##### 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 September 30, 2008
 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
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



TABLE OF CONTENTS
 PagePART I
    
    FINANCIAL INFORMATION
    
    
    2Item 1
    
    Financial Statements
    
    
    2Item 2
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    25Item 3
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    38Item 4
    
    Controls and Procedures
    
    
    38PART II
    
    Other Information
    
    
    39Item 1
    
    Legal Proceedings
    
    
    39Item 1A
    
    Risk Factors
    
    
    39Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39Item 3
    
    Defaults Upon Senior Securities
    
    
    39Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    39Item 5
    
    Other Information
    
    
    39Item 6
    
    Exhibits
    
    
    39EX-31.1EX-31.2EX-32.1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 COGDELL SPENCER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2008
    
    
    2007AssetsReal estate properties:Land
    
    $
    30,673
    
    
    $
    30,673Buildings and improvements
    
    
    498,822
    
    
    
    455,606Less: Accumulated depreciation
    
    
    (63,154
    )
    
    
    (44,596
    )Net operating real estate properties
    
    
    466,341
    
    
    
    441,683Construction in progress
    
    
    10,672
    
    
    
    13,380Net real estate properties
    
    
    477,013
    
    
    
    455,063Cash and cash equivalents
    
    
    10,637
    
    
    
    3,555Restricted cash
    
    
    18,388
    
    
    
    1,803Tenant and accounts receivable, net of allowance
of $154 in 2008 and $19 in 2007
    
    
    42,924
    
    
    
    2,249Goodwill and intangible assets, net of accumulated
amortization of $32,776 in 2008 and $18,728 in 2007
    
    
    308,423
    
    
    
    31,589Other assets
    
    
    27,689
    
    
    
    11,978Total assets
    
    $
    885,074
    
    
    $
    506,237Liabilities and stockholders equityMortgage notes payable
    
    $
    234,497
    
    
    $
    237,504Revolving credit facility
    
    
    90,000
    
    
    
    79,200Term loan
    
    
    100,000
    
    
    
    Accounts payable
    
    
    23,185
    
    
    
    5,817Billings in excess of costs and estimated earnings
on uncompleted contracts
    
    
    27,616
    
    
    
    Deferred income taxes
    
    
    40,302
    
    
    
    217Payable to Erdman shareholders
    
    
    24,003
    
    
    
    Other liabilities
    
    
    47,751
    
    
    
    21,243Total liabilities
    
    
    587,354
    
    
    
    343,981Commitments and contingenciesMinority interests in real estate partnerships
    
    
    6,205
    
    
    
    2,434Minority interests in operating partnership
    
    
    89,885
    
    
    
    44,787Stockholders 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, 17,563 and 11,948 shares issued
and outstanding in 2008 and 2007, respectively
    
    
    176
    
    
    
    119Additional paid-in capital
    
    
    273,635
    
    
    
    166,901Accumulated other comprehensive income (loss)
    
    
    235
    
    
    
    (1,234
    )Accumulated deficit
    
    
    (72,416
    )
    
    
    (50,751
    )Total stockholders equity
    
    
    201,630
    
    
    
    115,035Total liabilities and stockholders equity
    
    $
    885,074
    
    
    $
    506,237
  2




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COGDELL SPENCER INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Rental revenue
    
    $
    19,631
    
    
    $
    16,399
    
    
    $
    57,622
    
    
    $
    45,344Design-Build contract revenue and other sales
    
    
    72,914
    
    
    
    
    
    
    
    174,870
    
    
    
    Property management and other fees
    
    
    852
    
    
    
    874
    
    
    
    2,524
    
    
    
    2,644Development management and other income
    
    
    622
    
    
    
    25
    
    
    
    751
    
    
    
    276Total revenues
    
    
    94,019
    
    
    
    17,298
    
    
    
    235,767
    
    
    
    48,264Expenses:Property operating and management
    
    
    8,370
    
    
    
    6,797
    
    
    
    23,403
    
    
    
    18,766Costs related to design-build contract revenue and other sales
    
    
    59,578
    
    
    
    
    
    
    
    146,907
    
    
    
    Selling, general, and administrative
    
    
    7,599
    
    
    
    1,532
    
    
    
    20,396
    
    
    
    5,296Depreciation and amortization
    
    
    11,871
    
    
    
    7,273
    
    
    
    33,275
    
    
    
    20,664Total expenses
    
    
    87,418
    
    
    
    15,602
    
    
    
    223,981
    
    
    
    44,726Income from operations before other income (expense), income
tax expense (benefit), minority interests in real estate
partnerships, and minority interests in operating partnership
    
    
    6,601
    
    
    
    1,696
    
    
    
    11,786
    
    
    
    3,538Other income (expense):Interest and other income, net
    
    
    210
    
    
    
    183
    
    
    
    682
    
    
    
    763Interest expense
    
    
    (6,743
    )
    
    
    (4,101
    )
    
    
    (18,695
    )
    
    
    (11,324
    )Equity in earnings (loss) of unconsolidated real estate
partnerships
    
    
    10
    
    
    
    2
    
    
    
    18
    
    
    
    (2
    )Total other income (expense)
    
    
    (6,523
    )
    
    
    (3,916
    )
    
    
    (17,995
    )
    
    
    (10,563
    )Income (loss) from operations before income tax expense
(benefit), minority interests in real estate partnerships,
and minority interests in operating partnership
    
    
    78
    
    
    
    (2,220
    )
    
    
    (6,209
    )
    
    
    (7,025
    )Income tax (expense) benefit
    
    
    (883
    )
    
    
    19
    
    
    
    (143
    )
    
    
    (151
    )Loss from operations before minority interests in real estate
partnerships, and minority interests in operating partnership
    
    
    (805
    )
    
    
    (2,201
    )
    
    
    (6,352
    )
    
    
    (7,176
    )Minority interests in real estate partnerships
    
    
    (920
    )
    
    
    (16
    )
    
    
    (859
    )
    
    
    (55
    )Minority interests in operating partnership
    
    
    639
    
    
    
    615
    
    
    
    2,480
    
    
    
    2,226Net loss
    
    $
    (1,086
    )
    
    $
    (1,602
    )
    
    $
    (4,731
    )
    
    $
    (5,005
    )Net loss per share  basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.13
    )
    
    $
    (0.31
    )
    
    $
    (0.47
    )Weighted average common shares  basic and diluted
    
    
    15,747
    
    
    
    11,934
    
    
    
    15,170
    
    
    
    10,755
  3




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COGDELL SPENCER INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 AccumulatedNumber of
    
    
    
    
    
    
    Additional
    
    
    OtherCommon
    
    
    Common
    
    
    Paid-in
    
    
    Comprehensive
    
    
    AccumulatedShares
    
    
    Stock
    
    
    Capital
    
    
    Income (Loss)
    
    
    Deficit
    
    
    TotalBalance at December 31, 2007
    
    
    11,948
    
    
    $
    119
    
    
    $
    166,901
    
    
    $
    (1,234
    )
    
    $
    (50,751
    )
    
    $
    115,035Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,731
    )
    
    
    (4,731
    )Unrealized gain on interest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,469
    
    
    
    
    
    
    
    1,469Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,262
    )Issuance of common stock, net of costs
    
    
    5,609
    
    
    
    57
    
    
    
    91,288
    
    
    
    
    
    
    
    
    
    
    
    91,345Restricted stock grants
    
    
    6
    
    
    
    
    
    
    
    94
    
    
    
    
    
    
    
    
    
    
    
    94Amortization of restricted stock grants
    
    
    
    
    
    
    
    
    
    
    47
    
    
    
    
    
    
    
    
    
    
    
    47Dividends to common stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,934
    )
    
    
    (16,934
    )Adjustment to record change of interest
in the operating partnership due to the
issuance of operating partnership units
in excess of book value
    
    
    
    
    
    
    
    
    
    
    15,305
    
    
    
    
    
    
    
    
    
    
    
    15,305Balance at September 30, 2008
    
    
    17,563
    
    
    $
    176
    
    
    $
    273,635
    
    
    $
    235
    
    
    $
    (72,416
    )
    
    $
    201,630
  4




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COGDELL SPENCER INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007Operating activities:Net loss
    
    $
    (4,731
    )
    
    $
    (5,005
    )Adjustments to reconcile net loss to cash
provided by operating activities:Minority interests
    
    
    (1,621
    )
    
    
    (2,171
    )Depreciation and amortization
    
    
    33,275
    
    
    
    20,664Amortization of acquired above market leases and
acquired below market leases, net
    
    
    (533
    )
    
    
    (529
    )Straight line rental revenue
    
    
    (422
    )
    
    
    (237
    )Amortization of deferred financing costs and debt premium
    
    
    878
    
    
    
    186Deferred income taxes
    
    
    (468
    )
    
    
    Equity-based compensation
    
    
    1,110
    
    
    
    158Equity in loss (earnings) of unconsolidated
real estate partnerships
    
    
    (18
    )
    
    
    2Changes in operating assets and liabilities:Tenant and accounts receivable and other assets
    
    
    13,650
    
    
    
    (852
    )Accounts payable and other liabilities
    
    
    (7,042
    )
    
    
    5,330Billings in excess of costs and estimated earnings
on uncompleted contracts
    
    
    (9,518
    )
    
    
    Net cash provided by operating activities
    
    
    24,560
    
    
    
    17,546Investing activities:Business acquisition, net of cash acquired
    
    
    (130,264
    )
    
    
    Investment in real estate properties, net of cash assumed
    
    
    (38,633
    )
    
    
    (91,868
    )Purchase of minority interests in operating partnership
    
    
    (754
    )
    
    
    (3,807
    )Proceeds from sales-type capital lease
    
    
    230
    
    
    
    229Purchase of corporate equipment
    
    
    (1,068
    )
    
    
    (502
    )Distributions received from unconsolidated real
estate partnerships
    
    
    5
    
    
    
    4Increase in restricted cash
    
    
    (16,585
    )
    
    
    (329
    )Net cash used in investing activities
    
    
    (187,069
    )
    
    
    (96,273
    )Financing activities:Proceeds from mortgage notes payable
    
    
    8,087
    
    
    
    65,941Repayments of mortgage notes payable
    
    
    (13,733
    )
    
    
    (16,714
    )Proceeds from revolving credit facility
    
    
    110,500
    
    
    
    49,300Repayments to revolving credit facility
    
    
    (99,700
    )
    
    
    (80,687
    )Proceeds from term loan
    
    
    100,000
    
    
    
    Net proceeds from sale of common stock
    
    
    91,344
    
    
    
    78,443Dividends and distributions
    
    
    (22,831
    )
    
    
    (15,919
    )Equity
contributions by partners in consolidated real
estate partnerships
    
    
    517
    
    
    
    1,304Distributions to minority interests in real estate partnership
    
    
    (963
    )
    
    
    (117
    )Payment of deferred financing costs
    
    
    (3,630
    )
    
    
    (669
    )Net cash provided by financing activities
    
    
    169,591
    
    
    
    80,882Increase in cash and cash equivalents
    
    
    7,082
    
    
    
    2,155Balance at beginning of period
    
    
    3,555
    
    
    
    1,029Balance at end of period
    
    $
    10,637
    
    
    $
    3,184Supplemental disclosure of cash flow information:Cash paid for interest, net of capitalized interest
    
    $
    17,596
    
    
    $
    11,792Cash paid for income taxes
    
    $
    3,039
    
    
    $
    307Noncash investing and financing activities:Operating Partnership Units issued or to be issued in
connection with the acquisition of a business or real
estate property
    
    
    81,673
    
    
    
    3,583Debt assumed
with purchase of property
    
    
    2,733
    
    
    
    Minority
interest assumed with purchase of property
    
    
    3,359
    
    
    
    Investment in real estate costs contributed by partner in
a consolidated real estate partnership
    
    
    
    
    
    
    460Accrued dividends and distributions
    
    
    9,379
    
    
    
    5,779
  5




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##### Table of Contents



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
  6




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Revenue Recognition
 Rental Revenue and Property Management.
  Design-Build Contract Revenues and Development Management.
   Gains on Disposition of Real Estate.
 7




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##### Table of Contents



Other income.
 Income Taxes
     Warranties
   8




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For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Balance at the beginning of period
    
    $
    2,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Erdman acquisition
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    Accruals
    
    
    1,666
    
    
    
    
    
    
    
    2,330
    
    
    
    Settlements
    
    
    (1,666
    )
    
    
    
    
    
    
    (2,330
    )
    
    
    Balance at the end of period
    
    $
    2,000
    
    
    $
    
    
    
    $
    2,000
    
    
    $
    
 Deferred Financing Costs
  Per Share Data
  Concentrations and Credit Risk
   Reclassifications
  Recent Accounting Pronouncements
 
 9




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##### Table of Contents



3. Business and Property Acquisitions
 Merger with Erdman
    10




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##### Table of Contents



Fair value of OP Units issued and to be issued
    
    $
    81,347Cash consideration, net of cash acquired
    
    
    145,018Total purchase price, net of cash acquired
    
    $
    226,365
    11




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##### Table of Contents



Accounts receivable, including retainage receivables
    
    $
    52,637Goodwill and intangible assets
    
    
    287,592Other assets
    
    
    14,381Accounts payable
    
    
    (27,449
    )Billings in excess of costs and estimated earnings
on uncompleted contracts
    
    
    (37,134
    )Deferred income taxes
    
    
    (39,989
    )Other liabilities
    
    
    (23,673
    )Total purchase price, net of cash acquired
    
    $
    226,365
  Property Acquisitions
      Construction in progress
    
    $
    4,031Building and improvements
    
    
    20,259Acquired ground or air rights leases
    
    
    325Acquired in place lease value and deferred leasing costs
    
    
    2,948Acquired above market leases
    
    
    10Mortgage notes payable
    
    
    (2,722
    )Minority interest in real estate partnerships
    
    
    (3,359
    )Total purchase price allocated, net of cash acquired
    
    $
    21,492
  12




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For the Three Months Ended
    
    For the Nine Months EndedSeptember 30,
    
    September 30,
    
    September 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Revenue
    
    $
    94,019
    
    
    $
    96,208
    
    
    $
    286,581
    
    
    $
    284,995Net income (loss)
    
    
    856
    
    
    
    (107
    )
    
    
    (1,942
    )
    
    
    (1,472
    )Net income (loss) per share  basic and diluted
    
    $
    0.05
    
    
    $
    (0.01
    )
    
    $
    (0.13
    )
    
    $
    (0.14
    )
  4. Investments in Real Estate Partnerships
   
    
    Cogdell Spencer Medical Partners LLC, a Delaware limited liability
company, founded in 2008, has no assets as of September 30, 2008, and
20.0% owned by the Company;
    
    BSB Health/MOB Limited Partnership No. 2, a Delaware limited
partnership, founded in 2002, owns nine medical office buildings, and
2.0% owned by the Company;
    
    Shannon Health/MOB Limited Partnership No. 1, a Delaware limited
partnership, founded in 2001, owns ten medical office buildings, and
2.0% owned by the Company; and
    
    McLeod Medical Partners, LLC, a South Carolina limited liability
company, founded in 1982, owns three medical office buildings, and
1.1% owned by the Company.
  
    
    Genesis Property Holdings, LLC, a Florida limited liability company,
founded in 2007, has one medical office building under construction,
and 40.0% owned by the Company;
    
    Cogdell General Health Campus MOB, LP, a Pennsylvania limited
partnership, founded in 2006, owns one medical office building, and
80.9% owned by the Company;
    
    Mebane Medical Investors, LLC, a North Carolina limited liability
company, founded in 2006, owns one medical office building, and 35.1%
owned by the Company; and
    
    Rocky Mount MOB, LLC, a North Carolina limited liability company,
founded in 2002, owns one medical office building, and 34.5% owned by
the Company.
   13




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As of
    
    As ofSeptember 30,
    
    December 31,2008
    
    2007Financial position:Total assets
    
    $
    56,510
    
    
    $
    57,406Total liabilities
    
    
    50,379
    
    
    
    50,725Members equity
    
    
    6,131
    
    
    
    6,681
 For the Three Months Ended
    
    For the Nine Months EndedSeptember 30,
    
    September 30,
    
    September 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Results of operations:Total revenues
    
    $
    3,025
    
    
    $
    3,052
    
    
    $
    9,107
    
    
    $
    9,119Operating and general and
administrative expenses
    
    
    1,555
    
    
    
    1,320
    
    
    
    4,263
    
    
    
    3,853Net income
    
    
    (28
    )
    
    
    285
    
    
    
    446
    
    
    
    914
 5. Business Segments
    14




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##### Table of Contents



Design-BuildProperty
    
    
    and
    
    
    UnallocatedOperations
    
    
    Development
    
    
    and Other
    
    
    TotalThree months ended September 30, 2008:Revenues:Rental revenue
    
    $
    19,631
    
    
    $
    
    
    
    $
    
    
    
    $
    19,631Design-Build contract revenue and other sales
    
    
    
    
    
    
    72,914
    
    
    
    
    
    
    
    72,914Property management and other fees
    
    
    852
    
    
    
    
    
    
    
    
    
    
    
    852Development management and other income
    
    
    
    
    
    
    622
    
    
    
    
    
    
    
    622Total revenues
    
    
    20,483
    
    
    
    73,536
    
    
    
    
    
    
    
    94,019Certain operating expenses:Property operating and management
    
    
    8,370
    
    
    
    
    
    
    
    
    
    
    
    8,370Costs related to design-build contract revenue and other sales
    
    
    
    
    
    
    59,578
    
    
    
    
    
    
    
    59,578Selling, general, and administrative
    
    
    
    
    
    
    4,865
    
    
    
    
    
    
    
    4,865Total certain operating expenses
    
    
    8,370
    
    
    
    64,443
    
    
    
    
    
    
    
    72,81312,113
    
    
    
    9,093
    
    
    
    
    
    
    
    21,206Other income (expense)
    
    
    143
    
    
    
    52
    
    
    
    15
    
    
    
    210Corporate general and administrative expenses
    
    
    
    
    
    
    
    
    
    
    (2,734
    )
    
    
    (2,734
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (6,743
    )
    
    
    (6,743
    )Provision for income taxes applicable to funds from
operations modified
    
    
    
    
    
    
    
    
    
    
    (2,411
    )
    
    
    (2,411
    )Depreciation and amortization
    
    
    
    
    
    
    (348
    )
    
    
    (57
    )
    
    
    (405
    )Earnings from unconsolidated real estate partnerships,
before real estate related depreciation and amortization
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    13Minority interests in real estate partnerships, before
real estate related depreciation and amortization
    
    
    (977
    )
    
    
    
    
    
    
    
    
    
    
    (977
    )Funds from operations modified (FFOM)
    
    
    11,292
    
    
    
    8,797
    
    
    
    (11,930
    )
    
    
    8,159Amortization of intangibles related to purchase
accounting, net of income tax benefit
    
    
    (42
    )
    
    
    (3,876
    )
    
    
    1,528
    
    
    
    (2,390
    )Funds from operations (FFO)
    
    
    11,250
    
    
    
    4,921
    
    
    
    (10,402
    )
    
    
    5,769Real estate related depreciation and amortization
    
    
    (7,494
    )
    
    
    
    
    
    
    
    
    
    
    (7,494
    )Minority interests in operating partnership
    
    
    
    
    
    
    
    
    
    
    639
    
    
    
    639Net income (loss)
    
    $
    3,756
    
    
    $
    4,921
    
    
    $
    (9,763
    )
    
    $
    (1,086
    )Total assets
    
    $
    575,244
    
    
    $
    308,878
    
    
    $
    952
    
    
    $
    885,074
 15




---



##### Table of Contents



Design-BuildProperty
    
    
    and
    
    
    UnallocatedOperations
    
    
    Development
    
    
    and Other
    
    
    TotalThree months ended September 30, 2007:Revenues:Rental revenue
    
    $
    16,399
    
    
    $
    
    
    
    $
    
    
    
    $
    16,399Design-Build contract revenue and other sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Property management and other fees
    
    
    874
    
    
    
    
    
    
    
    
    
    
    
    874Development management and other income
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    25Total revenues
    
    
    17,273
    
    
    
    25
    
    
    
    
    
    
    
    17,298Certain operating expenses:Property operating and management
    
    
    6,797
    
    
    
    
    
    
    
    
    
    
    
    6,797Costs related to design-build contract revenue and other sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Selling, general, and administrative
    
    
    
    
    
    
    111
    
    
    
    
    
    
    
    111Total certain operating expenses
    
    
    6,797
    
    
    
    111
    
    
    
    
    
    
    
    6,90810,476
    
    
    
    (86
    )
    
    
    
    
    
    
    10,390Other income (expense)
    
    
    148
    
    
    
    
    
    
    
    35
    
    
    
    183Corporate general and administrative expenses
    
    
    
    
    
    
    
    
    
    
    (1,421
    )
    
    
    (1,421
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (4,101
    )
    
    
    (4,101
    )Provision for income taxes applicable to funds from
operations modified
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    (39
    )
    
    
    (39
    )Earnings from unconsolidated real estate partnerships,
before real estate related depreciation and amortization
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    16Minority interests in real estate partnerships, before
real estate related depreciation and amortization
    
    
    (41
    )
    
    
    
    
    
    
    
    
    
    
    (41
    )Funds from operations modified (FFOM)
    
    
    10,599
    
    
    
    (86
    )
    
    
    (5,524
    )
    
    
    4,989Amortization of intangibles related to purchase
accounting, net of income tax benefit
    
    
    (42
    )
    
    
    
    
    
    
    16
    
    
    
    (26
    )Funds from operations (FFO)
    
    
    10,557
    
    
    
    (86
    )
    
    
    (5,508
    )
    
    
    4,963Real estate related depreciation and amortization
    
    
    (7,180
    )
    
    
    
    
    
    
    
    
    
    
    (7,180
    )Minority interests in operating partnership
    
    
    
    
    
    
    
    
    
    
    615
    
    
    
    615Net income (loss)
    
    $
    3,377
    
    
    $
    (86
    )
    
    $
    (4,893
    )
    
    $
    (1,602
    )Total assets
    
    $
    474,856
    
    
    $
    
    
    
    $
    796
    
    
    $
    475,652
 16




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##### Table of Contents



Design-BuildProperty
    
    
    and
    
    
    UnallocatedOperations
    
    
    Development
    
    
    and Other
    
    
    TotalNine months ended September 30, 2008:Revenues:Rental revenue
    
    $
    57,622
    
    
    $
    
    
    
    $
    
    
    
    $
    57,622Design-Build contract revenue and other sales
    
    
    
    
    
    
    174,870
    
    
    
    
    
    
    
    174,870Property management and other fees
    
    
    2,524
    
    
    
    
    
    
    
    
    
    
    
    2,524Development management and other income
    
    
    
    
    
    
    751
    
    
    
    
    
    
    
    751Total revenues
    
    
    60,146
    
    
    
    175,621
    
    
    
    
    
    
    
    235,767Certain operating expenses:Property operating and management
    
    
    23,403
    
    
    
    
    
    
    
    
    
    
    
    23,403Costs related to design-build contract revenue and other sales
    
    
    
    
    
    
    146,907
    
    
    
    
    
    
    
    146,907Selling, general, and administrative
    
    
    
    
    
    
    12,548
    
    
    
    
    
    
    
    12,548Total certain operating expenses
    
    
    23,403
    
    
    
    159,455
    
    
    
    
    
    
    
    182,85836,743
    
    
    
    16,166
    
    
    
    
    
    
    
    52,909Other income (expense)
    
    
    456
    
    
    
    137
    
    
    
    89
    
    
    
    682Corporate general and administrative expenses
    
    
    
    
    
    
    
    
    
    
    (7,848
    )
    
    
    (7,848
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (18,695
    )
    
    
    (18,695
    )Provision for income taxes applicable to funds from
operations modified
    
    
    
    
    
    
    
    
    
    
    (3,719
    )
    
    
    (3,719
    )Depreciation and amortization
    
    
    
    
    
    
    (772
    )
    
    
    (176
    )
    
    
    (948
    )Earnings from unconsolidated real estate partnerships,
before real estate related depreciation and amortization
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    26Minority interests in real estate partnerships, before
real estate related depreciation and amortization
    
    
    (1,128
    )
    
    
    
    
    
    
    
    
    
    
    (1,128
    )Funds from operations modified (FFOM)
    
    
    36,097
    
    
    
    15,531
    
    
    
    (30,349
    )
    
    
    21,279Amortization of intangibles related to purchase
accounting, net of income tax benefit
    
    
    (127
    )
    
    
    (9,043
    )
    
    
    3,576
    
    
    
    (5,594
    )Funds from operations (FFO)
    
    
    35,970
    
    
    
    6,488
    
    
    
    (26,773
    )
    
    
    15,685Real estate related depreciation and amortization
    
    
    (22,896
    )
    
    
    
    
    
    
    
    
    
    
    (22,896
    )Minority interests in operating partnership
    
    
    
    
    
    
    
    
    
    
    2,480
    
    
    
    2,480Net income (loss)
    
    $
    13,074
    
    
    $
    6,488
    
    
    $
    (24,293
    )
    
    $
    (4,731
    )Total assets
    
    $
    575,244
    
    
    $
    308,878
    
    
    $
    952
    
    
    $
    885,074
 17




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##### Table of Contents



Design-BuildProperty
    
    
    and
    
    
    UnallocatedOperations
    
    
    Development
    
    
    and Other
    
    
    TotalNine months ended September 30, 2007:Revenues:Rental revenue
    
    $
    45,344
    
    
    $
    
    
    
    $
    
    
    
    $
    45,344Design-Build contract revenue and other sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Property management and other fees
    
    
    2,644
    
    
    
    
    
    
    
    
    
    
    
    2,644Development management and other income
    
    
    
    
    
    
    276
    
    
    
    
    
    
    
    276Total revenues
    
    
    47,988
    
    
    
    276
    
    
    
    
    
    
    
    48,264Certain operating expenses:Property operating and management
    
    
    18,766
    
    
    
    
    
    
    
    
    
    
    
    18,766Costs related to design-build contract revenue and other sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Selling, general, and administrative
    
    
    
    
    
    
    377
    
    
    
    
    
    
    
    377Total certain operating expenses
    
    
    18,766
    
    
    
    377
    
    
    
    
    
    
    
    19,14329,222
    
    
    
    (101
    )
    
    
    
    
    
    
    29,121Other income (expense)
    
    
    428
    
    
    
    237
    
    
    
    98
    
    
    
    763Corporate general and administrative expenses
    
    
    
    
    
    
    
    
    
    
    (4,919
    )
    
    
    (4,919
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (11,324
    )
    
    
    (11,324
    )Provision for income taxes applicable to funds from
operations modified
    
    
    
    
    
    
    
    
    
    
    (200
    )
    
    
    (200
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    (100
    )
    
    
    (100
    )Earnings from unconsolidated real estate partnerships,
before real estate related depreciation and amortization
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    28Minority interests in real estate partnerships, before
real estate related depreciation and amortization
    
    
    (128
    )
    
    
    
    
    
    
    
    
    
    
    (128
    )Funds from operations modified (FFOM)
    
    
    29,550
    
    
    
    136
    
    
    
    (16,445
    )
    
    
    13,241Amortization of intangibles related to purchase
accounting, net of income tax benefit
    
    
    (127
    )
    
    
    
    
    
    
    50
    
    
    
    (77
    )Funds from operations (FFO)
    
    
    29,423
    
    
    
    136
    
    
    
    (16,395
    )
    
    
    13,164Real estate related depreciation and amortization
    
    
    (20,395
    )
    
    
    
    
    
    
    
    
    
    
    (20,395
    )Minority interests in operating partnership
    
    
    
    
    
    
    
    
    
    
    2,226
    
    
    
    2,226Net income (loss)
    
    $
    9,028
    
    
    $
    136
    
    
    $
    (14,169
    )
    
    $
    (5,005
    )Total assets
    
    $
    474,856
    
    
    $
    
    
    
    $
    796
    
    
    $
    475,652
 18




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##### Table of Contents



6. Contracts
  September 30,
    
    
    December 31,2008
    
    
    2007Costs and estimated earnings on uncompleted contracts
    
    $
    257,402
    
    
    $
    Billings to date
    
    
    (280,473
    )
    
    
    Net billings in excess of costs and estimated earnings
    
    $
    (23,071
    )
    
    $
    
  September 30,
    
    
    December 31,2008
    
    
    2007Costs and estimated earnings in excess of billings (1)
    
    $
    4,545
    
    
    $
    Billings in excess of costs and estimated earnings
    
    
    (27,616
    )
    
    
    Net billings in excess of costs and estimated earnings
    
    $
    (23,071
    )
    
    $
    
 
 (1)
    
    Included in Other assets in the consolidated balance sheet 7. Goodwill and Intangible Assets
  September 30,
    
    
    December 31,2008
    
    
    2007Goodwill
    
    $
    5,335
    
    
    $
    5,335Intangible assets related to the Erdman acquisition,
net of accumulated amortization of $9,043 in 2008
    
    
    278,556
    
    
    
    Acquired above market leases, net of accumulated
amortization of $693 in 2008 and $516 in 2007
    
    
    866
    
    
    
    1,033Acquired in place lease value and deferred leasing costs,
net of accumulated amortization of $22,300 in 2008 and
$17,739 in 2007
    
    
    18,745
    
    
    
    20,359Acquired ground leases, net of accumulated amortization
of $357 in 2008 and $217 in 2007
    
    
    3,206
    
    
    
    3,021Acquired property management contracts, net of
accumulated amortization of $383 in 2008 and $256
in 2007
    
    
    1,715
    
    
    
    1,841Total goodwill and intangible assets, net
    
    $
    308,423
    
    
    $
    31,589
 19




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##### Table of Contents



8. Mortgage Notes Payable and Borrowing Agreements
 Revolving Credit Facility
   Term Loan
  20




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##### Table of Contents



Mortgage Notes Payable
     Scheduled Maturities
  For the period ending:2008
    
    $
    13,4662009
    
    
    47,5602010
    
    
    31,1092011
    
    
    212,3862012
    
    
    11,145Thereafter
    
    
    108,596424,262Unamortized premium
    
    
    235$
    424,497
 21




---



##### Table of Contents



9. Derivative Financial Instruments
   September 30, 2008
    
    
    December 31, 2007NotionalAmount as ofSeptember 30,
    
    
    
    
    
    
    
    
    
    
    Effective
    
    
    ExpirationEntity
    
    2008
    
    
    Receive Rate
    
    
    Pay Rate
    
    
    Date
    
    
    Date
    
    
    Asset
    
    
    Liability
    
    
    Asset
    
    
    LiabilityBeaufort Medical Plaza, LLC (1)
    
    $
    4,932
    
    
    1 Month LIBOR
    
    
    5.65
    %
    
    
    8/18/2008
    
    
    
    8/18/2011
    
    
    $
    
    
    
    $
    34
    
    
    $
    
    
    
    $
    Beaufort Medical Plaza, LLC
    
    
    4,855
    
    
    1 Month LIBOR
    
    
    5.01
    %
    
    
    10/25/2006
    
    
    
    7/25/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23Cogdell Health Campus MOB, LP
    
    
    11,025
    
    
    1 Month LIBOR
    
    
    4.03
    %
    
    
    3/14/2008
    
    
    
    3/2/2015
    
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    Indianapolis MOB LLC
    
    
    30,000
    
    
    1 Month LIBOR
    
    
    4.95
    %
    
    
    11/6/2006
    
    
    
    10/31/2009
    
    
    
    
    
    
    
    622
    
    
    
    
    
    
    
    689River Hills Medical Associates, LLC
    
    
    2,896
    
    
    1 Month LIBOR
    
    
    4.97
    %
    
    
    10/16/2006
    
    
    
    12/15/2008
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    29Roper MOB, LLC
    
    
    9,277
    
    
    1 Month LIBOR
    
    
    4.95
    %
    
    
    10/10/2006
    
    
    
    7/10/2009
    
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    173St. Francis Community MOB, LLC (2)
    
    
    
    
    
    
    N/A

    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25St. Francis Medical Plaza, LLC (2)
    
    
    
    
    
    
    N/A

    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27Genesis Property Holdings, LLC
    
    
    16,797
    
    
    1 Month LIBOR
    
    
    4.71
    %
    
    
    4/1/2010
    
    
    
    10/1/2018
    
    
    
    
    
    
    
    68
    
    
    
    
    
    
    
    MEA Holdings, Inc.
    
    
    100,000
    
    
    1 Month LIBOR
    
    
    2.82
    %
    
    
    4/1/2008
    
    
    
    3/1/2011
    
    
    
    1,446
    
    
    
    
    
    
    
    
    
    
    
    Cogdell Spencer LP (3)
    
    
    30,000
    
    
    1 Month LIBOR
    
    
    3.11
    %
    
    
    10/15/2008
    
    
    
    3/10/2011
    
    
    
    230
    
    
    
    
    
    
    
    
    
    
    
    Cogdell Spencer LP
    
    
    3,000
    
    
    1 Month LIBOR
    
    
    5.06
    %
    
    
    8/14/2007
    
    
    
    10/31/2008
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    27Cogdell Spencer LP
    
    
    27,000
    
    
    1 Month LIBOR
    
    
    5.06
    %
    
    
    8/20/2007
    
    
    
    10/31/2008
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    242$
    1,737
    
    
    $
    930
    
    
    $
    
    
    
    $
    1,235
 
 (1)
    
    Swap agreement represents the renewal of the agreement ended 7/25/2008.(2)
    
    Swap agreements expired on June 15, 2008 and were not renewed.(3)
    
    Swap agreement intended to replace the prior two agreements that
expired on 10/31/2008. . Application of
FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address
Fair Value Measurements for Purposes of Lease Classification of Measurement under Statement 13 Accounting for Leases
  22




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##### Table of Contents



Fair Value Measurements as ofSeptember 30, 2008Total
    
    Level 1
    
    Level 2
    
    Level 3Assets:Derivative financial instruments
    
    $
    1,737
    
    
    $
    
    
    
    $
    1,737
    
    
    $
    Liabilities:Derivative financial instruments
    
    $
    (930
    )
    
    $
    
    
    
    $
    (930
    )
    
    $
    
  10. Minority Interests in Operating Partnership
  11. Dividends and Distributions
  23




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##### Table of Contents



12. Incentive Plan
     13. Related Party Transactions
   24




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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 (the Securities Act), 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 integrate Erdman;
    
    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
   25




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##### Table of Contents



Core CapabilitiesErdman
Advance Planning
Design
Construction
    
    (PIE CHART)
    
    Core CapabilitiesCogdell Spencer
Ownership
Development
Acquisitions
Property Management
     Modern Healthcares
 26




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##### Table of Contents




    
    62 properties, comprised of 3.3 million net rentable square feet, each
of which the Company wholly-owns or is a consolidated real estate
partnership;
    
    Three properties, comprised of 0.2 million net rentable square feet,
in which the Company owns a minority interest; and
    
    51 properties, comprised of 2.2 million net rentable square feet, that
the Company manages for third parties.
  Factors Which May Influence Future Results of Operations
   Critical Accounting Policies
   27




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##### Table of Contents



Acquisition of Real Estate
  Useful Lives of Assets
  Asset Impairment Valuation
  28




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##### Table of Contents



Revenue Recognition
      REIT Qualification Requirements
  29




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##### Table of Contents



Changes in Financial Condition
   Results of Operations
   Business Segments
  Property Summary
  Three Months Ended
    
    Nine Months EndedSeptember 30, 2008
    
    September 30, 2007
    
    September 30, 2008
    
    September 30, 2007Properties at beginning of the period
    
    
    62
    
    
    
    53
    
    
    
    59
    
    
    
    50Acquisitions
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    3In-service completed developments
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Lease-up completed development
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    2Properties at end of the period
    
    
    62
    
    
    
    56
    
    
    
    62
    
    
    
    56
 Year EndedDecember 31, 2007Properties at January 1
    
    
    51Acquisitions
    
    
    5In-service completed developments
    
    
    2Lease-up completed development
    
    
    1Properties at December 31
    
    
    59
  30




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Comparison of the three months ended September 30, 2008 and 2007
 FFOM
   For the Three Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007Net loss
    
    $
    (1,086
    )
    
    $
    (1,602
    )Plus minority interests in operating partnership
    
    
    (639
    )
    
    
    (615
    )Plus real estate related depreciation and amortization
    
    
    7,494
    
    
    
    7,180Funds from Operations (FFO)
    
    
    5,769
    
    
    
    4,963Plus amortization of intangibles related to purchase
accounting, net of income tax benefit
    
    
    2,390
    
    
    
    26Funds from Operations Modified (FFOM)
    
    $
    8,159
    
    
    $
    4,989
 Revenue
    Expenses
  31




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##### Table of Contents



Interest expense
  Income tax (expense) benefit
  Comparison of the nine months ended September 30, 2008 and 2007
 FFOM
   32




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##### Table of Contents



For the Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007Net loss
    
    $
    (4,731
    )
    
    $
    (5,005
    )Plus minority interests in operating partnership
    
    
    (2,480
    )
    
    
    (2,226
    )Plus real estate related depreciation and amortization
    
    
    22,896
    
    
    
    20,395Funds from Operations (FFO)
    
    
    15,685
    
    
    
    13,164Plus amortization of intangibles related to purchase
accounting, net of income tax benefit
    
    
    5,594
    
    
    
    77Funds from Operations Modified (FFOM)
    
    $
    21,279
    
    
    $
    13,241
 Revenue
    Expenses
     Interest expense
  33




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Income tax (expense) benefit
  Cash Flows
 Comparison of the nine months ended September 30, 2008 and September 30, 2007
    Construction in Progress
  Estimated
    
    Net Rentable
    
    
    Investment
    
    
    Estimated 
TotalProperty
    
    Location
    
    Completion Date
    
    Square Feet
    
    
    to Date
    
    
    InvestmentSt. Lukes Riverside MOB
    
    Bethlehem, PA
    
    2nd Half 2010
    
    
    170,000
    
    
    $
    1,153
    
    
    $
    38,900The Woodlands Center
    
    Pensacola, FL
    
    December 2009
    
    
    76,000
    
    
    
    6,186
    
    
    
    24,769Land and pre-construction developments
    
    
    
    
    
    
    
    
    
    
    3,333
    
    
    
    246,000
    
    
    $
    10,672
    
    
    $
    63,669
 Liquidity and Capital Resources
     34




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##### Table of Contents



Long-Term Liquidity Needs
  35




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##### Table of Contents



Contractual Obligations
  Remainder of2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    Thereafter
    
    
    TotalObligation:Long-term debt principal
payments and maturities (1)
    
    $
    13,466
    
    
    $
    47,560
    
    
    $
    31,109
    
    
    $
    212,386
    
    
    $
    11,145
    
    
    $
    108,596
    
    
    $
    424,262Standby letters of credit (2)
    
    
    5
    
    
    
    8,048
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,053Interest payments (3)
    
    
    6,372
    
    
    
    24,371
    
    
    
    21,447
    
    
    
    10,051
    
    
    
    6,832
    
    
    
    19,742
    
    
    
    88,815Purchase commitments (4)
    
    
    245
    
    
    
    139
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    384Ground and air rights leases (5)
    
    
    79
    
    
    
    314
    
    
    
    314
    
    
    
    314
    
    
    
    315
    
    
    
    9,946
    
    
    
    11,282Operating leases (6)
    
    
    1,440
    
    
    
    4,800
    
    
    
    3,731
    
    
    
    3,202
    
    
    
    3,101
    
    
    
    27,776
    
    
    
    44,050Total
    
    $
    21,607
    
    
    $
    85,232
    
    
    $
    56,601
    
    
    $
    225,953
    
    
    $
    21,393
    
    
    $
    166,060
    
    
    $
    576,846
 
 (1)
    
    Includes notes payable under the Companys Credit Facility.(2)
    
    As collateral for performance, the Company is contingently liable under standby
letters of credit, which also reduces the availability under the Credit Facility.(3)
    
    Assumes one-month LIBOR of 3.93% and Prime Rate of 5.00%, which were the rates as of
September 30, 2008.(4)
    
    These purchase commitments are related to the Companys development projects that
are currently under construction.(5)
    
    Substantially all of the ground and air rights 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 or air rights
lease.(6)
    
    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. 36




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##### Table of Contents



Off-Balance Sheet Arrangements
  Real Estate Taxes
  Inflation
  Seasonality
  Recent Accounting Pronouncements
 
   37




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
 ITEM 4. CONTROLS AND PROCEDURES
    38




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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Issuer Purchases of Equity Securities
  Total Number ofEquity Securities
    
    Approximate DollarAverage
    
    Purchased as Part
    
    Value of EquityTotal Number of
    
    Price Paid
    
    of Publicly
    
    Securities that MayEquity Securities
    
    Per Equity
    
    Announced Plans
    
    Yet Be PurchasedFor the Month of
    
    Purchased
    
    Security
    
    or Programs
    
    Under the PlanJuly 2008
    
    
    
    
    
    $
    
    
    
    
    N/A
    
    
    
    N/AAugust 2008
    
    
    6,016
    
    
    
    18.61
    
    
    
    N/A
    
    
    
    N/ASeptember 2008
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    6,016
    
    
    $
    18.61
    
    
    
    N/A
    
    
    
    N/A
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
    
    Frank C. Spencer, Chief Executive Officer and President: (i) base
salary of $500,000; (ii) annual achievement bonus of up to $500,000,
based on certain corporate-level strategic benchmarks; and (iii)
annual incentive bonus of up to $250,000, based on certain funds from
operations modified (FFOM) growth benchmarks. Mr. Spencers annual
achievement bonus and annual incentive bonus for 2008, if any, is
payable in LTIP units.
    
    Charles M. Handy, Chief Financial Officer: (i) base salary of
$275,000; (ii) annual achievement bonus of up to $247,500, based on
certain corporate-level strategic benchmarks, individual
department-level goals and subjective evaluation by the Chief
Executive Officer; (iii) LTIP unit grants of up to $150,000, based on
certain corporate-level strategic benchmarks, individual
department-level goals and subjective evaluation by the Chief
Executive Officer; and (iv) development project LTIP unit grants equal
to 0.15% of the asset value of each of the Companys new completed and
owned development projects.
    
    Scott Ransom, President and Chief Executive Officer of Erdman Company:
(i) base salary of $315,000; (ii) annual bonus of up to $315,000,
based on certain performance goals and performance multipliers set by
the Companys Chief Executive Officer and recommended to the
Compensation Committee; (iii) LTIP unit grants of up to 16% of the
amount by which Erdmans EBITDA exceeds certain strategic benchmarks;
and (iv) development project LTIP unit grants equal to 0.5% of the
asset value of each of the Companys new completed and owned
development projects.
  
 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.
 39




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##### Table of Contents



SIGNATURES
  COGDELL SPENCER INC.RegistrantDate: November 10, 2008
    /s/ Frank C. SpencerFrank C. SpencerPresident and Chief Executive OfficerDate: November 10, 2008
    /s/ Charles M. HandyCharles M. HandySenior Vice President and Chief Financial Officer 40