3,115
    
    
    1 Month LIBOR
    
    
    3.63
    %
    
    
    3/10/2003
    
    
    
    12/15/2008
    
    
    
    130
    
    
    
    Roper MOB, LLC
    
    
    10,015
    
    
    1 Month LIBOR
    
    
    4.45
    %
    
    
    7/26/2004
    
    
    
    7/10/2009
    
    
    
    279
    
    
    
    $
    986
    
    
    $
    33
 6. Investments in Real Estate Partnerships
  
    
    Cabarrus Land Company, LLC, a North Carolina limited liability company, founded in 1987,
5.0% owned by the Company, and owns one medical office building;
    
    Mary Black MOB Limited Partnership, a South Carolina limited partnership, founded in
1988, 9.6% owned by the Company, and owns one medical office building;
    
    Mary Black MOB II Limited Partnership, a South Carolina limited partnership, founded in
1993, 1.0% owned by the Company, and owns one medical office building;
    
    Mary Black Westside Medical Park I Limited Partnership, a South Carolina limited
partnership, founded in 1991, 5.0% owned by the Company, and owns one medical office
building;
    
    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; 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.
 8




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June 30, 2006Financial position:Total assets
    
    $
    4,544Total liabilities
    
    
    4,345Members equity
    
    
    199
 Three Months
    
    Six MonthsEnded
    
    EndedJune 30, 2006
    
    June 30, 2006Results of operations:Revenues
    
    $
    208
    
    
    $
    415Operating and general and administrative expenses
    
    
    73
    
    
    
    133Net income
    
    
    33
    
    
    
    81
  June 30, 2006Financial position:Total assets
    
    $
    27,919Total liabilities
    
    
    19,325Members equity
    
    
    8,594
 Three Months
    
    Six MonthsEnded
    
    EndedJune 30, 2006
    
    June 30, 2006Results of operations:Revenues
    
    $
    1,354
    
    
    $
    2,713Operating and general and administrative expenses
    
    
    701
    
    
    
    1,376Net income
    
    
    114
    
    
    
    257
 7. Dividends and Distributions
  9




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8. Loss per Share
  Three Months
    
    Six MonthsEnded
    
    EndedJune 30, 2006
    
    June 30, 2006Net loss
    
    $
    (2,166
    )
    
    $
    (3,691
    )Weighted average shares outstanding  basic and diluted (1)
    
    
    7,975
    
    
    
    7,974Net loss per share  basic and diluted
    
    $
    (0.27
    )
    
    $
    (0.46
    )
 
 (1)
    
    25 shares of unvested restricted common stock are anti-dilutive due to the
net loss. 9. Minority Interests in Operating Partnership
   10




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10. Segment Reporting
  Company
    
    
    Predecessor
    
    
    Company
    
    
    PredecessorThree Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005Property operations:Rental revenues
    
    $
    13,176
    
    
    $
    10,753
    
    
    $
    24,686
    
    
    $
    21,348Interest and other income
    
    
    158
    
    
    
    239
    
    
    
    330
    
    
    
    463Property operating expenses
    
    
    (4,802
    )
    
    
    (3,848
    )
    
    
    (8,994
    )
    
    
    (7,696
    )Intersegment expenses
    
    
    (856
    )
    
    
    (810
    )
    
    
    (1,683
    )
    
    
    (1,620
    )Net operating income
    
    $
    7,676
    
    
    $
    6,334
    
    
    $
    14,339
    
    
    $
    12,495Total segment assets, end of period
    
    $
    357,897
    
    
    $
    173,189
    
    
    $
    357,897
    
    
    $
    173,189Real estate services:Fee revenue
    
    $
    247
    
    
    $
    310
    
    
    $
    685
    
    
    $
    848Expense reimbursements
    
    
    142
    
    
    
    165
    
    
    
    325
    
    
    
    329Interest and other income
    
    
    62
    
    
    
    2
    
    
    
    180
    
    
    
    2Intersegment revenues
    
    
    856
    
    
    
    810
    
    
    
    1,683
    
    
    
    1,620Real estate operating expenses
    
    
    (876
    )
    
    
    (550
    )
    
    
    (1,771
    )
    
    
    (1,070
    )Net operating income
    
    $
    431
    
    
    $
    737
    
    
    $
    1,102
    
    
    $
    1,729Total segment assets, end of period
    
    $
    3,910
    
    
    $
    3,571
    
    
    $
    3,910
    
    
    $
    3,571Reconciliations:Total segment revenues
    
    $
    14,641
    
    
    $
    12,279
    
    
    $
    27,889
    
    
    $
    24,610Elimination of intersegment revenues
    
    
    (856
    )
    
    
    (810
    )
    
    
    (1,683
    )
    
    
    (1,620
    )Rocky Mount MOB and elimination of related intersegment
revenues
    
    
    193
    
    
    
    
    
    
    
    384
    
    
    
    Total revenues
    
    $
    13,978
    
    
    $
    11,469
    
    
    $
    26,590
    
    
    $
    22,990Total segment net operating income
    
    $
    8,107
    
    
    $
    7,071
    
    
    $
    15,441
    
    
    $
    14,224Corporate general and administrative expenses
    
    
    (699
    )
    
    
    (1,195
    )
    
    
    (1,657
    )
    
    
    (1,638
    )Depreciation and amortization expense
    
    
    (7,433
    )
    
    
    (2,547
    )
    
    
    (13,860
    )
    
    
    (5,065
    )Interest expense
    
    
    (3,324
    )
    
    
    (3,374
    )
    
    
    (5,648
    )
    
    
    (5,091
    )Equity in earnings (loss) of unconsolidated real estate
partnerships
    
    
    
    
    
    
    (24
    )
    
    
    5
    
    
    
    (40
    )Net income of Rocky Mount MOB, net of minority intetests
    
    
    11
    
    
    
    
    
    
    
    27
    
    
    
    Minority interests in operating partnership
    
    
    1,177
    
    
    
    
    
    
    
    2,008
    
    
    
    Total discontinued operations
    
    
    (5
    )
    
    
    15
    
    
    
    (7
    )
    
    
    31Net income (loss)
    
    $
    (2,166
    )
    
    $
    (54
    )
    
    $
    (3,691
    )
    
    $
    2,421Total segment assets
    
    $
    361,807
    
    
    $
    176,760
    
    
    $
    361,807
    
    
    $
    176,760Corporate total assets
    
    
    2,412
    
    
    
    
    
    
    
    2,412
    
    
    
    Rocky Mount MOB total assets
    
    
    4,544
    
    
    
    
    
    
    
    4,544
    
    
    
    Total discontinued operations
    
    
    1,479
    
    
    
    1,114
    
    
    
    1,479
    
    
    
    1,114Total assets, end of period
    
    $
    370,242
    
    
    $
    177,874
    
    
    $
    370,242
    
    
    $
    177,874
 11. Subsequent Events
   11




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##### Table of Contents



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
   12




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##### Table of Contents




    
    49 wholly owned properties;
    
    eight joint venture properties; and
    
    19 properties owned by third parties (17 of which are for clients with whom the Company has
an existing investment relationship).
  Factors Which May Influence Future Results of Operations
    Critical Accounting Policies
  13




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##### Table of Contents



Investments in Real Estate
 Acquisition of real estate.
 Useful lives of assets.
 Asset impairment valuation.
 14




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##### Table of Contents



Revenue Recognition
   REIT Qualification Requirements
  Results of Operations
  15




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##### Table of Contents



Property Summary
  Company
    
    Predecessor2006
    
    2005Properties at January 1
    
    
    44
    
    
    
    43Consolidation of Rocky Mount MOB LLC
    
    
    1
    
    
    
    Acquisitions
    
    
    4
    
    
    
    Development that began rental operations
    
    
    
    
    
    
    1Properties at June 30
    
    
    49
    
    
    
    44
  Comparison of the three months ended June 30, 2006 and June 30, 2005
 Overview.
 Revenue.
  Property operating expenses.
 Interest
expense.
  Depreciation and amortization expenses.
 16




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##### Table of Contents



General and administrative expenses.
 Comparison of the six months ended June 30, 2006 and June 30, 2005
 Revenue.
   Property operating expenses.
 Interest expense.
  Depreciation and amortization expenses.
 General and administrative expenses.
 17




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##### Table of Contents



Cash Flows
 Comparison of the six months ended June 30, 2006 and June 30, 2005
    Construction in Progress
  Estimated
    
    
    
    
    
    
    
    
    
    EstimatedCompletion
    
    Net Rentable
    
    
    Investment
    
    
    Total
    
    
    PercentageProperty
    
    Location
    
    Date
    
    Square Feet
    
    
    to Date
    
    
    Investment
    
    
    LeasedCarolina Forest Medical Plaza
    
    Horry County, SC
    
    2Q 2007
    
    
    39,000
    
    
    $
    1,241
    
    
    $
    7,425
    
    
    
    43.2
    %Lancaster Rehabilitation Hospital
    
    Lancaster, PA
    
    2Q 2007
    
    
    52,800
    
    
    
    609
    
    
    
    12,720
    
    
    
    100.0
    %Land and pre-construction
developments
    
    
    
    
    
    
    
    
    
    
    753
    
    
    
    91,800
    
    
    $
    2,603
    
    
    $
    20,145
 Liquidity and Capital Resources
     18




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Long-Term Liquidity Needs
   19




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##### Table of Contents



Contractual Obligations
  ThroughRemainderof 2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    
    TotalObligation:Long-term debt principal payments and maturities (1)
    
    $
    11,291
    
    
    $
    39,187
    
    
    $
    113,400
    
    
    $
    16,440
    
    
    $
    1,456
    
    
    $
    47,842
    
    
    $
    229,616Standby letters of credit (2)
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500Interest payments (3)
    
    
    6,776
    
    
    
    11,975
    
    
    
    7,512
    
    
    
    3,641
    
    
    
    3,035
    
    
    
    7,692
    
    
    
    40,631Ground leases (4)
    
    
    78
    
    
    
    155
    
    
    
    155
    
    
    
    155
    
    
    
    155
    
    
    
    5,296
    
    
    
    5,994Operating leases (5)
    
    
    143
    
    
    
    270
    
    
    
    343
    
    
    
    351
    
    
    
    350
    
    
    
    389
    
    
    
    1,846Total
    
    $
    18,788
    
    
    $
    51,587
    
    
    $
    121,410
    
    
    $
    20,587
    
    
    $
    4,996
    
    
    $
    61,219
    
    
    $
    278,587
 
 (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 of 5.345% and Prime Rate of 8.0%(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
  20




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##### Table of Contents



Recent Accounting Pronouncements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
 ITEM 4. CONTROLS AND PROCEDURES
    21




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 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
    Nominee
    
    Votes For
    
    Votes WithheldJames W. Cogdell
    
    
    5,662,049
    
    
    
    133,655John R. Georgius
    
    
    5,683,026
    
    
    
    122,678Richard B. Jennings
    
    
    5,662,049
    
    
    
    133,655Christopher E. Lee
    
    
    5,683,026
    
    
    
    112,678Richard C. Neugent
    
    
    5,683,026
    
    
    
    112,678Randolph D.
Smoak, M.D.
    
    
    5,683,026
    
    
    
    122,678Frank C. Spencer
    
    
    5,662,049
    
    
    
    133,655
   Votes For
    
    Votes Against
    
    AbstentionsDeloitte & Touche LLP
    
    
    5,789,767
    
    
    
    5,937
    
    
    
    
 
 ITEM 5. OTHER INFORMATION
  22




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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.
 23




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SIGNATURES
  Cogdell Spencer Inc.RegistrantDate: August 14, 2006
    
    /s/ Frank C. SpencerFrank C. SpencerPresident and Chief Executive OfficerDate: August 14, 2006
    
    /s/ Charles M. HandyCharles M. HandySenior Vice President and Chief Financial Officer
 24