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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q







|x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2008.



| ̈ | 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 0-50854





THOMAS PROPERTIES GROUP, INC.

(Exact name of registrant as specified in its
charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 20-0852352                          
|(State or other jurisdiction of incorporation or organization) |  | (IRS employer identification number)
|                                                               | 
|515 South Flower Street, Sixth Floor Los Angeles, CA           |  | 90071                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

Registrants telephone number, including area code (213) 613-1900





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

Indicate by check mark whether the registrant is
a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule
12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer   ̈            Accelerated Filer  x            Non-accelerated Filer   ̈            Smaller reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   ̈    No  x

Indicate the number of shares outstanding of each
of the issuers classes of common stock, as of the latest practicable date.



|                                       |  |                                
|-------------------------------------- |  | -------------------------------
|Class                                  |  | Outstanding at November 7, 2008
|Common Stock, $.01 par value per share |  | 23,853,904                     









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##### Table of Contents

THOMAS PROPERTIES GROUP, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2008

TABLE OF CONTENTS



|                              |  |                                                                                                                   |  |         
|----------------------------- |  | ----------------------------------------------------------------------------------------------------------------- |  | --------
|                              |  |                                                                                                                   |  | PAGE NO.
|PART I. FINANCIAL INFORMATION |  |                                                                                                                  
|                              |  |                                                                                                                  
|ITEM 1.                       |  | Consolidated Financial Statements of Thomas Properties Group, Inc. and Subsidiaries                               |  |         
|                              |  | Consolidated Balance Sheets as of September 30, 2008 (unaudited) and December 31, 2007                            |  | 1       
|                              |  |                                                                                                                  
|                              |  | Consolidated Statements of Operations for the three and nine months ended September 30, 2008 and 2007 (unaudited) |  | 2       
|                              |  |                                                                                                                  
|                              |  | Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007 (unaudited)           |  | 3       
|                              |  |                                                                                                                  
|                              |  | Notes to Consolidated Financial Statements (unaudited)                                                            |  | 5       
|                              |  |                                                                                                                  
|ITEM 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                             |  | 21      
|                              |  |                                                                                                                  
|ITEM 3.                       |  | Quantitative and Qualitative Disclosure about Market Risk                                                         |  | 32      
|                              |  |                                                                                                                  
|ITEM 4.                       |  | Controls and Procedures                                                                                           |  | 32      
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                  
|                              |  |                                                                                                                  
|ITEM 1A.                      |  | Risk Factors                                                                                                      |  | 33      
|                              |  |                                                                                                                  
|ITEM 6.                       |  | Exhibits                                                                                                          |  | 44      
|                              | 
|Signatures                    |  | 45                                                                                                               



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PART I. FINANCIAL INFORMATION



|ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS
|------- | ---------------------------------

THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



|                                                                                                                                                                                 |  |                   |         |   |                  |   |          |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | -------- | -
|                                                                                                                                                                                 |  | September 30,2008 |         |   | December 31,2007 |  
|                                                                                                                                                                                 |  | (unaudited)       |         |   | (audited)        |  
|ASSETS                                                                                                                                                                           |  |                   |         |   |                  |   |          |  
|Investments in real estate:                                                                                                                                                      |  |                   |         |   |                  |   |          |  
|Land and improvements                                                                                                                                                            |  | $                 | 36,194  |   |                  | $ | 35,499   |  
|Land improvements  development properties                                                                                                                                       |  |                   | 104,538 |   |                  |   | 85,253   |  
|Construction in progress                                                                                                                                                         |  |                   | 136,871 |   |                  |   | 135,396  |  
|Buildings and improvements                                                                                                                                                       |  |                   | 265,188 |   |                  |   | 259,031  |  
|Tenant improvements                                                                                                                                                              |  |                   | 42,804  |   |                  |   | 59,804   |  
|                                                                                                                                                                                 |  |                   |         |   |                  |   |          |  
|                                                                                                                                                                                 |  |                   | 585,595 |   |                  |   | 574,983  |  
|Less accumulated depreciation                                                                                                                                                    |  |                   | (99,462 | ) |                  |   | (111,619 | )
|                                                                                                                                                                                 |  |                   |         |   |                  |   |          |  
|                                                                                                                                                                                 |  |                   | 486,133 |   |                  |   | 463,364  |  
|Investments in unconsolidated real estate entities                                                                                                                               |  |                   | 38,110  |   |                  |   | 49,199   |  
|Cash and cash equivalents                                                                                                                                                        |  |                   | 78,474  |   |                  |   | 126,647  |  
|Restricted cash                                                                                                                                                                  |  |                   | 15,219  |   |                  |   | 26,251   |  
|Rents and other receivables, net                                                                                                                                                 |  |                   | 4,527   |   |                  |   | 2,352    |  
|Receivables from condominium sales contracts                                                                                                                                     |  |                   | 19,170  |   |                  |   |         |  
|Receivables from unconsolidated real estate entities                                                                                                                             |  |                   | 5,997   |   |                  |   | 6,640    |  
|Deferred rents                                                                                                                                                                   |  |                   | 10,894  |   |                  |   | 14,696   |  
|Deferred leasing and loan costs, net                                                                                                                                             |  |                   | 15,454  |   |                  |   | 13,051   |  
|Other assets, net                                                                                                                                                                |  |                   | 17,190  |   |                  |   | 18,692   |  
|                                                                                                                                                                                 |  |                   |         |   |                  |   |          |  
|Total assets                                                                                                                                                                     |  | $                 | 691,168 |   |                  | $ | 720,892  |  
|                                                                                                                                                                                 |  |                   |         |   |                  |   |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                             |  |                   |         |   |                  |   |          |  
|Liabilities:                                                                                                                                                                     |  |                   |         |   |                  |   |          |  
|Mortgage loans                                                                                                                                                                   |  | $                 | 256,198 |   |                  | $ | 257,278  |  
|Other secured loan                                                                                                                                                               |  |                   | 130,728 |   |                  |   | 134,829  |  
|Unsecured loans                                                                                                                                                                  |  |                   | 3,900   |   |                  |   | 3,900    |  
|Accounts payable and other liabilities, net                                                                                                                                      |  |                   | 53,116  |   |                  |   | 74,733   |  
|Dividends and distributions payable                                                                                                                                              |  |                   | 2,377   |   |                  |   | 2,354    |  
|Due to affiliate                                                                                                                                                                 |  |                   |        |   |                  |   | 2,000    |  
|Prepaid rent                                                                                                                                                                     |  |                   | 2,338   |   |                  |   | 3,402    |  
|                                                                                                                                                                                 |  |                   |         |   |                  |   |          |  
|Total liabilities                                                                                                                                                                |  |                   | 448,657 |   |                  |   | 478,496  |  
|                                                                                                                                                                                 |  |                   |         |   |                  |   |          |  
|Minority interests:                                                                                                                                                              |  |                   |         |   |                  |   |          |  
|Unitholders in the Operating Partnership                                                                                                                                         |  |                   | 95,492  |   |                  |   | 95,245   |  
|Minority interests in consolidated real estate entities                                                                                                                          |  |                   | 3,838   |   |                  |   | 4,581    |  
|                                                                                                                                                                                 |  |                   |         |   |                  |   |          |  
|Total minority interests                                                                                                                                                         |  |                   | 99,330  |   |                  |   | 99,826   |  
|                                                                                                                                                                                 |  |                   |         |   |                  |   |          |  
|Commitments and contingencies                                                                                                                                                    |  |                   |         |   |                  |   |          |  
|Stockholders equity:                                                                                                                                                            |  |                   |         |   |                  |   |          |  
|Preferred stock, $.01 par value, 25,000,000 shares authorized, none issued or outstanding as of September 30, 2008 and December 31,
2007                                         |  |                   |        |   |                  |   |         |  
|Common stock, $.01 par value, 75,000,000 shares authorized, 23,853,904 and 23,747,936 shares issued and outstanding as of September 30,
2008 and December 31, 2007, respectively |  |                   | 237     |   |                  |   | 237      |  
|Limited voting stock, $.01 par value, 20,000,000 shares authorized, 14,496,666 issued and outstanding as of September 30, 2008 and
December 31, 2007                             |  |                   | 145     |   |                  |   | 145      |  
|Additional paid-in capital                                                                                                                                                       |  |                   | 160,508 |   |                  |   | 157,799  |  
|Retained deficit and dividends including $103 and $201 of other comprehensive loss as of September 30, 2008 and December 31, 2007,
respectively                                  |  |                   | (17,709 | ) |                  |   | (15,611  | )
|                                                                                                                                                                                 |  |                   |         |   |                  |   |          |  
|Total stockholders equity                                                                                                                                                       |  |                   | 143,181 |   |                  |   | 142,570  |  
|                                                                                                                                                                                 |  |                   |         |   |                  |   |          |  
|Total liabilities and stockholders equity                                                                                                                                       |  | $                 | 691,168 |   |                  | $ | 720,892  |  
|                                                                                                                                                                                 |  |                   |         |   |                  |   |          |  

See accompanying notes to consolidated financial statements.



1



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THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)



|                                                                                                         |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|-------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ---------- | - | ------------------------------ | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                                                         |  | Three months endedSeptember 30, |            |   | Nine months endedSeptember 30, |  
|                                                                                                         |  | 2008                            |            |   | 2007                           |   |            | 2008 |  |   | 2007       |  
|Revenues:                                                                                                |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Rental                                                                                                   |  | $                               | 7,482      |   |                                | $ | 8,193      |      |  | $ | 23,317     |   |  | $ | 24,574     |  
|Tenant reimbursements                                                                                    |  |                                 | 5,991      |   |                                |   | 6,653      |      |  |   | 20,116     |   |  |   | 19,897     |  
|Parking and other                                                                                        |  |                                 | 925        |   |                                |   | 949        |      |  |   | 2,747      |   |  |   | 2,841      |  
|Investment advisory, management, leasing, and development services                                       |  |                                 | 1,799      |   |                                |   | 7,070      |      |  |   | 5,570      |   |  |   | 10,909     |  
|Investment advisory, management, leasing, and development services - unconsolidated real estate entities |  |                                 | 4,244      |   |                                |   | 4,663      |      |  |   | 13,670     |   |  |   | 13,091     |  
|Reimbursement of property personnel costs                                                                |  |                                 | 1,657      |   |                                |   | 993        |      |  |   | 5,075      |   |  |   | 2,772      |  
|Condominium sales  percentage of completion                                                             |  |                                 | 3,622      |   |                                |   |           |      |  |   | 79,758     |   |  |   |           |  
|                                                                                                         |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Total revenues                                                                                           |  |                                 | 25,720     |   |                                |   | 28,521     |      |  |   | 150,253    |   |  |   | 74,084     |  
|                                                                                                         |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Expenses:                                                                                                |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Rental property operating and maintenance                                                                |  |                                 | 6,018      |   |                                |   | 5,621      |      |  |   | 18,877     |   |  |   | 16,828     |  
|Real estate taxes                                                                                        |  |                                 | 1,586      |   |                                |   | 1,554      |      |  |   | 4,762      |   |  |   | 4,578      |  
|Investment advisory, management, leasing, and development services                                       |  |                                 | 4,142      |   |                                |   | 3,303      |      |  |   | 12,520     |   |  |   | 9,471      |  
|Reimbursable property personnel costs                                                                    |  |                                 | 1,657      |   |                                |   | 993        |      |  |   | 5,075      |   |  |   | 2,772      |  
|Cost of condominium sales  percentage of completion                                                     |  |                                 | 3,113      |   |                                |   |           |      |  |   | 62,228     |   |  |   |           |  
|Rent  unconsolidated real estate entities                                                               |  |                                 | 65         |   |                                |   | 61         |      |  |   | 191        |   |  |   | 181        |  
|Interest                                                                                                 |  |                                 | 5,803      |   |                                |   | 4,362      |      |  |   | 13,740     |   |  |   | 12,405     |  
|Depreciation and amortization                                                                            |  |                                 | 2,948      |   |                                |   | 2,669      |      |  |   | 8,498      |   |  |   | 8,776      |  
|General and administrative                                                                               |  |                                 | 4,173      |   |                                |   | 4,477      |      |  |   | 13,556     |   |  |   | 12,992     |  
|                                                                                                         |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Total expenses                                                                                           |  |                                 | 29,505     |   |                                |   | 23,040     |      |  |   | 139,447    |   |  |   | 68,003     |  
|                                                                                                         |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Gain on sale of real estate                                                                              |  |                                 |           |   |                                |   | 901        |      |  |   | 3,618      |   |  |   | 3,290      |  
|Early extinguishment of debt                                                                             |  |                                 |           |   |                                |   |           |      |  |   | 255        |   |  |   |           |  
|Interest income                                                                                          |  |                                 | 587        |   |                                |   | 1,877      |      |  |   | 2,341      |   |  |   | 4,446      |  
|Equity in net loss of unconsolidated real estate entities                                                |  |                                 | (3,968     | ) |                                |   | (4,834     | )    |  |   | (9,108     | ) |  |   | (9,366     | )
|Minority interests  unitholders in the Operating Partnership                                            |  |                                 | 2,733      |   |                                |   | (1,372     | )    |  |   | (3,126     | ) |  |   | (1,720     | )
|Minority interests in consolidated real estate entities                                                  |  |                                 | 133        |   |                                |   | 52         |      |  |   | 133        |   |  |   | 87         |  
|                                                                                                         |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|(Loss) income before benefit (provision) for income taxes                                                |  |                                 | (4,300     | ) |                                |   | 2,105      |      |  |   | 4,919      |   |  |   | 2,818      |  
|Benefit (provision) for income taxes                                                                     |  |                                 | 1,359      |   |                                |   | (1,834     | )    |  |   | (2,695     | ) |  |   | (2,152     | )
|                                                                                                         |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Net (loss) income                                                                                        |  | $                               | (2,941     | ) |                                | $ | 271        |      |  | $ | 2,224      |   |  | $ | 666        |  
|                                                                                                         |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|(Loss) earnings per share-basic                                                                          |  | $                               | (0.12      | ) |                                | $ | 0.01       |      |  | $ | 0.09       |   |  | $ | 0.03       |  
|(Loss) earnings per share-diluted                                                                        |  | $                               | (0.12      | ) |                                | $ | 0.01       |      |  | $ | 0.09       |   |  | $ | 0.03       |  
|Weighted average common shares-basic                                                                     |  |                                 | 23,701,294 |   |                                |   | 23,626,645 |      |  |   | 23,681,997 |   |  |   | 19,522,069 |  
|Weighted average common shares-diluted                                                                   |  |                                 | 23,701,294 |   |                                |   | 23,645,563 |      |  |   | 23,681,997 |   |  |   | 19,563,897 |  

See accompanying notes to consolidated financial statements.



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THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                                                           |  |                                |         |   |      |   |          |  
|---------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | -------- | -
|                                                                                                           |  | Nine months endedSeptember 30, |        
|                                                                                                           |  | 2008                           |         |   | 2007 |  
|Cash flows from operating activities:                                                                      |  |                                |         |   |      |   |          |  
|Net income                                                                                                 |  | $                              | 2,224   |   |      | $ | 666      |  
|Adjustments to reconcile net income to net cash provided by operating activities:                          |  |                                |         |   |      |   |          |  
|Gain on sale of land                                                                                       |  |                                | (3,618  | ) |      |   | (3,290   | )
|Gain on sale of condominiums  closed units                                                                |  |                                | (13,261 | ) |      |   |         |  
|Gain on sale of condominiums  units under contract                                                        |  |                                | (4,269  | ) |      |   |         |  
|Equity in net loss of unconsolidated real estate entities                                                  |  |                                | 9,108   |   |      |   | 9,366    |  
|Deferred rents                                                                                             |  |                                | 3,113   |   |      |   | 4,384    |  
|Depreciation and amortization expense                                                                      |  |                                | 8,498   |   |      |   | 8,776    |  
|Amortization of loan costs                                                                                 |  |                                | 237     |   |      |   | 245      |  
|Amortization of above and below market leases, net                                                         |  |                                | (100    | ) |      |   | (4       | )
|Vesting of stock options, restricted stock and incentive units                                             |  |                                | 2,459   |   |      |   | 2,916    |  
|Minority interests                                                                                         |  |                                | 2,993   |   |      |   | 1,633    |  
|Distributions from operations of unconsolidated real estate entities                                       |  |                                | 224     |   |      |   | 3,422    |  
|Changes in assets and liabilities:                                                                         |  |                                |         |   |      |   |          |  
|Rents and other receivables                                                                                |  |                                | (2,175  | ) |      |   | (5,816   | )
|Receivables  unconsolidated real estate entities                                                          |  |                                | 643     |   |      |   | (2,654   | )
|Deferred leasing and loan costs                                                                            |  |                                | (3,564  | ) |      |   | (433     | )
|Other assets                                                                                               |  |                                | 585     |   |      |   | (6,591   | )
|Deferred interest payable                                                                                  |  |                                | 1,445   |   |      |   | 133      |  
|Accounts payable and other liabilities                                                                     |  |                                | 505     |   |      |   | 18,147   |  
|Prepaid rent                                                                                               |  |                                | (1,064  | ) |      |   | 104      |  
|Deferred tax liability                                                                                     |  |                                |        |   |      |   | (2,392   | )
|                                                                                                           |  |                                |         |   |      |   |          |  
|Net cash provided by operating activities                                                                  |  |                                | 3,983   |   |      |   | 28,612   |  
|                                                                                                           |  |                                |         |   |      |   |          |  
|Cash flows from investing activities:                                                                      |  |                                |         |   |      |   |          |  
|Expenditures for improvements to real estate                                                               |  |                                | (93,294 | ) |      |   | (85,417  | )
|Proceeds from sale of condominiums                                                                         |  |                                | 51,135  |   |      |   |         |  
|Purchase of interests in consolidated entities                                                             |  |                                | (4,000  | ) |      |   |         |  
|Purchase of interests in unconsolidated real estate entities                                               |  |                                |        |   |      |   | (18,438  | )
|Return of capital from unconsolidated real estate entities                                                 |  |                                | 3,166   |   |      |   | 3,523    |  
|Contributions to unconsolidated real estate entities                                                       |  |                                | (1,250  | ) |      |   | (2,121   | )
|Payments for purchase of naming rights                                                                     |  |                                |        |   |      |   | (750     | )
|Change in restricted cash                                                                                  |  |                                | 11,032  |   |      |   | (2,391   | )
|                                                                                                           |  |                                |         |   |      |   |          |  
|Net cash used in investing activities                                                                      |  |                                | (33,211 | ) |      |   | (105,594 | )
|                                                                                                           |  |                                |         |   |      |   |          |  
|Cash flows from financing activities:                                                                      |  |                                |         |   |      |   |          |  
|Proceeds from equity offering                                                                              |  |                                |        |   |      |   | 139,818  |  
|Payment of offering costs                                                                                  |  |                                |        |   |      |   | (431     | )
|Payment for redemption of operating units                                                                  |  |                                |        |   |      |   | (33,646  | )
|Payment of dividends to common stockholders and distributions to limited partners of the operating company |  |                                | (7,087  | ) |      |   | (6,204   | )
|Proceeds from mortgage and other secured loans                                                             |  |                                | 64,706  |   |      |   | 54,873   |  
|Principal payments of mortgage and other secured loans                                                     |  |                                | (76,369 | ) |      |   | (11,039  | )
|Minority interest distributions                                                                            |  |                                | (195    | ) |      |   | (10      | )
|Proceeds from exercise of stock options                                                                    |  |                                |        |   |      |   | 320      |  
|                                                                                                           |  |                                |         |   |      |   |          |  
|Net cash (used in) provided by financing activities                                                        |  |                                | (18,945 | ) |      |   | 143,681  |  
|                                                                                                           |  |                                |         |   |      |   |          |  
|Net (decrease) increase in cash and cash equivalents                                                       |  |                                | (48,173 | ) |      |   | 66,699   |  
|Cash and cash equivalents at beginning of period                                                           |  |                                | 126,647 |   |      |   | 64,343   |  
|                                                                                                           |  |                                |         |   |      |   |          |  
|Cash and cash equivalents at end of period                                                                 |  | $                              | 78,474  |   |      | $ | 131,042  |  
|                                                                                                           |  |                                |         |   |      |   |          |  
|Supplemental disclosure of cash flow information:                                                          |  |                                |         |   |      |   |          |  



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|                                                                                                                                 |  |   |        |   |  |   |       
|-------------------------------------------------------------------------------------------------------------------------------- |  | - | ------ | - |  | - | ------
|Cash paid for interest, net of amounts capitalized                                                                               |  | $ | 19,603 |   |  | $ | 18,430
|Supplemental disclosure of non-cash investing and financing activities:                                                          |  |   |        |   |  |   |       
|Accrual for declaration of dividends to common shareholders and distributions to limited partners of the operating partnership   |  | $ | 23     |   |  | $ | 438   
|Investments in real estate included in accounts payable and other liabilities                                                    |  | $ | (9,229 | ) |  | $ | 7,942 
|Decrease in investments in real estate and accumulated depreciation for removal of fully amortized improvements                  |  |   | 18,559 |   |  |   |      
|Reclassification of minority interest for limited partnership units in the Operating Partnership from additional paid in
capital |  | $ | 840    |   |  | $ | 21,590
|Receivables from condominium units under contract                                                                                |  | $ | 19,170 |   |  | $ |      
|Other comprehensive loss                                                                                                         |  | $ | (98    | ) |  | $ |      

See accompanying notes to consolidated financial statements.



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Notes to Consolidated Financial Statements (unaudited)

1. Organization and Description of Business

The
terms Thomas Properties, us, we and our as used in this report refer to Thomas Properties Group, Inc. together with our Operating Partnership, Thomas Properties Group, L.P. (the Operating
Company).

We were formed to succeed to certain businesses of the Thomas Properties predecessor (Thomas Properties Group, Inc.
Predecessor, or TPGI Predecessor), which was not a legal entity but rather a combination of real estate entities and operations. We own, manage, lease, acquire and develop real estate, consisting primarily of office properties and
related parking garages, located in Southern California; Sacramento, California; Philadelphia, Pennsylvania; Northern Virginia; Houston, Texas; and Austin, Texas. The owners of TPGI Predecessor were Mr. James A. Thomas, our Chairman, Chief
Executive Officer and President, and certain others who had minor ownership interests.

We were incorporated in the State of Delaware on
March 9, 2004. On October 13, 2004, we completed our initial public offering (the Offering). Concurrent with the consummation of the Offering, Thomas Properties and the Operating Partnership, together with the partners and
members of the affiliated partnerships and limited liability companies of TPGI Predecessor and other parties which held direct or indirect ownership interests in the properties engaged in certain formation transactions. The formation transactions
were designed to (i) continue the operations of TPGI Predecessor, (ii) enable us to raise the necessary capital to acquire increased interests in certain of the properties and repay certain property level indebtedness, (iii) fund
joint venture capital commitments, (iv) provide capital for future acquisitions, and (v) fund future development costs at our development properties.

Our operations are carried on through our Operating Partnership. We are the sole general partner in the Operating Partnership. Pursuant to contribution agreements among the owners of TPGI Predecessor and the Operating
Partnership, the Operating Partnership received a contribution of interests in the real estate properties, as well as the investment advisory, property management, leasing and real estate development operations of TPGI Predecessor in exchange for
limited partnership units (Units) in the Operating Partnership issued to the contributors and the assumption of debt and other specified liabilities. As of September 30, 2008, we held a 61.0% interest in the Operating Partnership
which we consolidate, as we have control over the major decisions of the Operating Partnership.

As of September 30, 2008, we were
invested in the following real estate properties:



|                         |  |                                                                                                                              |  |                                                              
|------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------
|Property                 |  | Type                                                                                                                         |  | Location                                                     
|Consolidated properties: |  |                                                                                                                              |  |                                                              
|One Commerce Square      |  | High-rise office                                                                                                             |  | Philadelphia Central Business District, Pennsylvania (PCBD)
|Two Commerce Square      |  | High-rise office                                                                                                             |  | PCBD                                                         
|Murano                   |  | Construction substantially complete; Residential condominiums                                                                |  | PCBD                                                         
|2100 JFK Boulevard       |  | Undeveloped land; Residential/Office/Retail                                                                                  |  | PCBD                                                         
|Four Points Centre       |  | Core and shell construction of two office buildings complete; undeveloped land; Office/Retail/Research and Development/Hotel |  | Austin, Texas                                                
|Campus El Segundo        |  | Site infrastructure in progress and undeveloped land; Office/Retail/ Research and Development/Hotel                          |  | El Segundo, California                                       
|Metro Studio@Lankershim  |  | Entitlements and pre-development in progress; Office/Studio/Production/Retail                                                |  | Los Angeles, California                                      



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|                                  |  |                                      |  |                                                  
|--------------------------------- |  | ------------------------------------ |  | -------------------------------------------------
|Property                          |  | Type                                 |  | Location                                         
|Unconsolidated properties:        |  |                                      |  |                                                  
|2121 Market Street                |  | Residential and Retail               |  | PCBD                                             
|TPG/CalSTRS, LLC:                 |  |                                      |  |                                                  
|City National Plaza               |  | High-rise office                     |  | Los Angeles Central Business District, California
|Reflections I                     |  | Suburban officesingle tenancy       |  | Reston, Virginia                                 
|Reflections II                    |  | Suburban officesingle tenancy       |  | Reston, Virginia                                 
|Four Falls Corporate Center       |  | Suburban office                      |  | Conshohocken, Pennsylvania                       
|Oak Hill Plaza                    |  | Suburban office                      |  | King of Prussia, Pennsylvania                    
|Walnut Hill Plaza                 |  | Suburban office                      |  | King of Prussia, Pennsylvania                    
|San Felipe Plaza                  |  | High-rise office                     |  | Houston, Texas                                   
|2500 City West                    |  | Suburban office                      |  | Houston, Texas                                   
|Brookhollow Central I, II and III |  | Suburban office                      |  | Houston, Texas                                   
|CityWestPlace                     |  | Suburban office and undeveloped land |  | Houston, Texas                                   
|Centerpointe I & II               |  | Suburban office                      |  | Fairfax, Virginia                                
|Fair Oaks Plaza                   |  | Suburban office                      |  | Fairfax, Virginia                                
|San Jacinto Center                |  | High-rise office                     |  | Austin Central Business District, Texas, (ACBD)
|Frost Bank Tower                  |  | High-rise office                     |  | ACBD                                             
|One Congress Plaza                |  | High-rise office                     |  | ACBD                                             
|One American Center               |  | High-rise office                     |  | ACBD                                             
|300 West 6thStreet                |  | High-rise office                     |  | ACBD                                             
|Research Park Plaza I & II        |  | Suburban Office                      |  | Austin, Texas                                    
|Park 22 I-III                     |  | Suburban Office                      |  | Austin, Texas                                    
|Great Hills Plaza                 |  | Suburban Office                      |  | Austin, Texas                                    
|Stonebridge Plaza II              |  | Suburban Office                      |  | Austin, Texas                                    
|Westech 360 I-IV                  |  | Suburban Office                      |  | Austin, Texas                                    

2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements of our company
include all the accounts of Thomas Properties Group, Inc., the Operating Partnership and the subsidiaries of the Operating Partnership. Property interests contributed to the Operating Partnership by Mr. Thomas and entities majority owned by him
in exchange for Units have been accounted for as a reorganization of entities under common control in a manner similar to a pooling of interests. Accordingly, the contributed assets and assumed liabilities were recorded at TPGI Predecessors
historical cost basis, except for the minority owners share. The pooling-of-interests method of accounting also requires the reporting of results of operations, for the period in which the combination occurred as though the entities had been
combined at either the beginning of the period or inception. Prior to the Offering, Thomas Properties Group, Inc. and the Operating Partnership had no operations. The combination did not require any material adjustments to conform the accounting
policies of the separate entities. The remaining interests, which were acquired for cash and Units, were accounted for as a purchase, and the excess of the purchase price over the related historical cost basis was allocated to the assets acquired
and liabilities assumed.

The real estate entities included in the consolidated financial statements have been consolidated only for the
periods that such entities were under control by us or TPGI Predecessor, or were considered a variable interest entity. The equity method of accounting is utilized to account for investments in real estate entities over which we have significant
influence, but not control over major decisions, including the decision to sell or refinance the properties owned by such entities. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements.

The interests in One Commerce Square (beginning June 1, 2004 through December 30, 2007), and Two Commerce Square (beginning
October 13, 2004 through August 6, 2008), not owned by us are reflected as minority interest. On August 6, 2008 and December 31, 2007, we exercised our option to purchase the remaining 11% interest in Two Commerce Square and One
Commerce Square, respectively, for $2.0 million each, resulting in our 100% ownership of Two Commerce Square and One Commerce Square. We are in process of allocating the purchase price of the 11% interest acquired in Two Commerce Square to the
acquired tangible assets and identified intangible assets and liabilities as of September 30, 2008. We will do so in the fourth quarter of 2008.



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We have a $20,510,000 preferred equity interest in Murano. Excluding the preferred equity interest, a
third party has a 27.0% ownership interest in Murano.

Earnings (loss) per share

The computation of basic earnings (loss) per share is based on net earnings (loss) and the weighted average number of shares of our common stock
outstanding during the period. The computation of diluted earnings (loss) per share includes the assumed exercise of outstanding stock options and the effect of the vesting of restricted stock that have been granted, all calculated using the
treasury stock method.

Development Activities

Project costs associated with the development and construction of a real estate project are capitalized as construction in progress. In addition, interest, loan fees, real estate taxes, and general and administrative expenses that are
directly associated with and incremental to our development activities and other costs are capitalized during the period in which activities necessary to get the property ready for its intended use are in progress, including the pre-development and
lease-up phases. Once the development and construction of the building shell of a real estate project is completed, the costs capitalized to construction in progress will be transferred to land and improvements and buildings and improvements. We
expect that our Murano and Four Points developments will be completed in the fourth quarter of 2008 at which time the costs will be transferred out of construction in progress. Included in land held for development and construction in progress is
capitalized interest of $24.1 million and $16.3 million as of September 30, 2008 and December 31, 2007, respectively.

Condominium
Sales-Percentage of Completion Method

We have one high-rise condominium project for which we use the percentage of completion
accounting method to recognize revenues and costs. Under the provisions of the Financial Accounting Standards Board (FASB) Statement No. 66, Accounting for Sales of Real Estate (SFAS 66), revenues and costs for projects
are recognized using the percentage of completion method of accounting when construction is beyond the preliminary stage, the buyer is committed to the extent of being unable to require a refund except for non-delivery of the unit, sufficient units
in the project have been sold to ensure that the property will not revert to rental property, the sales proceeds are collectible and the aggregate sales proceeds and the costs of the project can be reasonably estimated. Revenues are recognized on
the individual projects aggregate value of units which have closed and units for which the home buyers have signed binding agreements of sale, less an allowance for cancellations, and are based on the percentage of total estimated construction
costs that have been incurred. The total estimated costs of the project are allocated to these units on a relative sales value basis. Total estimated revenues and construction costs are reviewed periodically, and any change is applied to current and
future periods.

Forfeited customer deposits are recognized as revenue in the period in which we determine that the customer will not
complete the purchase of the condominium unit and when we determine that we have the right to keep the deposit. As of September 30, 2008, there were three forfeitures totaling $254,000, of which $207,000 was recognized in 2008, and $47,000 was
recognized in 2007.

Gains on Sale of Real Estate

Gains on sales of real estate are recognized pursuant to the provisions of SFAS 66. The specific timing of a sale is measured against various criteria in SFAS 66 related to the terms of the transaction and any
continuing involvement in the form of management or financial assistance associated with the property. If the sales criteria are not met, we defer gain recognition and account for the continued operations of the property by applying the deposit,
finance, installment, percentage of completion or cost recovery methods, as appropriate. When we sell land upon which we have not developed any significant building improvements, the revenue and cost of the disposition is reflected as a net gain in
our accompanying statements of operations.

Fair Value Measurements

On January 1, 2008 we adopted FASB Statement No. 157 Fair Value Measurement (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands
disclosures about fair value measurements. SFAS 157 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value
measurements of reported balances. SFAS 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market
participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, SFAS 157 establishes a fair value hierarchy that distinguishes between market participant



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assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of
the hierarchy) and the reporting entitys own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). Level 1 inputs utilize quoted prices (unadjusted) for identical assets or
liabilities in active markets that we have the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted
prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at
commonly quoted intervals.

Currently, we use interest rate caps, floors and collarsto manage the interest rate risk of our
investments in unconsolidated investments resulting from variable interest payments on our floating rate debt. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis
on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities.

To comply with the provisions of FAS 157, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance
risk and the respective counterpartys nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we considered the impact of netting and any
applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. We have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. We do not have
any fair value measurements using significant unobservable inputs (Level 3) as of September 30, 2008.

The table below presents the
assets and liabilities associated with our unconsolidated investments measured at fair value on a recurring basis as of September 30, 2008, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands).



|                        |  |                                                                           |   |                                             |   |                                         |  |                              |   |  |   |      
|----------------------- |  | ------------------------------------------------------------------------- | - | ------------------------------------------- | - | --------------------------------------- |  | ---------------------------- | - |  | - | -----
|                        |  | Quoted Prices inActive Markets forIdenticalAssets andLiabilities(Level 1) |   | Significant OtherObservableInputs (Level 2) |   | SignificantUnobservableInputs (Level 3) |  | Balance atSeptember 30, 2008
|Assets                  |  |                                                                           |   |                                             |   |                                         |  |                              |   |  |   |      
|Interest rate contracts |  | $                                                                         |  |                                             | $ | 8                                       |  | $                            |  |  | $ | 8    
|Liabilities             |  |                                                                           |   |                                             |   |                                         |  |                              |   |  |   |      
|Interest rate contracts |  | $                                                                         |  |                                             | $ | 2,275                                   |  | $                            |  |  | $ | 2,275

Recent Accounting Pronouncements

In February 2008, the FASB issued FASB Staff Position No. 157-1, 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 or Measurement under Statement 13 (SFAS 157-1). SFAS No. 157-1 amends SFAS 157, to exclude FASB Statement
No. 13, Accounting for Leases (SFAS 13), and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under SFAS 13. However, this scope exception does not
apply to assets acquired and liabilities assumed in a business combination that are required to be measured at fair value under FASB Statement No. 141 (R), Business Combinations (SFAS 141R), regardless of whether those
assets and liabilities are related to leases. We are evaluating SFAS 157-1 and have not yet determined the impact the adoption will have on our financial position or results of operations.

In December 2007, the FASB issued SFAS 141R, to create greater consistency in the accounting and financial reporting of business combinations. SFAS 141R
requires a company to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity to be measured at their fair values as of the acquisition date. SFAS 141R also requires companies to recognize the
fair value of assets acquired, the liabilities assumed and any noncontrolling interest in acquisitions of less than a one hundred percent interest when the acquisition constitutes a change in control of the acquired entity. In addition, SFAS 141R
requires that acquisition-related costs and restructuring costs be recognized separately from the business combination and expensed as incurred. SFAS 141R is effective for business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning after December 15, 2008. We are evaluating SFAS 141R and have not yet determined the impact the adoption will have on our financial position or results of operations.



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In February 2007, the FASB issued FAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities Including an Amendment of FASB Statement No. 115. This standard permits entities to choose to measure many financial instruments and certain other items at fair value and is effective for the first fiscal year
beginning after November 15, 2007, which for us means our fiscal year 2008. We did not elect the fair value measurement option for any financial assets or liabilities.

In December 2007, FASB issued FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statementsan Amendment of
Accounting Research Bulletin No. 51 (SFAS 160). SFAS 160 requires all entities to report noncontrolling interests in subsidiaries within equity in the consolidated financial statements, but separate from the parent
shareholders equity. SFAS No. 160 also requires any acquisitions or dispositions of noncontrolling interests that do not result in a change of control to be accounted for as equity transactions. In addition, SFAS No. 160 requires
that a parent company recognize a gain or loss in net income when a subsidiary is deconsolidated upon a change in control. SFAS No. 160 applies to fiscal years beginning after December 15, 2008 and is adopted prospectively. The
presentation and disclosure requirements shall be applied retrospectively for all periods presented. The adoption of SFAS 160 will result in a reclassification of minority interest to a separate component of total equity and net income attributable
to noncontrolling interests will no longer be treated as a reduction to net income but will be shown as a reduction from net income in calculating net income available to common stockholders. We are evaluating SFAS 160 and have not yet determined
the impact the adoption will have on our financial position or results of operations.

Interim Financial Data

The accompanying interim financial statements are unaudited, but have been prepared in accordance with U.S. generally accepted accounting principles
(GAAP) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. The results of operations for the
interim periods are not necessarily indicative of the results to be obtained for the full fiscal year. Certain prior period amounts have been reclassified to conform to the current period presentation.

3. Unconsolidated Real Estate Entities

The
unconsolidated real estate entities include our share of the entities that own 2121 Market Street, and the TPG/CalSTRS properties. TPG/CalSTRS owns the following properties:

City National Plaza (purchased January 2003)

Reflections I (purchased October 2004)

Reflections II (purchased October 2004)

Four Falls Corporate Center (purchased March 2005)

Oak Hill Plaza (purchased March 2005)

Walnut Hill Plaza (purchased March 2005)

San Felipe Plaza (purchased August 2005)

2500 City West (purchased August 2005)

Brookhollow Central I, II and III (purchased August 2005)

Intercontinental Center (purchased August 2005, sold May 2007)

2500 City West land (purchased December 2005)

CityWestPlace (purchased June 2006)

Centerpointe I & II (purchased January 2007)

Fair Oaks Plaza (purchased January 2007)

TPG/CalSTRS also owns a 25% interest in the TPG-Austin Portfolio Syndication Partners JV
LP (the Austin Portfolio Joint Venture Properties) which owns the following properties:

San Jacinto Center (purchased June
2007)

Frost Bank Tower (purchased June 2007)

One Congress Plaza (purchased June 2007)

One American Center (purchased June 2007)



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300 West 6th Street (purchased June 2007)

Research Park Plaza I & II (purchased June 2007)

Park 22 I-III (purchased June 2007)

Great Hills Plaza (purchased June 2007)

Stonebridge Plaza II (purchased June 2007)

Westech 360 I-IV (purchased June 2007)

Capital contributions, distributions, and profits and losses of the real estate entities
are allocated in accordance with the terms of the applicable partnership and limited liability company agreements. Such allocations may differ from the stated ownership percentage interests in such entities as a result of preferred returns and
allocation formulas as described in the partnership and limited liability company agreements. Following are the stated ownership percentages, prior to any preferred or special allocations, as of September 30, 2008:



|                                                                          |  |      |     
|------------------------------------------------------------------------- |  | ---- | ----
|2121 Market Street                                                        |  | 50.0 | %   
|TPG/CalSTRS, LLC:                                                         |  |      |     
|City National Plaza                                                       |  | 21.3 | %(1)
|All other properties, excluding Austin Portfolio Joint Venture Properties |  | 25.0 | %   
|Austin Portfolio Joint Venture Properties                                 |  | 6.3  | %   



|(1) | During 2005, the accumulated losses and distributions for the minority owner equaled their contribution amount. As such, net income/loss is allocated to the Operating Partnership
and CalSTRS.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Investments in unconsolidated real estate entities as of September 30, 2008 and December 31,
2007 are as follows:



|                                                          |  |                   |         |   |                  |   |        |  
|--------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------ | -
|                                                          |  | September 30,2008 |         |   | December 31,2007 |  
|TPG/CalSTRS:                                              |  |                   |         |   |                  |   |        |  
|City National Plaza                                       |  | $                 | (12,528 | ) |                  | $ | (9,168 | )
|Reflections I                                             |  |                   | 1,485   |   |                  |   | 1,402  |  
|Reflections II                                            |  |                   | 1,667   |   |                  |   | 1,609  |  
|Four Falls Corporate Center                               |  |                   | 748     |   |                  |   | 1,069  |  
|Oak Hill/Walnut Hill                                      |  |                   | 461     |   |                  |   | 700    |  
|Valley Square                                             |  |                   | (9      | ) |                  |   | (9     | )
|San Felipe                                                |  |                   | 3,639   |   |                  |   | 4,450  |  
|2500 City West                                            |  |                   | 1,140   |   |                  |   | 1,962  |  
|Brookhollow Central I, II and III/Intercontinental Center |  |                   | 1,103   |   |                  |   | 1,934  |  
|CityWestPlace                                             |  |                   | 21,073  |   |                  |   | 21,280 |  
|Centerpointe I, II                                        |  |                   | 5,464   |   |                  |   | 6,526  |  
|Fair Oaks Plaza                                           |  |                   | 2,692   |   |                  |   | 2,957  |  
|Austin Portfolio Investor                                 |  |                   | (1,456  | ) |                  |   | (472   | )
|Frost Bank Tower                                          |  |                   | 2,795   |   |                  |   | 3,057  |  
|300 West 6thStreet                                        |  |                   | 2,323   |   |                  |   | 2,611  |  
|San Jacinto Center                                        |  |                   | 1,887   |   |                  |   | 2,059  |  
|One Congress Plaza                                        |  |                   | 2,285   |   |                  |   | 2,587  |  
|One American Center                                       |  |                   | 2,093   |   |                  |   | 2,411  |  
|Stonebridge Plaza II                                      |  |                   | 701     |   |                  |   | 762    |  
|Park 22 I-III                                             |  |                   | 662     |   |                  |   | 671    |  
|Research Park Plaza I & II                                |  |                   | 846     |   |                  |   | 1,002  |  
|Westech 360 I-IV                                          |  |                   | 479     |   |                  |   | 540    |  
|Great Hills Plaza                                         |  |                   | 362     |   |                  |   | 397    |  
|TPG/CalSTRS                                               |  |                   | 48      |   |                  |   | 51     |  
|2121 Market Street and Harris Building Associates         |  |                   | (1,850  | ) |                  |   | (1,189 | )
|                                                          |  |                   |         |   |                  |   |        |  
|                                                          |  | $                 | 38,110  |   |                  | $ | 49,199 |  
|                                                          |  |                   |         |   |                  |   |        |  

The following is a summary of the investments in unconsolidated real estate entities for the nine
months ended September 30, 2008:



|                                       |  |   |        |  
|-------------------------------------- |  | - | ------ | -
|Investment balance, December 31, 2007  |  | $ | 49,199 |  
|Contributions                          |  |   | 1,250  |  
|Other comprehensive income             |  |   | 159    |  
|Equity in net loss                     |  |   | (9,108 | )
|Distributions                          |  |   | (3,390 | )
|                                       |  |   |        |  
|Investment balance, September 30, 2008 |  | $ | 38,110 |  
|                                       |  |   |        |  

TPG/CalSTRS was formed to acquire office properties on a nationwide basis classified as moderate
risk (core plus) and high risk (value add) properties. Core plus properties consist of under-performing properties that we believe can be brought to market potential through improved management. Value-add properties are characterized by unstable net
operating income for an extended period of time, occupancy less than 90% and/or physical or management problems which we believe can be positively impacted by introduction of new capital and/or management. We are required to use diligent efforts to
sell each joint venture property within five years of that property reaching stabilization, except for certain stabilized properties, as to which we are required to perform a hold/sell analysis at least annually and make a recommendation to the
TPG/CalSTRS management committee regarding the appropriate holding period.

The total capital commitment to the joint venture was
$353.3 million as of December 31, 2007, of which approximately $3.28 million and $1.13 million was unfunded by CalSTRS and us, respectively. On February 1, 2008, we revised our agreement with CalSTRS providing for $25 million in additional
capital commitments, $18.75 million and $6.25 million from CalSTRS and us, respectively. As of September 30, 2008, there were unfunded capital commitments of approximately $18.3 million and $6.1 million by CalSTRS and us, respectively.



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A buy-sell provision may be exercised by either CalSTRS or us. Under this provision, the initiating party sets a price
for its interest in the joint venture, and the other party has a specified time to elect to either buy the initiating partys interest or to sell its own interest to the initiating party. Upon the occurrence of certain events, CalSTRS also has
a buy-out option to purchase our interest in the joint venture. The buyout price is based upon a 3% discount to the appraised fair market value. In addition, the minority owner of City National Plaza has the option to require the joint venture to
purchase its interest for an amount equal to what would be payable to it upon liquidation of the asset at fair market value.

Following is
summarized financial information for the unconsolidated real estate entities as of September 30, 2008 and December 31, 2007 and for the three and nine month periods ended September 30, 2008 and 2007.

Summarized Balance Sheets



|                                                                                                                                    |  |                   |           |                  |   |          
|----------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- | ---------------- | - | ---------
|                                                                                                                                    |  | September 30,2008 |           | December 31,2007
|ASSETS                                                                                                                              |  |                   |           |                  |   |          
|Investments in real estate, net                                                                                                     |  | $                 | 2,321,848 |                  | $ | 2,326,679
|Land held for sale                                                                                                                  |  |                   | 3,809     |                  |   | 3,418    
|Assets associated with discontinued operations                                                                                      |  |                   | 86        |                  |   | 28       
|Receivables including deferred rents                                                                                                |  |                   | 68,294    |                  |   | 62,954   
|Deferred leasing and loan costs, net                                                                                                |  |                   | 177,177   |                  |   | 201,229  
|Other assets                                                                                                                        |  |                   | 119,704   |                  |   | 129,308  
|                                                                                                                                    |  |                   |           |                  |   |          
|Total assets                                                                                                                        |  | $                 | 2,690,918 |                  | $ | 2,723,616
|                                                                                                                                    |  |                   |           |                  |   |          
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                |  |                   |           |                  |   |          
|Mortgage and other secured loans                                                                                                    |  | $                 | 2,228,250 |                  | $ | 2,162,556
|Below market rents, net                                                                                                             |  |                   | 85,095    |                  |   | 99,002   
|Other liabilities                                                                                                                   |  |                   | 94,621    |                  |   | 109,975  
|Obligations associated with discontinued operations                                                                                 |  |                   | 122       |                  |   | 23       
|                                                                                                                                    |  |                   |           |                  |   |          
|Total liabilities                                                                                                                   |  |                   | 2,408,088 |                  |   | 2,371,556
|                                                                                                                                    |  |                   |           |                  |   |          
|Minority interest                                                                                                                   |  |                   |          |                  |   |         
|Owners equity:                                                                                                                     |  |                   |           |                  |   |          
|Thomas Properties, including $170 and $272 of other comprehensive loss as of September 30, 2008 and December 31, 2007, respectively |  |                   | 43,991    |                  |   | 54,041   
|Other owners, including $2,251 and $2,612 of other comprehensive loss as of September 30, 2008 and December 31, 2007, respectively  |  |                   | 238,839   |                  |   | 298,019  
|                                                                                                                                    |  |                   |           |                  |   |          
|Total owners equity                                                                                                                |  |                   | 282,830   |                  |   | 352,060  
|                                                                                                                                    |  |                   |           |                  |   |          
|Total liabilities and owners equity                                                                                                |  | $                 | 2,690,918 |                  | $ | 2,723,616
|                                                                                                                                    |  |                   |           |                  |   |          

Summarized Statements of Operations



|                                                          |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|--------------------------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                          |  | Three months endedSeptember 30, |         |   | Nine months endedSeptember 30, |  
|                                                          |  | 2008                            |         |   | 2007                           |   |         | 2008 |  |   | 2007    |  
|Revenues:                                                 |  | $                               | 78,071  |   |                                | $ | 77,276  |      |  | $ | 240,628 |   |  | $ | 180,453 |  
|                                                          |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Expenses:                                                 |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Operating and other expenses                              |  |                                 | 44,306  |   |                                |   | 41,330  |      |  |   | 126,316 |   |  |   | 98,258  |  
|Interest expense                                          |  |                                 | 30,710  |   |                                |   | 37,314  |      |  |   | 95,410  |   |  |   | 81,278  |  
|Depreciation and amortization                             |  |                                 | 32,184  |   |                                |   | 33,742  |      |  |   | 94,990  |   |  |   | 69,973  |  
|                                                          |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Total expenses                                            |  |                                 | 107,200 |   |                                |   | 112,386 |      |  |   | 316,716 |   |  |   | 249,509 |  
|                                                          |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Loss from continuing operations                           |  |                                 | (29,129 | ) |                                |   | (35,110 | )    |  |   | (76,088 | ) |  |   | (69,056 | )
|Gain on sale of real estate                               |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   | 7,932   |  
|Minority interest                                         |  |                                 |        |   |                                |   | (27     | )    |  |   |        |   |  |   | (78     | )
|Loss from discontinued operations                         |  |                                 | (34     | ) |                                |   | (40     | )    |  |   | (105    | ) |  |   | (252    | )
|                                                          |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Net loss                                                  |  | $                               | (29,163 | ) |                                | $ | (35,177 | )    |  | $ | (76,193 | ) |  | $ | (61,454 | )
|                                                          |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Thomas Properties share of net loss                      |  |                                 | (4,751  | ) |                                |   | (5,637  | )    |  |   | (11,450 | ) |  |   | (11,102 | )
|Intercompany eliminations                                 |  |                                 | 783     |   |                                |   | 803     |      |  |   | 2,342   |   |  |   | 1,736   |  
|                                                          |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Equity in net loss of unconsolidated real estate entities |  | $                               | (3,968  | ) |                                | $ | (4,834  | )    |  | $ | (9,108  | ) |  | $ | (9,366  | )
|                                                          |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  



12



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##### Table of Contents

Included in the preceding summarized balance sheets as of September 30, 2008 and December 31, 2007, are the
following balance sheets of TPG/CalSTRS, LLC:



|                                                                                                                                    |  |                   |           |                  |   |          
|----------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- | ---------------- | - | ---------
|                                                                                                                                    |  | September 30,2008 |           | December 31,2007
|ASSETS                                                                                                                              |  |                   |           |                  |   |          
|Investments in real estate, net                                                                                                     |  | $                 | 1,208,767 |                  | $ | 1,194,028
|Land held for sale                                                                                                                  |  |                   | 3,809     |                  |   | 3,418    
|Assets associated with discontinued operations                                                                                      |  |                   | 86        |                  |   | 28       
|Receivables including deferred rents                                                                                                |  |                   | 61,954    |                  |   | 55,582   
|Investments in unconsolidated real estate entities                                                                                  |  |                   | 51,229    |                  |   | 61,662   
|Deferred leasing and loan costs, net                                                                                                |  |                   | 93,850    |                  |   | 104,132  
|Other assets                                                                                                                        |  |                   | 85,627    |                  |   | 70,251   
|                                                                                                                                    |  |                   |           |                  |   |          
|Total assets                                                                                                                        |  | $                 | 1,505,322 |                  | $ | 1,489,101
|                                                                                                                                    |  |                   |           |                  |   |          
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                |  |                   |           |                  |   |          
|Mortgage and other secured loans                                                                                                    |  | $                 | 1,301,851 |                  | $ | 1,235,932
|Other liabilities                                                                                                                   |  |                   | 71,830    |                  |   | 83,914   
|Obligations associated with discontinued operations                                                                                 |  |                   | 122       |                  |   | 23       
|                                                                                                                                    |  |                   |           |                  |   |          
|Total liabilities                                                                                                                   |  |                   | 1,373,803 |                  |   | 1,319,869
|                                                                                                                                    |  |                   |           |                  |   |          
|Minority interest                                                                                                                   |  |                   |          |                  |   |         
|Members equity:                                                                                                                    |  |                   |           |                  |   |          
|Thomas Properties, including $170 and $272 of other comprehensive loss as of September 30, 2008 and December 31, 2007, respectively |  |                   | 44,857    |                  |   | 54,250   
|Other owners, including $521 and $2,612 of other comprehensive loss as of September 30, 2008 and December 31, 2007, respectively    |  |                   | 86,662    |                  |   | 114,982  
|                                                                                                                                    |  |                   |           |                  |   |          
|Total members equity                                                                                                               |  |                   | 131,519   |                  |   | 169,232  
|                                                                                                                                    |  |                   |           |                  |   |          
|Total liabilities and members equity                                                                                               |  | $                 | 1,505,322 |                  | $ | 1,489,101
|                                                                                                                                    |  |                   |           |                  |   |          

Following is summarized financial information by real estate entity for the unconsolidated real
estate entities for the three months ended September 30, 2008 and 2007:



|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|--------------------------------------------------------- |  | ------------------------------------- | ----- | - | --------------- | - | ------- | ------------------------------------- |  | - | ------------ | - | ----- | - | ----- |  | - | ------- | -
|                                                          |  | Three months ended September 30, 2008 |      
|                                                          |  | 2121MarketStreet                      |       |   | TPG/CalSTRS,LLC |   |         | AustinPortfolioJointVentureProperties |  |   | Eliminations |   | Total |  
|Revenues:                                                 |  | $                                     | 903   |   |                 | $ | 49,638  |                                       |  | $ | 27,530       |   |       | $ |      |  | $ | 78,071  |  
|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|Expenses:                                                 |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|Operating and other expenses                              |  |                                       | 322   |   |                 |   | 30,725  |                                       |  |   | 13,259       |   |       |   |      |  |   | 44,306  |  
|Interest expense                                          |  |                                       | 293   |   |                 |   | 16,296  |                                       |  |   | 14,121       |   |       |   |      |  |   | 30,710  |  
|Depreciation and amortization                             |  |                                       | 1,269 |   |                 |   | 16,141  |                                       |  |   | 14,774       |   |       |   |      |  |   | 32,184  |  
|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|Total expenses                                            |  |                                       | 1,884 |   |                 |   | 63,162  |                                       |  |   | 42,154       |   |       |   |      |  |   | 107,200 |  
|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|Loss from continuing operations                           |  |                                       | (981  | ) |                 |   | (13,524 | )                                     |  |   | (14,624      | ) |       |   |      |  |   | (29,129 | )
|Equity in net loss of unconsolidated real estate entities |  |                                       |      |   |                 |   | (3,544  | )                                     |  |   |             |   |       |   | 3,544 |  |   |        |  
|Minority interest                                         |  |                                       |      |   |                 |   |        |                                       |  |   |             |   |       |   |      |  |   |        |  
|Loss from discontinued operations                         |  |                                       |      |   |                 |   | (34     | )                                     |  |   |             |   |       |   |      |  |   | (34     | )
|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|Net income (loss)                                         |  | $                                     | (981  | ) |                 | $ | (17,102 | )                                     |  | $ | (14,624      | ) |       | $ | 3,544 |  | $ | (29,163 | )
|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|Thomas Properties share of net income (loss)             |  | $                                     | (490  | ) |                 | $ | (3,436  | )                                     |  | $ | (825         | ) |       | $ |      |  | $ | (4,751  | )
|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|Intercompany eliminations                                 |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   | 783     |  
|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|Equity in net loss of unconsolidated real estate entities |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  | $ | (3,968  | )
|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  



13



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##### Table of Contents

|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|--------------------------------------------------------- |  | ------------------------------------- | ----- | - | --------------- | - | ------- | ------------------------------------- |  | - | ------------ | - | ----- | - | ----- |  | - | ------- | -
|                                                          |  | Three months ended September 30, 2007 |      
|                                                          |  | 2121MarketStreet                      |       |   | TPG/CalSTRS,LLC |   |         | AustinPortfolioJointVentureProperties |  |   | Eliminations |   | Total |  
|Revenues:                                                 |  | $                                     | 1,519 |   |                 | $ | 47,919  |                                       |  | $ | 27,838       |   |       | $ |      |  | $ | 77,276  |  
|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|Expenses:                                                 |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|Operating and other expenses                              |  |                                       | 999   |   |                 |   | 28,130  |                                       |  |   | 12,201       |   |       |   |      |  |   | 41,330  |  
|Interest expense                                          |  |                                       | 297   |   |                 |   | 21,507  |                                       |  |   | 15,510       |   |       |   |      |  |   | 37,314  |  
|Depreciation and amortization                             |  |                                       | 241   |   |                 |   | 16,508  |                                       |  |   | 16,993       |   |       |   |      |  |   | 33,742  |  
|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|Total expenses                                            |  |                                       | 1,537 |   |                 |   | 66,145  |                                       |  |   | 44,704       |   |       |   |      |  |   | 112,386 |  
|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|Loss from continuing operations                           |  |                                       | (18   | ) |                 |   | (18,226 | )                                     |  |   | (16,866      | ) |       |   |      |  |   | (35,110 | )
|Equity in net loss of unconsolidated real estate entities |  |                                       |      |   |                 |   | (4,308  | )                                     |  |   |             |   |       |   | 4,308 |  |   |        |  
|Minority interest                                         |  |                                       | (27   | ) |                 |   |        |                                       |  |   |             |   |       |   |      |  |   | (27     | )
|Loss from discontinued operations                         |  |                                       |      |   |                 |   | (40     | )                                     |  |   |             |   |       |   |      |  |   | (40     | )
|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|Net income (loss)                                         |  | $                                     | (45   | ) |                 | $ | (22,574 | )                                     |  | $ | (16,866      | ) |       | $ | 4,308 |  | $ | (35,177 | )
|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|Thomas Properties share of net income (loss)             |  | $                                     | (21   | ) |                 | $ | (4,585  | )                                     |  | $ | (1,031       | ) |       |   |      |  | $ | (5,637  | )
|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|Intercompany eliminations                                 |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   | 803     |  
|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  
|Equity in net loss of unconsolidated real estate entities |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  | $ | (4,834  | )
|                                                          |  |                                       |       |   |                 |   |         |                                       |  |   |              |   |       |   |       |  |   |         |  



14



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##### Table of Contents

Following is summarized financial information by real estate entity for the unconsolidated real estate
entities for the nine months ended September 30, 2008 and 2007:



|                                                          |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|--------------------------------------------------------- |  | ------------------------------------ | ------ | - | --------------- | - | ------- | ------------------------------------- |  | - | ------------ | - | ----- | - | ------ |  | - | ------- | -
|                                                          |  | Nine months ended September 30, 2008 |       
|                                                          |  | 2121MarketStreet                     |        |   | TPG/CalSTRS,LLC |   |         | AustinPortfolioJointVentureProperties |  |   | Eliminations |   | Total |  
|Revenues:                                                 |  | $                                    | 2,724  |   |                 | $ | 150,831 |                                       |  | $ | 87,073       |   |       | $ |       |  | $ | 240,628 |  
|                                                          |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|Expenses:                                                 |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|Operating and other expenses                              |  |                                      | 987    |   |                 |   | 85,540  |                                       |  |   | 39,789       |   |       |   |       |  |   | 126,316 |  
|Interest expense                                          |  |                                      | 876    |   |                 |   | 50,801  |                                       |  |   | 43,733       |   |       |   |       |  |   | 95,410  |  
|Depreciation and amortization                             |  |                                      | 2,160  |   |                 |   | 47,520  |                                       |  |   | 45,310       |   |       |   |       |  |   | 94,990  |  
|                                                          |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|Total expenses                                            |  |                                      | 4,023  |   |                 |   | 183,861 |                                       |  |   | 128,832      |   |       |   |       |  |   | 316,716 |  
|                                                          |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|Loss from continuing operations                           |  |                                      | (1,299 | ) |                 |   | (33,030 | )                                     |  |   | (41,759      | ) |       |   |       |  |   | (76,088 | )
|Equity in net loss of unconsolidated real estate entities |  |                                      |       |   |                 |   | (10,330 | )                                     |  |   |             |   |       |   | 10,330 |  |   |        |  
|Minority interest                                         |  |                                      |       |   |                 |   |        |                                       |  |   |             |   |       |   |       |  |   |        |  
|Income (loss) from discontinued operations                |  |                                      |       |   |                 |   | (105    | )                                     |  |   |             |   |       |   |       |  |   | (105    | )
|                                                          |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|Net income (loss)                                         |  | $                                    | (1,299 | ) |                 | $ | (43,465 | )                                     |  | $ | (41,759      | ) |       | $ | 10,330 |  | $ | (76,193 | )
|                                                          |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|Thomas Properties share of net income (loss)             |  | $                                    | (649   | ) |                 | $ | (8,280  | )                                     |  | $ | (2,521       | ) |       | $ |       |  | $ | (11,450 | )
|                                                          |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|Intercompany eliminations                                 |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   | 2,342   |  
|                                                          |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|Equity in net loss of unconsolidated real estate entities |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  | $ | (9,108  | )
|                                                          |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|                                                          | 
|                                                          |  | Nine months ended September 30, 2007 |       
|                                                          |  | 2121MarketStreet                     |        |   | TPG/CalSTRS,LLC |   |         | AustinPortfolioJointVentureProperties |  |   | Eliminations |   | Total |  
|Revenues:                                                 |  | $                                    | 4,392  |   |                 | $ | 137,469 |                                       |  | $ | 38,592       |   |       | $ |       |  | $ | 180,453 |  
|                                                          |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|Expenses:                                                 |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|Operating and other expenses                              |  |                                      | 2,736  |   |                 |   | 79,284  |                                       |  |   | 16,238       |   |       |   |       |  |   | 98,258  |  
|Interest expense                                          |  |                                      | 886    |   |                 |   | 59,921  |                                       |  |   | 20,471       |   |       |   |       |  |   | 81,278  |  
|Depreciation and amortization                             |  |                                      | 722    |   |                 |   | 46,840  |                                       |  |   | 22,411       |   |       |   |       |  |   | 69,973  |  
|                                                          |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|Total expenses                                            |  |                                      | 4,344  |   |                 |   | 186,045 |                                       |  |   | 59,120       |   |       |   |       |  |   | 249,509 |  
|                                                          |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|Income (loss) from continuing operations                  |  |                                      | 48     |   |                 |   | (48,576 | )                                     |  |   | (20,528      | ) |       |   |       |  |   | (69,056 | )
|Gain on sale of real estate                               |  |                                      |       |   |                 |   | 7,932   |                                       |  |   |             |   |       |   |       |  |   | 7,932   |  
|Equity in net loss of unconsolidated real estate entities |  |                                      |       |   |                 |   | (5,273  | )                                     |  |   |             |   |       |   | 5,273  |  |   |        |  
|Minority interest                                         |  |                                      | (78    | ) |                 |   |        |                                       |  |   |             |   |       |   |       |  |   | (78     | )
|Income (loss) from discontinued operations                |  |                                      |       |   |                 |   | (252    | )                                     |  |   |             |   |       |   |       |  |   | (252    | )
|                                                          |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|Net income (loss)                                         |  | $                                    | (30    | ) |                 | $ | (46,169 | )                                     |  | $ | (20,528      | ) |       | $ | 5,273  |  | $ | (61,454 | )
|                                                          |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|Thomas Properties share of net income (loss)             |  | $                                    | (15    | ) |                 | $ | (9,815  | )                                     |  | $ | (1,272       | ) |       | $ |       |  | $ | (11,102 | )
|                                                          |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|Intercompany eliminations                                 |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   | 1,736   |  
|                                                          |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  
|Equity in net loss of unconsolidated real estate entities |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  | $ | (9,366  | )
|                                                          |  |                                      |        |   |                 |   |         |                                       |  |   |              |   |       |   |        |  |   |         |  

Following is a reconciliation of our share of owners equity of the unconsolidated real estate entities as
shown above to amounts recorded by us as of September 30, 2008 and December 31, 2007:



|                                                                            |  |                   |        |   |                  |   |        |  
|--------------------------------------------------------------------------- |  | ----------------- | ------ | - | ---------------- | - | ------ | -
|                                                                            |  | September 30,2008 |        |   | December 31,2007 |  
|Our share of owners equity recorded by unconsolidated real estate entities |  | $                 | 43,991 |   |                  | $ | 54,041 |  
|Intercompany eliminations and other adjustments                             |  |                   | (5,881 | ) |                  |   | (4,842 | )
|                                                                            |  |                   |        |   |                  |   |        |  
|Investments in unconsolidated real estate entities                          |  | $                 | 38,110 |   |                  | $ | 49,199 |  
|                                                                            |  |                   |        |   |                  |   |        |  



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4. Mortgage and Other Secured Loans

A summary of the consolidated properties outstanding mortgage and other secured loans as of September 30, 2008 is as follows:



|                                         |  |              |   |  |                 |         |              |           
|---------------------------------------- |  | ------------ | - |  | --------------- | ------- | ------------ | ----------
|Secured debt                             |  | InterestRate |   |  | OutstandingDebt |         | MaturityDate
|One Commerce Square mortgage loan (1)    |  | 5.7          | % |  | $               | 130,000 |              | 1/6/2016  
|Two Commerce Square:                     |  |              |   |  |                 |         |              |           
|Mortgage Loan (2)                        |  | 6.3          |   |  |                 | 108,939 |              | 5/9/2013  
|Senior mezzanine loan (3) (4)            |  | 19.2         |   |  |                 | 32,013  |              | 1/9/2010  
|Junior mezzanine loan (3) (5)            |  | 15.0         |   |  |                 | 4,418   |              | 1/9/2010  
|Campus El Segundo mortgage loan (6)      |  | 6.5          |   |  |                 | 17,259  |              | 10/10/2009
|Four Points Centre construction loan (7) |  | 4.7          |   |  |                 | 24,941  |              | 6/11/2010 
|Murano construction loan (8)             |  | 7.3          |   |  |                 | 69,356  |              | 7/31/2009 
|                                         |  |              |   |  |                 |         |              |           
|Total secured debt                       |  |              |   |  | $               | 386,926 |              |           
|                                         |  |              |   |  |                 |         |              |           



|(1) | The mortgage loan is subject to interest only payments through January 2011, and thereafter, principal and interest payments are due based on a thirty-year amortization schedule.
The loan is subject to yield maintenance payments for any prepayments prior to October 2015, and beginning January 2009, may be defeased.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The mortgage loan may be defeased, and beginning February 2012, may be prepaid.
|--- | -------------------------------------------------------------------------------



|(3) | These loans are guaranteed by Mr. Thomas up to an aggregate maximum of $7.5 million. We have agreed to indemnify Mr. Thomas in the event his guarantees are called
upon.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | The senior mezzanine loan bears interest at a rate such that the weighted average of the rate on this loan and the rate on the mortgage loan secured by Two Commerce Square equals
9.2% per annum. The effective interest rate on this loan as of September 30, 2008 was 19.2% per annum. The loan may not be prepaid prior to August 9, 2009, and thereafter is subject to yield maintenance payments unless the loan
is prepaid within 60 days of maturity. The loan is secured by our ownership interest in the real estate entities that own Two Commerce Square.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Interest at a rate of 10% per annum is payable currently, and additional interest of 5% per annum is deferred until maturity. The loan is subject to a prepayment penalty
in the amount of the greater of 3% of the principal amount or a yield maintenance premium. The loan is secured by our ownership interest in the real estate entities that own Two Commerce Square.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | The interest rate as of September 30, 2008 was 6.5% per annum. The loan has a one-year extension option at our election.
|--- | ------------------------------------------------------------------------------------------------------------------------



|(7) | The interest rate as of September 30, 2008 was 4.7% per annum. The loan has two one-year extension options at our election subject to certain conditions. The first
extension option and the second extension option are subject to achievement of 75% and 90% occupancy levels, respectively, and certain other conditions.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(8) | We may borrow an additional $13.2 million under this construction loan. This loan has two six-month extension options. The first extension option is conditional on the closing of
100 residential units, which has occurred. The interest rate for this loan as of September 30, 2008 was 7.3%.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The loan
agreement for Two Commerce Square requires that all receipts collected from this property be deposited in lockbox accounts under the control of the lenders to fund reserves, debt service and operating expenditures. Included in restricted cash at
September 30, 2008 and December 31, 2007 is $2,518,000 and $3,263,000, respectively, which has been deposited in the lockbox account.



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##### Table of Contents

As of September 30, 2008, principal payments due for the secured and unsecured outstanding debt are
as follows:



|           |  |   |        
|---------- |  | - | -------
|2008       |  | $ | 800    
|2009       |  |   | 91,015 
|2010       |  |   | 61,399 
|2011       |  |   | 1,971  
|2012       |  |   | 2,160  
|Thereafter |  |   | 233,481
|           |  |   |        
|           |  | $ | 390,826
|           |  |   |        

5. Unsecured Loan

In October 2005, we purchased the entire interest of our unaffiliated minority partner in TPG-El Segundo Partners, LLC, of which $3.9 million was financed with an unsecured loan from the former minority partner. As of
September 30, 2008, there was $0.6 million in accrued interest payable related to this loan. The loan bears interest at 5% per annum. Principal and interest of $4.7 million will be payable at maturity on October 12, 2009.

6. Earnings (Loss) per Share and Dividends Declared

The following is a summary of the components used in calculating basic and diluted earnings per share for the three and nine months ended September 30, 2008 and 2007 (in thousands except share and per share amounts):



|                                                              |  |                                 |            |                                |      |   |            |  |      |            |  |   |           
|------------------------------------------------------------- |  | ------------------------------- | ---------- | ------------------------------ | ---- | - | ---------- |  | ---- | ---------- |  | - | ----------
|                                                              |  | Three months endedSeptember 30, |            | Nine months endedSeptember 30,
|                                                              |  | 2008                            |            |                                | 2007 |   | 2008       |  | 2007
|Earnings available to common shares:                          |  | $                               | (2,941     | )                              |      | $ | 271        |  | $    | 2,224      |  | $ | 666       
|                                                              |  |                                 |            |                                |      |   |            |  |      |            |  |   |           
|Weighted average common shares outstanding  basic            |  |                                 | 23,701,294 |                                |      |   | 23,626,645 |  |      | 23,681,997 |  |   | 19,522,069
|Potentially dilutive common shares (1)                        |  |                                 |            |                                |      |   |            |  |      |            |  |   |           
|Stock options                                                 |  |                                 |           |                                |      |   | 18,918     |  |      |           |  |   | 39,799    
|Restricted stock                                              |  |                                 |            |                                |      |   |           |  |      |            |  |   | 2,029     
|                                                              |  |                                 |            |                                |      |   |            |  |      |            |  |   |           
|Adjusted weighted average common shares outstanding - diluted |  |                                 | 23,701,294 |                                |      |   | 23,645,563 |  |      | 23,681,997 |  |   | 19,563,897
|                                                              |  |                                 |            |                                |      |   |            |  |      |            |  |   |           
|Earnings per share  basic                                    |  | $                               | (0.12      | )                              |      | $ | 0.01       |  | $    | 0.09       |  | $ | 0.03      
|                                                              |  |                                 |            |                                |      |   |            |  |      |            |  |   |           
|Earnings per share  diluted                                  |  | $                               | (0.12      | )                              |      | $ | 0.01       |  | $    | 0.09       |  | $ | 0.03      
|                                                              |  |                                 |            |                                |      |   |            |  |      |            |  |   |           
|Dividends declared per share                                  |  | $                               | 0.06       |                                |      | $ | 0.06       |  | $    | 0.18       |  | $ | 0.18      
|                                                              |  |                                 |            |                                |      |   |            |  |      |            |  |   |           



|(1) | For the three and nine months ended September 30, 2008, the potentially dilutive shares were not included in the income per share calculation as their effect is antidilutive.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7. Stockholders Equity

A Unit and a share of our common stock have essentially the same economic characteristics as they share equally in the total net income or loss and distributions of the Operating Partnership. A Unit may be redeemed by the holder in exchange
for cash or shares of common stock at our election, on a one-for-one basis. We have issued 1,303,336 incentive units to certain employees. Incentive units represent a profits interest in the Operating Partnership and generally will be treated as
regular Units in the Operating Partnership and rank pari passu with the Units as to payment of distributions, including distributions of assets upon liquidation. Incentive units are subject to vesting, forfeiture and additional restrictions on
transfer as may be determined by us as general partner of the Operating Partnership. The holder of an incentive unit has the right to convert all or a part of his vested incentive units into Units, but only to the extent of the incentive units
economic capital account balance. As general partner, we may also cause any number of vested incentive units to be converted into Units to the extent of the incentive units economic capital account balance. We had 23,853,904 shares of common
stock, and 14,496,666 Units outstanding as of September 30, 2008, and 1,258,336 incentive units outstanding which were issued under our Incentive Plan, defined below.



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##### Table of Contents

We adopted the 2004 Equity Incentive Plan of Thomas Properties Group, Inc. as amended, (the
Incentive Plan) effective upon the closing of our initial public offering and amended it in May 2007 and June 2008 to increase the shares reserved under the plan. The Incentive Plan provides incentives to our employees and is designed to
attract, reward and retain personnel. Our Incentive Plan permits the granting of awards in the form of options to purchase common stock, restricted shares of common stock and restricted incentive units in our Operating Partnership. We may issue up
to 3,361,906 shares as either stock option awards, restricted stock awards or incentive unit awards. In addition, under our Non-Employee Directors Restricted Stock Plan (the Non-Employee Directors Plan) a total of 60,000 shares are
reserved for grant.

Shares of newly issued common stock will be issued upon exercise of stock options.

Restricted Stock

Under the Incentive Plan, we have
issued the following restricted shares to Mr. Thomas:



|                                            |  |         |  |                              |       |                |             
|------------------------------------------- |  | ------- |  | ---------------------------- | ----- | -------------- | ------------
|Grant Date                                  |  | Shares  |  | AggregateValue(in thousands) |       | Vesting Status
|October 2004                                |  | 46,667  |  | $                            | 560   |                | Fully vested
|February 2006                               |  | 60,000  |  |                              | 740   |                | See below   
|March 2007                                  |  | 100,000 |  |                              | 1,580 |                | See below   
|March 2008                                  |  | 100,000 |  |                              | 855   |                | See below   
|                                            |  |         |  |                              |       |                |             
|Issued from Inception to September 30, 2008 |  | 306,667 |  | $                            | 3,735 |                |             
|                                            |  |         |  |                              |       |                |             

Vesting for the 60,000, 100,000 and 100,000 shares commenced as of February 22,
2006, March 7, 2007 and March 19, 2008 respectively. The restricted shares will vest in full on the third anniversary of the vesting commencement date, provided that vesting for the March 2007 and March 2008 grants could occur on the
second anniversary of the vesting commencement date if certain performance goals are met. Mr. Thomas has full voting rights and will receive any dividends paid.

Under the Non-Employee Directors Plan, we have issued the following outstanding restricted shares to our non-employee directors:



|                                            |  |        |  |                              |     |                |                 
|------------------------------------------- |  | ------ |  | ---------------------------- | --- | -------------- | ----------------
|                                            |  | Shares |  | AggregateValue(in thousands) |     | Vesting Status
|Issued in October 2004                      |  | 10,000 |  | $                            | 120 |                | Fully vested    
|Issued in 2005                              |  | 4,984  |  |                              | 60  |                | Fully vested    
|Issued in 2006                              |  | 6,419  |  |                              | 82  |                | Fully vested    
|Issued in 2007                              |  | 3,564  |  |                              | 60  |                | Fully vested    
|Issued in 2008                              |  | 5,968  |  |                              | 60  |                | 2009  see below
|                                            |  |        |  |                              |     |                |                 
|Issued from Inception to September 30, 2008 |  | 30,935 |  | $                            | 382 |                |                 
|                                            |  |        |  |                              |     |                |                 

The 5,968 shares granted will vest subject to the continued service of the directors up to and
through the 2009 Annual Meeting of Stockholders. The holders of these shares have full voting rights and will receive any dividends paid.

As of September 30, 2008, there was $1,593,000 of total unrecognized compensation cost related to the nonvested restricted stock under both the Incentive Plan and Non-Employees Directors Plan. The cost is expected to be recognized over
a weighted average period of 2.0 years. The weighted-average grant date fair value of restricted stock granted during the nine months ended September 30, 2008 was $8.63.

We recorded compensation expense totaling $280,000 and $784,000 for the vesting of the restricted stock grants for the three and nine months ended
September 30, 2008, respectively, and $260,000 and $675,000 for the vesting of the restricted stock grants for the three and nine months ended September 30, 2007, respectively. The total income tax benefit recognized in the statement of
operations related to this compensation expense was $119,000 and $333,000 for the three and nine months ended September 30, 2008, respectively, and $208,000 and $540,000 for the three and nine months ended September 30, 2007, respectively.



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##### Table of Contents

Incentive Units

Under our Incentive Plan, we issued to certain executives 730,003 incentive units upon consummation of our initial public offering in October 2004, which fully vested on October 13, 2007. In February 2006 we
issued 120,000 incentive units to certain executives, which units will vest on the third anniversary of the grant date. In March 2007 we issued an additional 183,336 incentive units to certain executives, which units vest over a three year period,
with one third vesting each on the first, second, and third anniversary dates of the grant. In March 2008 we issued an additional 160,000 incentive units to certain executives, which units vest over a three year period, with one third vesting each
on the first, second, and third anniversary dates of the grant. In September 2008 we issued an additional 110,000 incentive units to a new executive, which vest over a three to five year period and are subject to market based performance measures as
well as individual and Company goals.

For the three and nine months ended September 30, 2008, we recorded compensation expense of
$513,000 and $1,507,000, respectively, and for the three and nine months ended September 30, 2007, we recorded compensation expense of $813,000 and $2,071,000, respectively, relating to the incentive units. As of September 30, 2008, there
was $3,249,000 of unrecognized compensation cost related to incentive units. The weighted-average grant date fair value of incentive units granted in the nine months ended September 30, 2008 was $8.56.

Stock options

Under our Incentive Plan, we have
670,609 stock options outstanding as of September 30, 2008. The options vest at the rate of one third per year over three years and expire ten years after the date of commencement of vesting. The fair market value of each option granted was
estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted-average assumptions for grants in 2008 and 2007:



|                                |  |              |   |  |              |  
|------------------------------- |  | ------------ | - |  | ------------ | -
|                                |  | 2008         |   |  | 2007         |  
|Expected dividend yield         |  | 2.9          | % |  | 2.0          | %
|Expected life of option         |  | 5 to 8 years |   |  | 2 to 4 years |  
|Risk-free interest rate         |  | 3.2          | % |  | 4.4          | %
|Expected stock price volatility |  | 11           | % |  | 15           | %

The following is a summary of stock option activity under our Incentive Plan as of
September 30, 2008 and for the nine months ended September 30, 2008:



|                                          |  |         |  |                               |       |                                                     |     |                                        |  
|----------------------------------------- |  | ------- |  | ----------------------------- | ----- | --------------------------------------------------- | --- | -------------------------------------- | -
|                                          |  | Shares  |  | WeightedAverageExercise Price |       | Weighted AverageRemainingContractual Term(in years) |     | AggregateIntrinsic Value(in thousands)
|Outstanding at January 1, 2008            |  | 501,197 |  | $                             | 13.44 |                                                     |     |                                        |  
|Granted                                   |  | 169,412 |  |                               | 10.45 |                                                     |     |                                        |  
|Forfeitures                               |  |        |  |                               |       |                                                     |     |                                        |  
|Exercised                                 |  |        |  |                               |       |                                                     |     |                                        |  
|                                          |  |         |  |                               |       |                                                     |     |                                        |  
|Outstanding at September 30, 2008         |  | 670,609 |  | $                             | 12.74 |                                                     | 7.0 |                                        | 
|                                          |  |         |  |                               |       |                                                     |     |                                        |  
|Options exercisable at September 30, 2008 |  | 359,102 |  | $                             | 12.72 |                                                     | 7.0 |                                        | 
|                                          |  |         |  |                               |       |                                                     |     |                                        |  

As of September 30, 2008, there was $164,000 of total unrecognized compensation cost related
to the nonvested stock options. The cost is expected to be recognized over a weighted average period of 1.4 years. The weighted-average grant date fair value of options granted during the nine months ended September 30, 2008 was $1.00. There
were no options exercised during the three and nine months ended September 30, 2008.

We recorded compensation expense totaling
$56,000 and $167,000 related to the stock options for the three and nine months ended September 30, 2008, respectively, and $67,000 and $169,000 related to the stock options for the three and nine months ended September 30, 2007,
respectively. The total income tax benefit recognized in the statement of operations related to this compensation expense was $24,000 and $71,000 for the three and nine months ended September 30, 2008, respectively, and $54,000 and $135,000 for
the three and nine months ended September 30,2007, respectively.



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##### Table of Contents

8. Income Taxes

All operations are carried on through the Operating Partnership and its subsidiaries. The Operating Partnership is not subject to income tax, and all of the taxable income, gains, losses, deductions and credits are
passed through to its partners. We are responsible for our share of taxable income or loss of the Operating Partnership allocated to us in accordance with the Operating Partnerships Agreement of Limited Partnership. As of September 30,
2008, we held a 61% capital interest in the Operating Partnership. For the three and nine months ended September 30, 2008, we were allocated 61% of the income and losses from the Operating Partnership.

Our effective tax rate is 31.08% and 55.85% respectively, for the three and nine months ended September 30, 2008. The higher effective tax rate
compared to the federal statutory rate of 35% is primarily due to the amortization of the incentive units granted which are an expense for financial reporting purposes but are not deductible for tax purposes and the interest expense recorded
during the quarter related to the Companys unrecognized tax benefits.

The provision for income taxes is based on reported income
before income taxes. Deferred income tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and the amount recognized for tax purposes, as
measured by applying the currently enacted tax laws.

FASB Statement No. 109, Accounting for Income Taxes (SFAS
No. 109), requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized. Realization of the deferred tax asset is dependent on us generating
sufficient taxable income in future years as the deferred income tax charges become currently deductible for tax reporting purposes. Although realization is not assured, management believes that it is more likely than not that the net deferred
income tax asset will be realized.

Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48)
clarifies the accounting for uncertainty in income taxes recognized in a companys financial statements in accordance with SFAS No. 109. The interpretation prescribes a recognition threshold and measurement attribute criteria for the
financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods,
disclosure and transition.

The Companys policy is to recognize interest and penalties related to unrecognized tax benefits as a
component of income tax expense. For the three and nine months ended September 30, 2008, we recorded $148,000 ($96,000, net of federal benefit) and $529,000 ($344,000, net of federal benefit), of accrued interest related to unrecognized tax
benefits as a component of income tax expense. We have not recorded any penalties with respect to unrecognized tax benefits.

We do not anticipate any
significant increases or decreases to the amounts of unrecognized tax benefits within the next twelve months.

9. Fair Value of Financial Instruments

SFAS No. 107, Disclosures about Fair Value of Financial Instruments, requires us to disclose fair value information about all
financial instruments, whether or not recognized in the balance sheets, for which it is practicable to estimate fair value.

Our estimates
of the fair value of financial instruments at September 30, 2008 were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value.
The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.

The carrying
amounts for cash and cash equivalents, restricted cash, rent and other receivables, due from affiliate, accounts payable and other liabilities approximate fair value due to the short-term nature of these instruments.

As of September 30, 2008, the fair value of our mortgage and other secured loans and unsecured loan aggregates $395.0 million, compared to the
aggregate carrying value of $390.8 million.



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##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. This report
includes statements that are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section in this report entitled Forward-Looking Statements.
Certain risks may cause our actual results, performance or achievements to differ materially from those expressed or implied by the following discussion. For a discussion of such risks, see the section in this report entitled Risk
Factors.

When you read the financial statements and the information included in this report, you should be aware that our operations
are significantly affected by both macro and micro economic forces. Our operations are directly affected by actual and perceived trends in various national and regional economic conditions that affect national and regional markets for commercial
real estate services, including interest rates, the availability of credit to finance commercial real estate transactions, and the impact of tax laws affecting real estate. Periods of economic slowdown or recession, rising interest rates, tightening
of the credit markets, declining demand for or increased supply of real estate, or the public perception that any of these events may occur can adversely affect our business. These conditions could result in a general decline in rents, which in turn
would reduce revenue from property management fees and brokerage commissions derived from leases. In addition, these conditions could lead to a decline in property values as well as a decline in funds invested in commercial real estate and related
assets, which in turn may reduce revenues from investment advisory, property management, leasing and development fees.

Forward-Looking Statements

Forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from those
anticipated and you should not rely on them as predictions of future events. Although information is based on our current estimations, forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise. You are
cautioned not to place undue reliance on this information as we cannot guarantee that any future expectations and events described will happen as described or that they will happen at all. You can identify forward-looking statements by the use of
forward-looking terminology such as believes, expects, may, should, seeks, approximately, intends, plans, pro forma, estimates or
anticipates or the negative of these words and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans or intentions.

Overview and Background

We are a full-service real
estate operating company that owns, acquires, develops and manages primarily office, as well as mixed-use and residential properties on a nationwide basis. We conduct our business through our Operating Partnership, of which we own 61.0% and have
control over the major decisions of the Operating Partnership.

Results of Operations

The results of operations reflect the consolidation of the affiliates that own One Commerce Square, Two Commerce Square, Murano, 2100 JFK Boulevard, Four
Points Centre, Campus El Segundo and our investment advisory, property management, leasing and real estate development operations. The following properties are accounted for using the equity method of accounting:

2121 Market Street

City National Plaza (as of January 2003, the date of
acquisition)

Reflections I (as of October 2004, the date of acquisition)

Reflections II (as of October 2004, the date of acquisition)

Four Falls Corporate Center (as of March 2005, the date of
acquisition)

Oak Hill Plaza (as of March 2005, the date of acquisition)

Walnut Hill Plaza (as of March 2005, the date of acquisition)

San Felipe Plaza (as of August 2005, the date of acquisition)

2500 City West (as of August 2005, the date of acquisition)

Brookhollow Central I, II, and III (as of August 2005, the date of acquisition)



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Intercontinental Center (as of August 2005, the date of acquisition through May 2007, the date of disposition)

2500 City West land (as of December 2005, the date of acquisition)

CityWestPlace (as of June 2006, the date of acquisition)

CityWestPlace land (as of June 2006, the date of acquisition)

Centerpointe I & II (as of January 2007, the date of acquisition)

Fair
Oaks Plaza (as of January 2007, the date of acquisition)

TPG/CalSTRS, LLC also owns a 25% interest in the Austin Portfolio Joint Venture which owns the
following properties (Austin Portfolio Joint Venture Properties):

San Jacinto Center (as of June 2007, the date of acquisition)

Frost Bank Tower (as of June 2007, the date of acquisition)

One Congress
Plaza (as of June 2007, the date of acquisition)

One American Center (as of June 2007, the date of acquisition)

300 West 6th Street (as of June 2007, the date of acquisition)

Research Park
Plaza I & II (as of June 2007, the date of acquisition)

Park 22 I-III (as of June 2007, the date of acquisition)

Great Hills Plaza (as of June 2007, the date of acquisition)

Stonebridge
Plaza II (as of June 2007, the date of acquisition)

Westech 360 I-IV (as of June 2007, the date of acquisition)

Comparison of three months ended September 30, 2008 to three months ended September 30, 2007

Rental revenues.Rental revenue decreased $0.7 million, or 9% to $7.5 million for the three months ended September 30, 2008 compared to
$8.2 million for the three months ended September 30, 2007. The decrease was primarily related to a scheduled expiration in June 2008 of a significant tenant at Two Commerce Square representing approximately 375,000 rentable square feet.
Approximately 65% of the space has been leased to former subtenants or new tenants at current market rates, which are lower than the expired lease rates.

Tenant reimbursements.Tenant reimbursements decreased $0.7 million, or 10%, to $6.0 million for the three months ended September 30, 2008 compared to $6.7 million for the three months ended
September 30, 2007. The decrease was primarily related to a scheduled expiration in June 2008 of a significant tenant at Two Commerce Square representing approximately 375,000 rentable square feet, offset by revenues from former subtenants or
new tenants that are now direct tenants.

Parking and other revenues.Parking and other revenues remained consistent at
$0.9 million for each of the three month periods ended September 30, 2008 and 2007.

Investment advisory, management, leasing
and development services revenues.This caption represents revenues earned from services provided to unaffiliated entities in which we have no ownership interest. Revenues from these services decreased by $5.3 million, or 75%, from $7.1 million
for the three months ended September 30, 2007 to $1.8 million for the three months ended September 30, 2008. The decrease was primarily related to a disposition incentive fee of $5.4 million that was earned in 2007.

Investment advisory, management, leasing and development services revenues  unconsolidated real estate entities.This caption represents
revenues earned from services provided to entities in which we use the equity method to account for our ownership interest since we have significant influence, but not control, over the entities. Revenues from these services from unconsolidated real
estate entities decreased by $0.4 million, or 11%, from $4.7 million for the three months ended September 30, 2007 to $4.2 million for the three months ended September 30, 2008 due to a decrease in lease commission revenue at City National
Plaza for the three months ended September 30, 2008, which had leasing activity equaling approximately 17,000 square feet of net absorption compared to 133,000 square feet of net absorption in the three months ended September 30, 2007.
Additionally, we had higher lease commission revenue at our CityWestPlace project in the three months ended September 30, 2007 compared to the corresponding period in 2008. These decreases in lease commission revenue were offset by additional
leasing activity at our Austin Portfolio Joint Venture Properties in the three months ended September 30, 2008 equaling approximately 113,000 square feet of net absorption compared to negative absorption of approximately 14,000 square feet in
the three months ended September 30, 2007.



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##### Table of Contents

Reimbursement of property personnel costs. This caption represents the reimbursement for property
personnel salary, payroll taxes and benefits. The increase of $0.7 million or 70% to $1.7 million for the three months ended September 30, 2008 compared to $1.0 million for the three months ended September 30, 2007 was primarily a result
of an increase in salaries and employment related costs related to the Austin Portfolio Joint Venture Properties acquired in June 2007, which reached full staffing levels by the quarter ended September 30, 2007.

Condominium sales  percentage of completion. This caption represents the revenue recognized on the percentage of completion method of
accounting of the Murano condominium units and parking spaces which closed or were under a binding sales contract as of September 30, 2008. As of September 30, 2008, we had closed the sale of 101 units and 94 parking spaces and had an
additional 24 units and 28 parking spaces under contract of sale, for which we recognized revenue of $3.6 million for the three months ended September 30, 2008. Prior to the quarter ended June 30, 2008, we accounted for units and parking
spaces under contract of sale based on the deposit method of accounting.

Rental property operating and maintenance expense.Rental
property operating and maintenance increased by $0.4 million, or 7%, to $6.0 million for the three months ended September 30, 2008 compared to $5.6 million for the three months ended September 30, 2007. The increase was primarily a result
of an increase in certain operating expenses and marketing and other expenses related to our completed development properties.

Real
estate taxes.Real estate taxes remained consistent at $1.6 million for each of the three month periods ended September 30, 2008 and 2007.

Investment advisory, management, leasing and development services expenses.Expenses for these services increased by $0.8 million, or 24%, to $4.1 million for the three months ended September 30, 2008 compared to $3.3 million
for the three months ended September 30, 2007, primarily as a result of an increase in the use of consultants for both our third party development and property management services business as well as the asset management services we provide to
our joint venture portfolio.

Reimbursable property personnel costs. This caption represents the reimbursement of property personnel
salary, payroll taxes and benefits. The increase of $0.7 million or 70% to $1.7 million for the three months ended September 30, 2008 compared to $1.0 million for the three months ended September 30, 2007 was primarily a result of an
increase in salaries and employment related costs related to the Austin Portfolio Joint Venture Properties acquired in June 2007, which reached full staffing levels by the quarter ended September 30, 2007.

Cost of condominium sales  percentage of completion.This caption represents the cost recognized on the percentage of completion method of
accounting for the Murano condominium units and parking spaces which closed or were under a binding sales contract as of September 30, 2008. As of September 30, 2008, we had closed the sale of 101 units and 94 parking spaces and had an
additional 24 units and 28 parking spaces under contract of sale, for which we recognized cost of sales of $3.1 million for the three months ended September 30, 2008. Prior to the quarter ended June 30, 2008, we accounted for units and
parking spaces under contract of sale based on the deposit method of accounting.

Rent  unconsolidated entities.Rent 
unconsolidated entities remained consistent for each of the three month periods ended September 30, 2008 and 2007.

Interest
expense.Interest expense increased by $1.4 million, or 32%, to $5.8 million for the three month period ended September 30, 2008 from $4.4 million for the three month period ended September 30, 2007. The increase in interest expense is
primarily attributable to interest costs no longer being capitalized on Murano and our Four Points office buildings due to the substantial completion of development on these projects during the quarter ended June 30, 2008 and the quarter ended
September 30, 2008, respectively.

Depreciation and amortization expense.Depreciation and amortization expense increased by
$0.2 million or 7% to $2.9 million for the three months ended September 30, 2008 compared to $2.7 million for the three months ended September 30, 2007 due to normal activity at Commerce Square.



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General and administrative.General and administrative expense decreased by $0.3 million, or 7%,
to $4.2 million for the three months ended September 30, 2008 compared to $4.5 million for the three months ended September 30, 2007. The decrease was primarily a result of revisions to estimated bonuses and a decrease in compensation
expense related to incentive units granted to executives.

Gain on sale of real estate.Gain on sale of real estate decreased by
$0.9 million, or 100%, from $0.9 for the three months ended September 30, 2007 to $0 for the three months ended September 30, 2008 due to the full recognition of deferred gain upon completion of infrastructure costs related to the sale of
a 14.1 acre parcel at Campus El Segundo in 2006.

Interest income.Interest income decreased by $1.3 million, or 68%, to $0.6
million for the three months ended September 30, 2008 compared to $1.9 million for the three months ended September 30, 2007 primarily due to declining investment balances and lower interest rates.

Equity in net loss of unconsolidated real estate entities.Set forth below is a summary of the unconsolidated condensed financial information for
the unconsolidated real estate entities and our share of net loss and equity in net loss for the three months ended September 30, 2008 and 2007 (in thousands):



|                                                          |  |      |         |   |      |   |         |  
|--------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                          |  | 2008 |         |   | 2007 |  
|Revenue                                                   |  | $    | 78,071  |   |      | $ | 77,276  |  
|Operating and other expenses                              |  |      | (44,306 | ) |      |   | (41,330 | )
|Interest expense                                          |  |      | (30,710 | ) |      |   | (37,314 | )
|Depreciation and amortization                             |  |      | (32,184 | ) |      |   | (33,742 | )
|Minority interest                                         |  |      |        |   |      |   | (27     | )
|Loss from discontinued operations                         |  |      | (34     | ) |      |   | (40     | )
|                                                          |  |      |         |   |      |   |         |  
|Net loss                                                  |  | $    | (29,163 | ) |      | $ | (35,177 | )
|                                                          |  |      |         |   |      |   |         |  
|Thomas Properties share of net loss                      |  | $    | (4,751  | ) |      | $ | (5,637  | )
|Intercompany eliminations                                 |  |      | 783     |   |      |   | 803     |  
|                                                          |  |      |         |   |      |   |         |  
|Equity in net loss of unconsolidated real estate entities |  | $    | (3,968  | ) |      | $ | (4,834  | )
|                                                          |  |      |         |   |      |   |         |  

Aggregate revenue increased due to an increase in occupancy for the three months ended
September 30, 2008 compared to the three months ended September 30, 2007. Aggregate operating and other expenses for unconsolidated real estate entities for the three months ended September 30, 2008 compared to the three months ended
September 30, 2007 increased primarily due to an increase of $1.3 million in utilities expense and $1.7 million in real estate taxes related to the acquisition of the Austin Portfolio Joint Venture Properties in June 2007.Interest
expense for the three months ended September 30, 2008 compared to the three months ended September 30, 2007 decreased primarily due to declining interest rates. Depreciation and amortization for unconsolidated real estate entities
decreased for the three months ended September 30, 2008 compared to the three months ended September 30, 2007 primarily due to certain intangible assets related to the purchase of the Austin Portfolio Joint Venture Properties becoming
fully amortized.

Comparison of nine months ended September 30, 2008 to nine months ended September 30, 2007

Rental revenues.Rental revenue decreased $1.3 million, or 5%, to $23.3 million for the nine months ended September 30,
2008 compared to $24.6 million for the nine months ended September 30, 2007. The decrease was primarily related to a scheduled expiration in June 2008 of a significant tenant at Two Commerce Square representing approximately 375,000 rentable
square feet. Approximately 65% of the space has been leased to former subtenants or new tenants at current market rates, which are lower than the expired lease rates.

Tenant reimbursements.Tenant reimbursements remained consistent at $20 million for each of the nine months ended September 30, 2007 and September 30, 2008.



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Parking and other revenues.Parking and other revenues remained consistent for each of the nine
month periods ended September 30, 2008 and 2007.

Investment advisory, management, leasing and development services revenues.This caption represents revenues earned from services provided to unaffiliated entities in which we have no ownership interest. Revenues from these services decreased by $5.3 million, or 49%, from $10.9 million for the nine months ended
September 30, 2007 to $5.6 million for the nine months ended September 30, 2008. The decrease was primarily related to a disposition incentive fee of $5.4 million that was earned in 2007.

Investment advisory, management, leasing and development services revenues  unconsolidated real estate entities.This caption represents
revenues earned from services provided to entities in which we use the equity method to account for our ownership interest since we have significant influence, but not control, over the entities. Revenues from these services from unconsolidated real
estate entities increased by $0.6 million, or 5%, to $13.7 million for the nine months ended September 30, 2008 compared to $13.1 million for the nine months ended September 30, 2007. This increase was primarily a result of an increase in
fee income of $3.5 million related to the Austin Portfolio Joint Venture Properties acquired in June 2007 and an increase of $0.4 million in fee income related to the rest of the portfolio, which was offset by a decrease in acquisition fees of $1.7
million related to the property investments in Fairfax, Virginia acquired in January 2007, and Austin, Texas acquired in June 2007 as well as a decrease of $1.6 million in leasing commissions primarily related to our Houston portfolio and City
National Plaza.

Reimbursement of property personnel costs. This caption represents the reimbursement for property personnel
salary, payroll taxes and benefits. The increase of $2.3 million or 82% to $5.1 million for the nine months ended September 30, 2008 compared to $2.8 million for the nine months ended September 30, 2007 was primarily a result of an
increase in personnel as a result of the acquisition of the Austin Portfolio Joint Venture Properties in June 2007 resulting in a full nine months in 2008 compared to four months in 2007.

Condominium sales  percentage of completion. This caption represents the revenue recognized on the percentage of completion method of
accounting of the Murano condominium units and parking spaces which closed or were under a binding sales contract as of September 30, 2008. As of September 30, 2008, we had closed the sale of 101 units and 94 parking spaces and had an
additional 24 units and 28 parking spaces under contract of sale, for which we recognized revenue of $80 million. Prior to the quarter ended June 30, 2008, we accounted for units and parking spaces under contract of sale based on the deposit
method of accounting.

Rental property operating and maintenance expense.Rental property operating and maintenance increased by
$2.1 million, or 13%, to $18.9 million for the nine months ended September 30, 2008 compared to $16.8 million for the nine months ended September 30, 2007. The increase was primarily a result of increases in certain operating expenses,
increased bad debt charges, wind down costs associated with closing a restaurant at Commerce Square, and marketing and other expenses related to our completed development properties.

Real estate taxes.Real estate taxes remained consistent for each of the nine month periods ended September 30, 2008 and 2007.

Investment advisory, management, leasing and development services expenses.Expenses for these services increased by $3.0 million, or 32%, to
$12.5 million for the nine months ended September 30, 2008 compared to $9.5 million for the nine months ended September 30, 2007, an increase in the use of consultants for accounting software improvements and our third party development
services business and legal fees related to our investment in the Green Fund offset by a decrease in our third party leasing costs in Houston due to lower leasing volume in 2008 compared to 2007.

Reimbursable property personnel costs. This caption represents the reimbursement of property personnel salary, payroll taxes and benefits. The
increase of $2.3 million or 82% to $5.1 million for the nine months ended September 30, 2008 compared to $2.8 million for the nine months ended September 30, 2007 was primarily a result of an increase in salaries and employment related
costs related to the Austin Portfolio Joint Venture Properties acquired in June 2007, resulting in a full nine months in 2008 compared to four months in 2007.

Cost of condominium sales  percentage of completion.This caption represents the cost recognized on the percentage of completion method of accounting for the Murano condominium units and parking spaces
which closed or were under a binding sales contract as of September 30, 2008. As of September 30, 2008, we had closed the sale of 101 units and 94 parking spaces and had an additional 24 units and 28 parking spaces under contract of sale,
for which we recognized cost of sales of $62.2 million. Prior to the quarter ended June 30, 2008, we accounted for units and parking spaces under contract of sale based on the deposit method of accounting.



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Rent  unconsolidated entities.Rent  unconsolidated entities remained consistent for
each of the nine month periods ended September 30, 2008 and 2007.

Interest expense.Interest expense increased by $1.3
million, or 11%, to $13.7 million for the nine months ended September 30, 2008 from $12.4 million for the nine months ended September 30, 2007. The increase in interest expense is primarily attributable to interest costs no longer being
capitalized on Murano and our Four Points office buildings due to the substantial completion of development on these projects during the nine months ended September 30, 2008.

Depreciation and amortization expense.Depreciation and amortization expense decreased by $0.3 million, or 3% to $8.5 million for the nine month
period ended September 30, 2008 from $8.8 million for the nine months ended September 30, 2008. The decrease was primarily related to a scheduled expiration in June 2008 of a significant tenant at Two Commerce Square.

General and administrative.General and administrative expense increased by $0.6 million, or 5%, to $13.6 million for the nine months ended
September 30, 2008 from $13.0 million for the nine months ended September 30, 2007. The increase was primarily due to higher compensation costs due to an increase in the number of personnel, an increase in consultant costs to implement
accounting software initiatives, offset by a decrease in compensation expense related to incentive units granted to executives.

Gain on
sale of real estate.Gain on sale of real estate for both the nine month periods ended September 30, 2008 and September 30, 2007 related to recognition of deferred gain upon completion of infrastructure costs related to the sale of a
14.1 acre parcel at Campus El Segundo in 2006.

Interest income.Interest income decreased by $2.1 million, or 47%, to $2.3 million
for the nine months ended September 30, 2008 compared to $4.4 million for the nine months ended September 30, 2007 primarily due to declining investment balances and lower interest rates.

Equity in net loss of unconsolidated real estate entities.Set forth below is a summary of the unconsolidated condensed financial information for
the unconsolidated real estate entities and our share of net loss and equity in net loss for the nine months ended September 30, 2008 and 2007 (in thousands):



|                                                          |  |      |          |   |      |   |         |  
|--------------------------------------------------------- |  | ---- | -------- | - | ---- | - | ------- | -
|                                                          |  | 2008 |          |   | 2007 |  
|Revenue                                                   |  | $    | 240,628  |   |      | $ | 180,453 |  
|Operating and other expenses                              |  |      | (126,316 | ) |      |   | (98,258 | )
|Interest expense                                          |  |      | (95,410  | ) |      |   | (81,278 | )
|Depreciation and amortization                             |  |      | (94,990  | ) |      |   | (69,973 | )
|Minority interest                                         |  |      |         |   |      |   | (78     | )
|Gain on sale of real estate                               |  |      |         |   |      |   | 7,932   |  
|Loss from discontinued operations                         |  |      | (105     | ) |      |   | (252    | )
|                                                          |  |      |          |   |      |   |         |  
|Net loss                                                  |  | $    | (76,193  | ) |      | $ | (61,454 | )
|                                                          |  |      |          |   |      |   |         |  
|Thomas Properties share of net loss                      |  | $    | (11,450  | ) |      | $ | (11,102 | )
|Intercompany eliminations                                 |  |      | 2,342    |   |      |   | 1,736   |  
|                                                          |  |      |          |   |      |   |         |  
|Equity in net loss of unconsolidated real estate entities |  | $    | (9,108   | ) |      | $ | (9,366  | )
|                                                          |  |      |          |   |      |   |         |  



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Aggregate revenue, operating and other expenses, interest expense and depreciation and amortization for
unconsolidated real estate entities for the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007 increased primarily due to the acquisition of the Austin Portfolio Joint Venture Properties in June 2007.
Gain on sale of real estate decreased by $7.9 million for the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007 due to the sale of Intercontinental Center in 2007.

Liquidity and Capital Resources

Analysis of liquidity and capital
resources

As of September 30, 2008, we have unrestricted cash and cash equivalents of $78.5 million. Our management believes that
our company will have sufficient capital to satisfy our liquidity needs over the next 12 months through working capital and net cash provided by operations. We expect to meet our long-term liquidity requirements, including property and undeveloped
land acquisitions and additional future development and redevelopment activity, through cash flow from operations, additional secured and unsecured long-term borrowings, dispositions of non-strategic assets, and the potential issuance of common
units of our Operating Partnership or additional debt, common or preferred equity securities, including convertible securities. We do not have any present intent to reserve funds to retire existing debt upon maturity. We will instead seek to
refinance this debt at maturity or retire the long-term debt through the issuance of securities, as market conditions permit.

As of
September 30, 2008, we have unfunded capital commitments to (1) our joint venture with CalSTRS of $6.1 million; (2) the Thomas High Performance Green Fund, an investment fund formed by us, CalSTRS and other institutional investors, of
$50.0 million; and (3) the UBS North American Property Fund, an investment fund formed by us and UBS Wealth Management-North American Property Fund Limited, of $50.0 million. With respect to our joint venture with CalSTRS, we are not obligated
to fund our share of the capital commitment for the acquisition of any new project, but we are obligated to fund to implement tenant improvements and other capital improvements for projects that were acquired prior to June 1, 2007 We estimate
we will fund the entire $6.1 million in 2009. Our requirement to fund all or a portion of our commitments to the Thomas High Performance Green Fund and the UBS North American Property Fund is subject to our identifying properties to acquire that are
mutually acceptable to us, and our partners. Our cash requirements for the Green Fund could be reduced by contributions by us to the fund of assets in which we have an interest.

We intend to declare and pay annual dividends on our common stock. The availability of funds to pay dividends is impacted by property-level restrictions
on cash flows. Two Commerce Square is subject to debt financing with lock-box arrangements. Funds generated by Two Commerce Square cannot be distributed to us under the terms of the lock-box arrangements established for the existing lenders for the
property. In addition, all of our properties held in our joint venture with CalSTRS are subject to debt financing with a lockbox arrangements. With respect to our joint venture properties, we do not control decision making with respect to these
properties, and may not be able to obtain monies from these properties even if funds are available for distribution to us. In addition, we may enter future financing arrangements that contain restrictions on our use of cash generated from our
properties.

Development and Redevelopment Projects

We currently own interests in four development projects and our joint venture with CalSTRS includes six redevelopment properties and two development sites. We have substantially completed construction and received
certificates of occupancy for all of the units at Murano, a 302-unit high-rise residential condominium project in downtown Philadelphia. We closed sales on 101 units and 94 parking spaces as of September 30, 2008 and had an additional 24 units
and 28 parking spaces under contract of sale. Under the percentage-of-completion method of accounting, we recognized a gain on sale of approximately $17.5 million for the nine months ended September 30, 2008. During the third quarter 2008, we
completed the core and shell construction of two office buildings totaling approximately 192,000 square feet at Four Points Centre. We are presently entitling approximately 14.4 acres in Los Angeles, California, for office, production facility,
residential and retail uses. The project, called Metro Studio@Lankershim, will include approximately 1.5 million square feet. Upon completion of entitlements, we expect to enter into a long-term ground lease with the Los Angeles County
Metropolitan Transportation Authority, which owns the land. Also, we have been engaged by NBC/Universal to entitle, master plan and have a right of first offer to develop 124 acres located adjacent to Universal City in Los Angeles for the
development of a residential and retail town center. We anticipate completing the development of these projects as market feasibility permits. We also anticipate seeking to mitigate development risk by obtaining significant pre-leasing and
guaranteed maximum cost construction contracts. There can be no assurance we will be able to successfully implement these risk mitigation measures.

The amount and timing of costs associated with our development and redevelopment projects is inherently uncertain due to market and economic conditions. We presently intend to fund development and redevelopment expenditures primarily
through construction or refurbishment financing. In 2006, we refinanced the loan for City National Plaza, which provides proceeds to cover the estimated future redevelopment costs for this property. Construction of the Murano was financed in part
with a construction loan up to $142.5 million. Repayment of this loan is being made with proceeds from the sales of condominium units. The loan has a



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balance of $69.4 million as of September 30, 2008 and we had additional borrowing capacity of $13.2 million. The development at Four Points is financed
in part with a construction loan up to $42.7 million. Presently, we have not obtained construction financing for the development at Campus El Segundo. If we finance these development projects through construction loans and are unable to obtain
permanent financing on advantageous terms or at all, we would need to fund these obligations from cash flow from operations or seek alternative capital sources. If unsuccessful, this could adversely impact our financial condition and results of
operations and impair our ability to satisfy our debt service obligations. If we are successful in obtaining construction or refurbishment financing and permanent financing, we anticipate that the corresponding interest costs would represent both a
significant use of our cash flow and a material component of our results of operations.

Leasing, Tenant Improvement and Capital Needs

In addition to our development and redevelopment projects, we also own One Commerce Square and Two Commerce Square. These properties are substantially
leased and have stabilized cash flows. These properties require routine capital maintenance in the ordinary course of business. The properties also require that we incur expenditures for leasing commissions and tenant improvement costs. The level of
these expenditures varies from year to year based on several factors, including lease expirations. Based upon historical expenditure levels, the leasing activity for the properties and the current rent roll, we anticipate incurring expenditures of
approximately $8.6 million in capital improvements, tenant improvements, and leasing commissions for the One Commerce Square and Two Commerce Square properties collectively during 2008 through 2010.

Annual capital expenditures may fluctuate in response to the nature, extent and timing of improvements required to maintain our properties. Tenant
improvements and leasing costs may also fluctuate depending upon other factors, including the type of property involved, the existing tenant base, terms of leases, types of leases, the involvement of leasing agents and overall market conditions.

Contractual Obligations

A summary of
our contractual obligations at September 30, 2008 is as follows (in thousands):



|                                                         |  |                        |       |      |   |         |      |  |   |        |     |      |   |            |  |       |        |  |   |         |  |   |        
|-------------------------------------------------------- |  | ---------------------- | ----- | ---- | - | ------- | ---- |  | - | ------ | --- | ---- | - | ---------- |  | ----- | ------ |  | - | ------- |  | - | -------
|                                                         |  | Payments Due by Period
|                                                         |  | Remainderof 2008       |       | 2009 |   |         | 2010 |  |   | 2011   |     | 2012 |   | Thereafter |  | Total
|Regularly scheduled principal payments                   |  | $                      | 800   |      | $ | 500     |      |  | $ | 492    |     |      | $ | 1,971      |  | $     | 2,160  |  | $ | 5,826   |  | $ | 11,749 
|Balloon payments                                         |  |                        |      |      |   | 90,515  | (1)  |  |   | 60,907 | (2) |      |   |           |  |       |       |  |   | 227,655 |  |   | 379,077
|Interest payments  fixed rate debt                      |  |                        | 5,232 |      |   | 21,757  |      |  |   | 14,912 |     |      |   | 14,290     |  |       | 14,205 |  |   | 24,806  |  |   | 95,202 
|Interest payments  variable rate debt (3)               |  |                        |      |      |   |        |      |  |   |       |     |      |   |           |  |       |       |  |   |        |  |   |       
|Capital commitments (4)                                  |  |                        | 3,378 |      |   | 10,526  |      |  |   | 857    |     |      |   |           |  |       |       |  |   |        |  |   | 14,761 
|Operating lease (5)                                      |  |                        | 32    |      |   | 53      |      |  |   |       |     |      |   |           |  |       |       |  |   |        |  |   | 85     
|FIN 48 obligations, including interest and penalties (6) |  |                        |      |      |   |        |      |  |   |       |     |      |   |           |  |       |       |  |   |        |  |   |       
|                                                         |  |                        |       |      |   |         |      |  |   |        |     |      |   |            |  |       |        |  |   |         |  |   |        
|Total                                                    |  | $                      | 9,442 |      | $ | 123,351 |      |  | $ | 77,168 |     |      | $ | 16,261     |  | $     | 16,365 |  | $ | 258,287 |  | $ | 500,874
|                                                         |  |                        |       |      |   |         |      |  |   |        |     |      |   |            |  |       |        |  |   |         |  |   |        



|(1) | The debt maturing in 2009 includes a $69.4 million construction loan that has two six-month extension options, the first of which is conditional on the closing of 100 residential
units, which has occurred, and a $17.3 million dollar loan that has a one-year extension option at our election.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The debt maturing in 2010 includes a $24.9 million construction loan that has two one-year extension options at our election subject to certain conditions.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | As of September 30, 2008, 71.5% of our debt was at contractually fixed rates. The information in the table above reflects our projected interest rate obligations for the
fixed-rate payments based on the contractual interest rates and scheduled maturity dates. The remaining 28.5% of our debt bears interest at variable rates based on the prime rate or LIBOR plus a spread that ranges from 1.5% to 4.0%. The interest
payments on the variable rate debt have not been reported in the table above because we cannot reasonably determine the future interest obligations on our variable rate debt as we cannot predict what prime and LIBOR rates will be in the future. As
of September 30, 2008, the one-month LIBOR was 3.93% and the prime rate was 5.00%.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Capital commitments of our company and consolidated subsidiaries include approximately $8.6 million of tenant improvements and leasing commissions for certain tenants in One
Commerce Square and Two Commerce Square. We have an unfunded capital commitment of $6.1 million to our TPG/CalSTRS joint venture, which we estimate we will fund the entire amount in 2009. We are not obligated to fund our share for the acquisition of
any new project, but we are obligated to fund to implement tenant improvements and other capital improvements for projects that were acquired prior to June 1, 2007.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(5) | Represents the future minimum lease payments on our operating lease for our corporate office at City National Plaza. The table does not reflect available maturity extension options.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | The FIN 48 obligations in the table above should represent amounts associated with uncertain tax positions related to temporary differences. However, reasonable estimates cannot be
made about the amount and timing of payment for these obligations. As of September 30, 2008, $16.8 million of unrecognized tax benefits have been recorded as liabilities in accordance with FIN 48, and we are uncertain as to if and when such
amounts may be settled. We have recorded $1.3 million of accrued interest with respect to unrecognized tax benefits. We have not recorded any penalties with respect to unrecognized tax benefits.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Off-Balance Sheet Arrangements  Indebtedness of Unconsolidated Real Estate Entities

As of September 30, 2008, our company had investments in entities owning unconsolidated properties with stated ownership percentages ranging from
6.25% to 50.0%. We do not have control of these entities, and none of the entities are considered variable interest entities. Therefore, we account for them using the equity method of accounting. The table below summarizes the outstanding debt for
the properties as of September 30, 2008 (in thousands). We have not guaranteed any of the debt.



|                                      |  |                      |  |                 |         |              |          
|------------------------------------- |  | -------------------- |  | --------------- | ------- | ------------ | ---------
|                                      |  | Interest Rate        |  | PrincipalAmount |         | MaturityDate
|City National Plaza (1)               |  |                      |  |                 |         |              |          
|Senior mortgage loan                  |  | LIBOR + 1.07%(2)(3)  |  | $               | 355,300 |              | 7/17/2009
|Senior mezzanine loan-Note A (4)      |  | LIBOR + 2.59%(2)(3)  |  |                 | 60,661  |              | 7/17/2009
|Senior mezzanine loan-Note B          |  | LIBOR + 1.90%(2)(3)  |  |                 | 24,000  |              | 7/17/2009
|Senior mezzanine loan-Note C          |  | LIBOR + 2.25%(2)(3)  |  |                 | 24,000  |              | 7/17/2009
|Senior mezzanine loan-Note D          |  | LIBOR + 2.50%(2)(3)  |  |                 | 24,000  |              | 7/17/2009
|Senior mezzanine loan-Note E          |  | LIBOR + 3.05%(2)(3)  |  |                 | 22,700  |              | 7/17/2009
|Junior mezzanine loan (5)             |  | LIBOR + 5.00%(2)(3)  |  |                 | 51,996  |              | 7/17/2009
|CityWestPlace                         |  |                      |  |                 |         |              |          
|Fixed                                 |  | 6.16%                |  |                 | 121,000 |              | 7/6/2016 
|Floating                              |  | LIBOR + 1.25%(2)(6)  |  |                 | 92,400  |              | 7/1/2009 
|San Felipe Plaza                      |  |                      |  |                 |         |              |          
|Mortgage loan - Note A                |  | 5.28%                |  |                 | 101,500 |              | 8/11/2010
|Mortgage loan - Note B (7)            |  | LIBOR + 3.00%        |  |                 | 16,200  |              | 8/11/2010
|2500 City West                        |  |                      |  |                 |         |              |          
|Mortgage loan-Note A                  |  | 5.28%                |  |                 | 70,000  |              | 8/11/2010
|Mortgage loan-Note B (8)              |  | LIBOR + 3.00%        |  |                 | 11,378  |              | 8/11/2010
|Brookhollow Central I, II and III     |  |                      |  |                 |         |              |          
|Mortgage loan-Note A                  |  | LIBOR + 0.44%(2)(3)  |  |                 | 24,154  |              | 8/9/2009 
|Mortgage loan-Note B                  |  | LIBOR + 4.25%(2)(3)  |  |                 | 19,443  |              | 8/9/2009 
|Mortgage loan-Note C                  |  | LIBOR + 4.86%(2)(3)  |  |                 | 16,746  |              | 8/9/2009 
|Four Falls Corporate Center           |  |                      |  |                 |         |              |          
|Mortgage loan-Note A                  |  | 5.31%                |  |                 | 42,200  |              | 3/6/2010 
|Mortgage loan-Note B (9)              |  | LIBOR + 3.25%(2)(10) |  |                 | 9,867   |              | 3/6/2010 
|Oak Hill Plaza/Walnut Hill Plaza      |  |                      |  |                 |         |              |          
|Mortgage loan-Note A                  |  | 5.31%                |  |                 | 35,300  |              | 3/6/2010 
|Mortgage loan-Note B (9)              |  | LIBOR + 3.25%(2)(10) |  |                 | 9,152   |              | 3/6/2010 
|2121 Market Street mortgage loan (11) |  | 6.05%                |  |                 | 18,900  |              | 8/1/2033 
|Reflections I mortgage loan           |  | 5.23%                |  |                 | 22,262  |              | 4/1/2015 
|Reflections II mortgage loan          |  | 5.22%                |  |                 | 9,275   |              | 4/1/2015 
|Centerpointe I & II                   |  |                      |  |                 |         |              |          
|Senior mortgage loan                  |  | LIBOR + 0.60%(2)     |  |                 | 55,000  |              | 2/9/2009 
|Mezzanine loan (Note A) (12) (13)     |  | LIBOR + 1.51%(2)     |  |                 | 14,181  |              | 2/9/2009 
|Mezzanine loan (Note B) (12) (14)     |  | LIBOR + 4.79%(2)     |  |                 | 12,263  |              | 2/9/2009 
|Mezzanine loan (Note C) (12) (15)     |  | LIBOR + 3.26%(2)     |  |                 | 12,572  |              | 2/9/2009 
|Fair Oaks Plaza (16)                  |  | 5.52%                |  |                 | 44,300  |              | 2/9/2017 



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|                                                    |  |                       |  |   |           |  |          
|--------------------------------------------------- |  | --------------------- |  | - | --------- |  | ---------
|Austin Portfolio Joint Venture Properties:          |  |                       |  |   |           |  |          
|San Jacinto Center                                  |  |                       |  |   |           |  |          
|Mortgage loan-Note A                                |  | 6.05%                 |  |   | 43,000    |  | 6/11/2017
|Mortgage loan-Note B                                |  | 6.05%                 |  |   | 58,000    |  | 6/11/2017
|Frost Bank Tower                                    |  |                       |  |   |           |  |          
|Mortgage loan-Note A                                |  | 6.06%                 |  |   | 61,300    |  | 6/11/2017
|Mortgage loan-Note B                                |  | 6.06%                 |  |   | 88,700    |  | 6/11/2017
|One Congress Plaza                                  |  |                       |  |   |           |  |          
|Mortgage loan-Note A                                |  | 6.08%                 |  |   | 57,000    |  | 6/11/2017
|Mortgage loan-Note B                                |  | 6.08%                 |  |   | 71,000    |  | 6/11/2017
|One American Center                                 |  |                       |  |   |           |  |          
|Mortgage loan-Note A                                |  | 6.03%                 |  |   | 50,900    |  | 6/11/2017
|Mortgage loan-Note B                                |  | 6.03%                 |  |   | 69,100    |  | 6/11/2017
|300 West 6th Street                                 |  | 6.01%                 |  |   | 127,000   |  | 6/11/2017
|Research Park Plaza I & II                          |  |                       |  |   |           |  |          
|Senior mortgage loan                                |  | LIBOR + 0.55%(2)(17)  |  |   | 23,560    |  | 6/9/2009 
|Mezzanine loan                                      |  | LIBOR + 2.01%(2)(17)  |  |   | 27,940    |  | 6/9/2009 
|Stonebridge Plaza II                                |  |                       |  |   |           |  |          
|Senior mortgage loan                                |  | LIBOR + 0.63%(2)(17)  |  |   | 19,800    |  | 6/9/2009 
|Mezzanine loan                                      |  | LIBOR + 1.76%(2)(17)  |  |   | 17,700    |  | 6/9/2009 
|Austin Bank Term Loan                               |  | LIBOR + 3.25%(18)(19) |  |   | 192,500   |  | 6/1/2013 
|Revolving Credit Facility                           |  | (20)                  |  |   |          |  | 6/1/2012 
|                                                    |  |                       |  |   |           |  |          
|Subtotal - Austin, TX Portfolio                     |  |                       |  | $ | 907,500   |  |          
|                                                    |  |                       |  |   |           |  |          
|Total outstanding debt of unconsolidated properties |  |                       |  | $ | 2,228,250 |  |          
|                                                    |  |                       |  |   |           |  |          



The LIBOR rate for the loans above was 3.9% at September 30, 2008.



|(1) | The City National Plaza loans collectively have maximum borrowings of $580 million. The senior mortgage loan and Notes B, C, D and E under the senior mezzanine loans are subject to
exit fees equal to .25% of the loan amounts. Note A under the senior mezzanine loan and the junior mezzanine loan are subject to an exit fee equal to .50% of the loan amount. Under certain circumstances all of the exit fees will be waived.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The partnership that owns each property has purchased interest rate cap agreements for the funded portion of these loans.
|--- | -------------------------------------------------------------------------------------------------------------------------



|(3) | These loans have a one-year extension option at our election.
|--- | -------------------------------------------------------------



|(4) | TPG/CalSTRS may borrow an additional $9.3 million.
|--- | --------------------------------------------------



|(5) | TPG/CalSTRS may borrow an additional $8.0 million.
|--- | --------------------------------------------------



|(6) | This loan has two one-year extension options at our election.
|--- | -------------------------------------------------------------



|(7) | This loan has been fully funded as of September 30, 2008.
|--- | ---------------------------------------------------------



|(8) | TPG/CalSTRS may borrow an additional $4.1 million under this loan.
|--- | ------------------------------------------------------------------



|(9) | These loans are subject to exit fees equal to 1% of the loan amounts, however, under certain circumstances the exit fees will be waived.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



|(10) | These loans bear interest at the greater of the one month LIBOR or 2.25% per annum, plus the applicable margin. As of September 30, 2008, one month LIBOR exceeds
2.25%, per annum.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(11) | The 2121 Market Street mortgage loan is prepayable without penalty after May 1, 2013, at which date the outstanding principal amount of this loan will be approximately $17.2
million. The interest rate will increase to the greater of 8.1% or the treasury rate plus 2.0% on August 1, 2013. Any amounts over the initial interest rate may be deferred to the extent excess cash is not available to make such payments.
Provided there is no deferred interest, the loan balance will be fully amortized on August 1, 2033, the maturity date of the loan.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(12) | The loans are subject to exit fees of up to 1.0% through February 9, 2009. The Centerpointe I & II senior mortgage loan bears interest at a rate equal to one month LIBOR
plus 0.60%. The mezzanine loans bear interest at a rate such that the weighted average of the rate on these loans and the rate on the senior mortgage loan secured by Centerpointe I & II equals LIBOR plus 1.59% per annum. The effective
interest rate on the mezzanine loans as of September 30, 2008 was 6.92% per annum. The weighted average interest rate on all of the loans was 5.52% per annum. All of these loans have three one-year extension options at our election.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(13) | TPG/CalSTRS may borrow an additional $10.8 million under this loan.
|---- | -------------------------------------------------------------------



|(14) | TPG/CalSTRS may borrow an additional $9.4 million under this loan.
|---- | ------------------------------------------------------------------



|(15) | TPG/CalSTRS may borrow an additional $9.6 million under this loan.
|---- | ------------------------------------------------------------------



|(16) | This loan may be defeased in full after three years (or January 31, 2010), or prepaid in full after 9 years and 8 months (or October 2016).
|---- | -------------------------------------------------------------------------------------------------------------------------------------------



|(17) | These loans have three one-year extension options at our election.
|---- | ------------------------------------------------------------------



|(18) | The Austin Portfolio Joint Venture entered into an interest rate collar agreement for 50% of the loan balance, or $96.25 million, in which we bought a cap and sold a floor.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(19) | The margin above LIBOR on the bank term loan is subject to adjustment under certain circumstances. The term loan is secured by mortgages on three of the Austin Portfolio Joint
Venture Properties, a pledge of equity interests in the remaining seven Austin Portfolio Joint Venture Properties and guarantees of certain other Austin Portfolio Joint Venture Properties.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(20) | The Austin Portfolio Joint Venture has a $100 million secured revolving credit commitment to fund future capital requirements, bearing interest at LIBOR plus 3.25%. The margin above
LIBOR on this facility is subject to adjustment under certain circumstances. On September 17, 2008, we submitted a borrowing notice with respect to the full $100 million available under the revolving credit facility, which was not funded. It is
our understanding that Lehman Brothers Holdings, Inc., the parent of the lead arranger and the administrative agent of this facility, as well as the administrative agent itself have filed for bankruptcy protection.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cash Flows

Comparison of nine months ended September 30,
2008 to nine months ended September 30, 2007

Cash and cash equivalents (including restricted cash) were $93.7 million as of
September 30, 2008 and $152.9 million as of September 30, 2007.

Operating Activities - Net cash (used in) provided by operating
activities decreased by $24.6 million to $4.0 million for the nine months ended September 30, 2008 compared to $28.6 million for the nine months ended September 30, 2007. The decrease was primarily the result of a gain on sale related to
the sale of condominium units of $17.5 million, decrease in distributions for services provided to unconsolidated real estate entities of $3.2 million and a $1.3 decrease in deferred rents. Further, there was a decrease in assets and liabilities of
$4.1 million primarily related to a decrease in accrued liabilities resulting from a decrease in Murano security deposits, offset by an increase in net income of $1.5 million, from $0.7 million for the nine months ended September 30, 2007 to
$2.2 million for the nine months ended September 30, 2008.

Investing Activities - Net cash used in investing activities increased by
$72.4 million to $(33.2) million for the nine months ended September 30, 2008 compared to $(105.6) million for the nine months ended September 30, 2007. The increase was primarily the result of $51.1 million in proceeds from sales of our
Murano condominium units for the nine months ended September 30, 2008, a $13.4 million increase in restricted cash, an increase of $0.8 million related to the purchase of naming rights for the soccer field at Campus El Segundo and our equity
investment of $18.4 million in the Austin Portfolio Joint Venture Properties in 2007. The increases were offset primarily due to uses of cash for increased expenditures of $7.9 million on our Murano, Four Points Center, Campus El Segundo and
MetroStudio@Lankershim development projects as well as $2.0 million to purchase the remaining interest in One Commerce Square and $2.0 million to purchase the remaining interest in Two Commerce Square.

Financing Activities - Net cash (used in) provided by financing activities decreased by $162.6 million to $(18.9) million for the nine months ended
September 30, 2008 compared to $143.7 million for the nine months ended September 30, 2007. The decrease was primarily the result of net equity proceeds of $139.4 million offset by redemption payments of $33.6 million in April 2007. The
decrease was also due to an increase of $0.9 million in dividend payments, principal payments on the Murano construction loan and the loan secured by our preferred equity interest in Murano totaling $65.3 million in the nine months ended
September 30, 2008, offset by increased borrowings on our Murano and Four Points Center construction loans of $9.8 million in the nine months ended September 30, 2008.

Inflation

Substantially all of our office leases provide for tenants to reimburse us for increases
in real estate taxes and operating expenses related to the leased space at the applicable property. In addition, many of the leases provide for increases in fixed base rent. We believe that inflationary increases may be partially offset by the
contractual rent increases and expense reimbursements as described



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above. We have one multi-family residential rental property and are substantially complete with construction on Murano, a high-rise residential tower in
Philadelphia. The existing residential property is located in the Philadelphia central business district and subject to short-term leases. Inflationary increases can often be offset by increased rental rates, however, a weak economic environment may
restrict our ability to raise rental rates.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

A primary market risk faced by our company is interest rate risk. Our strategy is to match as closely as possible the expected holding periods and income streams of our assets with the terms of our debt. In general, we use floating rate
debt on assets with higher growth prospects and less stability to their income streams. Correspondingly, with respect to stabilized assets with lower growth rates, we will generally use longer-term fixed-rate debt. As of September 30, 2008, our
company had $111.6 million of outstanding consolidated floating rate debt, which is not subject to an interest rate cap.

The
unconsolidated real estate entities have total debt of $2.2 billion, of which $1.14 billion bears interest at floating rates. As of September 30, 2008, interest rate caps have been purchased for $1.11 billion of the floating rate loans.

Our fixed and variable rate consolidated long-term debt at September 30, 2008 consisted of the following (in thousands):



|                               |  |            |         |   |               |   |         |       |  |   |         |  
|------------------------------ |  | ---------- | ------- | - | ------------- | - | ------- | ----- |  | - | ------- | -
|Year of Maturity               |  | Fixed Rate |         |   | Variable Rate |   |         | Total | 
|2008                           |  | $          | 800     |   |               | $ |        |       |  | $ | 800     |  
|2009                           |  |            | 4,400   |   |               |   | 86,615  |       |  |   | 91,015  |  
|2010                           |  |            | 36,458  |   |               |   | 24,941  |       |  |   | 61,399  |  
|2011                           |  |            | 1,971   |   |               |   |        |       |  |   | 1,971   |  
|2012                           |  |            | 2,160   |   |               |   |        |       |  |   | 2,160   |  
|Thereafter                     |  |            | 233,481 |   |               |   |        |       |  |   | 233,481 |  
|                               |  |            |         |   |               |   |         |       |  |   |         |  
|Total                          |  | $          | 279,270 |   |               | $ | 111,556 |       |  | $ | 390,826 |  
|                               |  |            |         |   |               |   |         |       |  |   |         |  
|Weighted average interest rate |  |            | 7.6     | % |               |   | 6.7     | %     |  |   | 7.3     | %

We utilize sensitivity analyses to assess the potential effect of our variable rate debt. At
September 30, 2008, our variable rate long-term debt represents 28.5% of our total long-term debt. If interest rates were to increase by 75 basis points, or by approximately 11.4% of the weighted average variable rate at September 30,
2008, the net impact would be increased interest costs of $0.8 million per year.

As of September 30, 2008, the fair value of our
mortgage and other secured loans and unsecured loan aggregate $395.0 million, compared to the aggregate carrying value of $390.8 million.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Evaluation of Disclosure Controls and
Procedures

We have adopted and maintain disclosure controls and procedures that are designed to ensure that information required to be
disclosed in the reports that we file or submit under the Securities Exchange Act, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities
and Exchange Commission (SEC) and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding
required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired
control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b), promulgated by the SEC under the Exchange Act, we have carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized,
and reported within the time periods specified in the SECs rules and forms.



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Internal Controls over Financial Reporting

There was no change in our internal control over financial reporting as defined in Rules 13a-15(f) or 15(d)-15(f) under the Exchange Act that occurred
during the quarter ended September 30, 2008 that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting. From time to time, we may make changes in our companys internal control
processes in the future.

PART II. OTHER INFORMATION



|ITEM 1A. | RISK FACTORS
|-------- | ------------

Risks Related to Our Business and Our Properties

We generate a significant portion of our revenues as a result of our relationships with CalSTRS. If we were to lose these relationships, our
financial results and growth prospects would be significantly negatively affected.

Our relationships with CalSTRS are a significant
factor in our ability to achieve our intended business growth. Our separate account and joint venture relationships with CalSTRS, including the Austin Portfolio Joint Venture in which we invested through our joint venture with CalSTRS, provide us
with substantial fee revenues. For the three and nine months ended September 30, 2008, approximately 23.8% and 13.3%, respectively, of our revenue has been derived from fees earned from these relationships. We may also earn fee revenues in the
future from the Green Fund as a result of CalSTRS investment in that partnership.

We cannot assure you that our relationships with
CalSTRS will continue and we may not be able to replace these relationships with other strategic alliances that would provide comparable revenues. Our interest in TPG/CalSTRS is subject to a buy-sell provision, and is subject to purchase by CalSTRS
upon the occurrence of certain events. Under the buy-sell provision either our Operating Partnership or CalSTRS can initiate a buy-out by delivering a notice to the other specifying a purchase price for all the joint ventures assets; the other
venture partner then has the option to sell its joint venture interest or purchase the interest of the initiating venture partner. The purchase price is based on what each venture partner would receive on liquidation if the joint ventures
assets were sold for the specified price and the joint ventures liabilities paid and the remaining assets distributed to the joint venture partners. In addition, CalSTRS has the ability to initiate this provision upon certain events of default
by us under the joint venture agreement or related management and development agreements or upon bankruptcy of our Operating Partnership, or upon the death or disability of either James A. Thomas, our Chairman, President and CEO, or John R.
Sischo, one of our Executive Vice Presidents, or the failure of either of them to devote the necessary time to perform their duties (unless replaced by an individual approved by CalSTRS) (a Buyout Default), or upon any transfer of stock
of our company or limited partnership units in our Operating Partnership resulting in Mr. Thomas, his immediate family and controlled entities owning less than 30% of our securities entitled to vote for the election of directors. Upon the
occurrence of a Buyout Default by the Company, CalSTRS may elect to purchase our joint venture interest based on a three percent discount to the appraised fair market value.

Most of our fee arrangements under our separate account relationship with CalSTRS are terminable on 30 days notice. Termination of either our joint
venture or separate account relationship with CalSTRS could adversely affect our revenue and profitability and our ability to achieve our business plan by reducing our fee income and access to co-investment capital to acquire additional properties.

Our joint venture investments may be adversely affected by our lack of control or input on decisions or shared decision-making authority or disputes
with our co-venturers.

We hold interests in each of our operating properties in a joint venture or partnership. As a result, with the
exception of One Commerce Square and Two Commerce Square, we do not exercise sole decision-making authority regarding the property, joint venture or other entity, including with respect to cash distributions or the sale of the property. Furthermore,
we expect to co-invest in the future through other partnerships, joint ventures or other entities, acquiring non-controlling interests or in sharing responsibility for managing the affairs of a property, partnership or joint venture. Investments in
partnerships, joint ventures or other entities may, under certain circumstances, involve risks including partners who may have economic or other business interests or goals which are inconsistent with our business interests or goals and may be in a
position to take actions contrary to our policies or objectives. These investments may also have the risk of impasses on significant decisions, because neither we nor our partner or co-venturer would have full control over the partnership or joint
venture. Disputes between us and our partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their full time and effort on our business. In addition,
under the principles of agency and partnership law, we may in certain circumstances be liable for the actions of our third-party partners or co-venturers such as if a partner or co-venturer were to become bankrupt and default on its reimbursement
and contribution obligations to us, were to subject property owned by the partnership or joint venture to liabilities in excess of those contemplated by the partnership or joint venture agreement or were to incur debts or liabilities on behalf of
the partnership or joint



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venture in excess of the authority otherwise granted by the partnership or joint venture agreement. In some joint ventures or other investments we make, if
the entity in which we invest is a limited partnership, we have acquired and may acquire in the future all or a portion of our interest in such partnership as a general partner. In such event, we may be liable for all the liabilities of the
partnership, although we attempt to limit such liability to our investment in the partnership by investing through a subsidiary.

Our joint venture
partners have rights under our joint venture agreements that could adversely affect us.

As of September 30, 2008, we hold
interests in 22 of our properties through TPG/CalSTRS, 10 of which are held indirectly through TPG/CalSTRS interest in the Austin Portfolio Joint Venture. TPG/CalSTRS requires a unanimous vote of the joint ventures management committee
on certain major decisions, including approval of annual business plans and budgets, financings and refinancings, and additional capital calls not in compliance with an approved annual plan. All other decisions, including sales of properties, are
made based upon a majority decision of the management committee, which currently consists of two members appointed by CalSTRS and one member appointed by us. Thus CalSTRS has the ability to control certain decisions for the joint venture that may
result in an outcome contrary to our interests. In addition to CalSTRS ability to control certain decisions relating to the joint venture, our joint venture agreement with CalSTRS includes provisions negotiated for the benefit of CalSTRS that
could adversely affect us. Unless otherwise determined by the management committee of the joint venture, we are required to use diligent efforts to sell each joint venture property generally within five years of that property reaching stabilization,
except that the holding period for Reflections I and Reflections II, both of which are 100% leased, will be separately determined by the joint venture management committee. With respect to these two properties, we are required to perform a hold/sell
analysis at least annually, and make a recommendation to the management committee regarding the appropriate holding period, which could be less than five years. We have a right of first offer to purchase a joint venture property upon a required sale
at a price we propose, and if CalSTRS accepts our offer we must close within 90 days. If we do not exercise the right of first offer and we subsequently fail to effect a sale by the end of the specified holding period, CalSTRS has the right to
assume control of the sale process. This may require us to sell a substantial portion of our assets at an inopportune time, or for prices that are lower than could be achieved if we had more flexibility in the timing for effecting sales.

TPG/CalSTRS entered into a partnership agreement and syndication agreement with an affiliate of Lehman Brothers, Inc. in relation to the Austin
Portfolio Joint Venture. That agreement required us to assist the Lehman affiliate that was the primary equity holder in the joint venture with syndicating a substantial portion of the entitys equity position by June of this year. As of
September 30, 2008, 33% of the Lehman affiliates original equity in the joint venture had been sold to an unrelated institutional investor. We and Lehman were unable to sell the Lehman affiliates remaining equity to investors during
the syndication period. As a result of the failed syndication, the Lehman affiliate holds 50% of the equity in the joint venture as of September 30, 2008 and retains certain approval rights with respect to an expanded set of major decisions of
the joint venture, although we are still in charge of operating, leasing and managing the joint venture assets within approved budgets and guidelines. Also, the other limited partner in this partnership has approval rights over such major decisions.
These rights include but are not limited to the right to approve annual business plans and budgets, financings and refinancings, sales of properties, additional capital calls not in compliance with an approved annual plan, and agreements with
affiliates. The limited partners also have the right to remove the general partner under certain circumstances. These rights could adversely affect us.

The bankruptcy of Lehman Brothers Holdings, Inc. may adversely effect the Austin Portfolio Joint Venture.

The Lehman
affiliate that owns the equity interest in the Austin Portfolio Joint Venture is 100% indirectly owned by Lehman Brothers Holdings, Inc. In addition, two Lehman Brothers Holdings, Inc. affiliates consisting of Lehman Commercial Paper Inc. and Lehman
Brothers Inc., are administrative agent and lead arranger, respectively, under the Austin Portfolio Joint Ventures $292.5 million credit agreement, which includes a $100 million revolving credit facility and a $192.5 million term loan. The
$192.5 million term loan has been fully funded by Lehman Commercial Paper Inc. and is secured by certain properties held in the joint venture and secondary liens on other joint venture properties. We submitted a borrowing notice on
September 17, 2008 with respect to the full $100 million available under the revolving credit facility, which was not funded. On September 19, 2008, we sent Lehman Commercial Paper Inc. and Lehman Brothers Inc. a notice of default of their
obligations under the credit agreement. We cannot offer any assurance that these entities will honor any draw notices we may submit under the credit agreement. If we are unable to enforce our rights to obtain funds under the revolving credit
facility, we will be forced to seek alternative debt financing or other financing which may be on less favorable terms, and may be obligated to make additional capital calls on the joint ventures partners.



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We depend on significant tenants, and their failure to pay rent could seriously harm our operating results and
financial condition.

As of September 30, 2008, the 20 largest tenants for properties in which we hold an ownership interest
collectively leased 32.0% of the rentable square feet of space, representing 54.8% of the total annualized rent generated by these properties. Consolidated Rail Corporation, together with its wholly-owned subsidiary New York Central Lines, LLC
(Conrail), leases approximately 39.7% of the space at Two Commerce Square and accounted for approximately 8.0% of the total annualized rent generated by all of our consolidated and unconsolidated properties as of September 30, 2008.
In addition, Conrails rental revenues and tenant reimbursements accounted for approximately 7.9% and 11.2% of total consolidated revenue, on a GAAP basis, for the three and nine months ended September 30, 2008.

We rely on rent payments from our tenants as a source of cash to finance our business. Any of our tenants may experience a downturn in its business that
may weaken its financial condition. As a result, a tenant may delay lease commencement, fail to make rental payments when due, decline to extend a lease upon its expiration, become insolvent or declare bankruptcy. In addition, current economic and
market conditions increase the possibility that one or more of our tenants will become insolvent. Any tenant bankruptcy or insolvency, leasing delay or failure to make rental payments when due could result in the termination of the tenants
lease and material losses to our company.

In particular, if any of our significant tenants becomes insolvent, suffers a downturn in its
business and decides not to renew its lease or vacates a property, it may seriously harm our business. Failure on the part of a tenant to comply with the terms of a lease may give us the right to terminate the lease, repossess the applicable
property and enforce the payment obligations under the lease. In those circumstances, we would be required to find another tenant. We cannot assure you that we would be able to find another tenant without incurring substantial costs, or at all, or
that if another tenant were found, we would be able to enter into a new lease on favorable terms. We are not aware of an insolvency issue with any of our significant tenants.

Bankruptcy filings by or relating to one of our tenants could bar us from collecting pre-bankruptcy debts from that tenant or their property. A tenant
bankruptcy would delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude full collection of these amounts. If a lease is assumed by the tenant in bankruptcy, all pre-bankruptcy amounts due under the
lease must be paid to us in full. However, if a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages. Any unsecured claim we hold against a bankrupt entity may be paid only to the extent that funds
are available and only in the same percentage as is paid to all other holders of unsecured claims. We may recover substantially less than the full value of any unsecured claims in the event of the bankruptcy of a large tenant, which would adversely
impact our financial condition.

Our operating results depend upon the regional economies in which our properties are located and the demand for office
and other mixed-use space, and an economic downturn in these regions could harm our operating results.

Our operating and development
properties are located in three geographic regions of the United States: the West Coast, Southwest and Mid-Atlantic regions. Historically, the largest part of our revenues has been derived from our ownership and management of properties consisting
primarily of office buildings. A decrease in the demand for office space in these geographic regions, and Class A office space in particular, may have a greater adverse effect on our business and financial condition than if we owned a more
diversified real estate portfolio. We are susceptible to adverse developments in these regions and in the national office market, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics, terrorist
targeting of high-rise structures, infrastructure quality, increases in real estate and other taxes, costs of complying with government regulations or increased regulation and other factors, and oversupply of or reduced demand for office space. Some
of the regional issues we face include the more highly regulated and taxed economy of Southern California and high local and municipal taxes for our Philadelphia properties. Any adverse economic or real estate developments in a local region, or any
decrease in demand for office space resulting from the local regulatory environment, business climate or energy or fiscal problems, could adversely impact our revenue and profitability, thereby causing a significant downturn in our financial
condition, results of operations, cash flow, the trading price of our common stock and impairing our ability to satisfy our debt service obligations.

Our debt service obligations reduce cash available to fund business growth and may expose us to the risk of default under our debt obligations.

As of September 30, 2008, our total consolidated indebtedness is approximately $390.8 million. In addition, we own interests in unconsolidated entities subject to total indebtedness in the amount of $2.2 billion
as of September 30, 2008. Mortgage loans, which comprise a portion of both the consolidated and unconsolidated indebtedness, are secured by first deeds of trust in the related real property. Mezzanine loans and other secured loans are secured
by our direct or indirect ownership interest in the entity that owns the related real property. We may seek to incur significant additional debt to finance future acquisition and development activities, however debt financing may not be available to
us on acceptable terms under current market conditions. In addition, it is possible the



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required payments of principal and interest on borrowings may leave us with insufficient cash to operate our properties profitably. Our need for debt
financing, our existing level of debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following:



| |  |  | our cash flow may be insufficient to meet our required principal and interest payments or to pay dividends;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | we may be unable to borrow additional funds as needed or on favorable terms;
| | - |  | ----------------------------------------------------------------------------



| |  |  | we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may be unable to distribute funds from a property to our Operating Partnership or apply such funds to cover expenses related to another property;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we could be required to dispose of one or more of our properties, possibly on disadvantageous terms and/or at disadvantageous times;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we could default on our obligations and the lenders or mortgagees may foreclose on our properties that secure their loans and receive an assignment of rents and
leases;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we could violate covenants in our loan documents or our joint venture agreements, including provisions that may limit our ability to further mortgage a property,
make distributions, acquire additional properties, repay indebtedness prior to a set date without payment of a premium or other pre-payment penalties, all of which would entitle the lenders to accelerate our debt obligations;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a default under any one of our mortgage loans with cross default provisions could result in a default on other indebtedness; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | because we have agreed to use commercially reasonable efforts to maintain certain debt levels to provide the ability for Mr. Thomas and entities controlled by
him to guarantee debt of $210 million, including $11 million of debt available for guarantee by Mr. Edward Fox, one of our non-employee directors, and by Mr. Richard Gilchrist, an individual formerly affiliated with Maguire Thomas
Partners, we may not be able to refinance our debt when it would otherwise be advantageous to do so or to reduce our indebtedness when our board of directors thinks it is prudent.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If any one of these events were to occur, our revenue and profitability could be adversely impacted, causing a significant downturn in our financial
condition, results of operations, cash flow, and the trading price of our common stock and impairing our ability to satisfy our debt service obligations.

We have a substantial amount of debt which bears interest at variable rates. Our failure to hedge effectively against interest rate changes may adversely affect our results of operations.

As of September 30, 2008, $111.6 million of our consolidated debt and $1.14 billion of our unconsolidated debt was at variable interest rates. As of
September 30, 2008, interest rate caps have been purchased for $1.11 billion of the unconsolidated floating rate loans. Interest rate hedging arrangements and swap agreements we enter into to cap our interest rate exposure involve risks,
including that our hedging or swap transactions might not achieve the desired effect in eliminating the impact of interest rate fluctuations, or that counterparties may fail to honor their obligations under these arrangements. As a result, these
arrangements may not be effective in reducing our exposure to interest rate fluctuations and this could reduce our revenue, require us to modify our leverage strategy, and adversely affect our expected investment returns. Of the existing interest
rate caps, one or more Lehman Brothers Holdings, Inc. affiliates was the counterparty on the interest rate cap transactions related to our Austin Portfolio Joint Venture Properties. We have replaced the Lehman affiliates as counterparty on four
interest rate cap transactions.

We may be unable to complete acquisitions necessary to grow our business, and even if consummated, we may fail to
successfully operate these acquired properties.

Our planned growth strategy includes the acquisition of additional properties as
opportunities arise. We regularly evaluate approximately 20 markets in the United States for office, mixed-use and other properties for strategic opportunities. Our ability to acquire properties on favorable terms and successfully operate them
is subject to the following significant risks:



| |  |  | we may be unable to generate sufficient cash from operations, or obtain the necessary debt or equity to consummate an acquisition or, if obtainable, it may not be
on favorable terms;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may need to spend more than budgeted amounts to make necessary improvements or renovations to acquired properties;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



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| |  |  | we may be unable to acquire a desired property because of competition from other real estate investors with more available capital, including other real estate
operating companies, real estate investment trusts and investment funds;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | competition from other potential acquirers may significantly increase the purchase price, even if we are able to acquire a desired property;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | agreements for the acquisition of office properties are typically subject to customary conditions to closing, including satisfactory completion of due diligence
investigations, and we may spend significant time and money on a potential acquisition we eventually decide not to pursue;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | market conditions may result in higher than expected vacancy rates and lower than expected rental rates; and
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | we may acquire properties subject to liabilities without any recourse, or with only limited recourse, for unknown liabilities such as clean-up of undisclosed
environmental contamination, claims by tenants, vendors or other persons dealing with the former owners of the properties and claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the
properties.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If we cannot complete property acquisitions on favorable terms, or operate acquired properties to meet our
expectations, our revenue and profitability could be adversely impacted, causing a significant downturn in our financial condition, results of operations, trading price of our common stock, and impairing our ability to satisfy our debt service
obligations.

Our real estate acquisitions may result in disruptions to our business as a result of the burden in integrating operations placed on our
management.

Our business strategy includes acquisitions and investments in real estate on an ongoing basis. These acquisitions may
cause disruptions in our operations and divert managements attention from day-to-day operations, which could impair our relationships with our current tenants and employees. In addition, if we acquire real estate by acquiring another entity,
we may be unable to effectively integrate the operations and personnel of the acquired business. In addition, we may be unable to train, retain and motivate any key personnel from the acquired business. If our management is unable to effectively
implement our acquisition strategy, we may experience disruptions to our business.

We may be unable to successfully complete and operate properties
under development, which would impair our financial condition and operating results.

A significant part of our business is devoted to
the development of office, mixed-use and other properties, including the redevelopment of core plus and value-add properties. Our development, construction and redevelopment activities involve the following significant risks:



| |  |  | we may be unable to obtain construction or redevelopment financing on favorable terms or at all;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | if we finance development projects through construction loans, we may be unable to obtain permanent financing at all or on advantageous terms;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may not complete development projects on schedule or within budgeted amounts;
| | - |  | --------------------------------------------------------------------------------



| |  |  | we may underestimate the expected costs and time necessary to achieve the desired result with a redevelopment project;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | we may discover structural, environmental or other feasibility issues with properties acquired as redevelopment projects following our acquisition, which may render
the redevelopment as planned not possible;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may encounter delays or refusals in obtaining all necessary zoning, land use, building, occupancy, and other required governmental permits and authorizations;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | occupancy rates and rents at newly developed or renovated properties may fluctuate depending on a number of factors, including market and economic conditions, and
may result in our investment not being profitable;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | adverse weather that damages the project or causes delays;
| | - |  | ----------------------------------------------------------



| |  |  | changes to the plans or specifications;
| | - |  | ---------------------------------------



| |  |  | shortages of materials and skilled labor;
| | - |  | -----------------------------------------



| |  |  | increases in material and labor costs;
| | - |  | --------------------------------------



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| |  |  | shortages of qualified employees;
| | - |  | ---------------------------------



| |  |  | fire, flooding and other natural disasters; and
| | - |  | -----------------------------------------------



| |  |  | inability to sell or close on the sale of condominium units at Murano.
| | - |  | ----------------------------------------------------------------------

If we are not successful in our property development initiatives, it could adversely impact our revenue and profitability, causing a significant downturn
in our business, including our financial condition, results of operations, trading price of our common stock and impairing our ability to satisfy our debt service obligations. Further, our Murano project is the development of a high-rise residential
condominium building. Historically, our development and property management activities have centered on office properties. During 2007 and 2008 the residential housing market has experienced a decline and we could experience difficulties in selling
or closing on the sale of condominium units at Murano.

We face significant competition, which may decrease or prevent increases of the occupancy and
rental rates of our properties.

We face significant competition from other developers, managers and owners of office and mixed-use real
estate, many of which own properties similar to ours in the same regional markets in which our properties are located. We also compete with other diversified real estate companies and companies focused solely on offering property investment
management and brokerage services. A number of our competitors are larger and better able to take advantage of efficiencies created by size, and have better financial resources, or increased access to capital at lower costs, and may be better known
in regional markets in which we compete. Our smaller size as compared to some of our competition may increase our susceptibility to economic downturns and pressures on rents. Our failure to compete successfully in our industry would materially
affect our business prospects.

We may be unable to renew leases, lease vacant space or re-lease space as leases expire resulting in increased vacancy
rates, lower revenue and an adverse effect on our operating results.

As of September 30, 2008, leases representing 3.0% and 5.1%
of the rentable square feet of the office and mixed-use properties in which we hold an ownership interest will expire in 2008 and 2009, respectively. Further, an additional 13.3% of the square feet of these properties was available for lease as of
September 30, 2008. Rental rates on existing leases above the current market rate at some of the properties in our office and mixed-use portfolio may require us to renew or re-lease some expiring leases at lower rates. If the rental rates for
our properties decrease, our existing tenants do not renew their leases or we do not re-lease a significant portion of our available space and space for which leases will expire, our revenue and profitability could be adversely impacted, causing a
significant downturn in our financial condition, results of operations, cash flow, and the trading price of our common stock and impairing our ability to satisfy our debt service obligations. Current economic and real estate market conditions have
resulted in depressed leasing activity recently as a result of tenant unwillingness to make long term leasing commitments given recent financial markets upheaval, and it is unclear how long this may continue to prevail. A significant amount of space
at our Two Commerce Square property has historically been leased to Conrail. Approximately half or 375,000 square feet of this lease expired in June 2008 and the remaining half expires in June 2009. Conrail currently subleases substantially all of
its space to a number of subtenants. While we have entered into agreements with many of the subtenants for direct leases once their sublease term expires, the rental rates are lower than paid by the current tenant. As a result, we currently expect
our aggregate revenues from this property will be lower following the expiration of the Conrail lease in 2008 and 2009. We have entered into direct leases for 623,000 square feet of the Conrail space. The lease terms range from 5 months to 145
months. If we are unable to lease the remaining 130,000 square feet of the space currently leased by Conrail in Two Commerce Square prior to the expiration of the lease and assuming all subtenants to the Conrail lease exercise no renewal options and
exercise all early termination options, our rental revenue (excluding tenant reimbursements revenue) computed in accordance with accounting principles generally accepted in the United States of America (GAAP) would decrease by $1.7
million in 2008 as compared to 2007, $1.9 million in 2009 as compared to 2008, and $2.2 million in 2010 as compared to 2009.

Our growth depends on
external sources of capital, some of which are outside of our control. If we are unable to access capital from external sources, we may not be able to implement our business strategy.

Our business strategy requires us to rely significantly on third-party sources to fund our capital needs. We may not be able to obtain debt or equity on
favorable terms or at all. During the second half of 2007 and the first three quarters of 2008, we have experienced an increasing tightening of the credit markets, and we may experience difficulty refinancing existing debt or obtaining new debt to
complete acquisitions. Any additional debt we incur will increase our leverage. Any issuance of equity by our company will cause dilution to our existing stockholders, and could have a negative impact on our stock price. Our access to third-party
sources of capital depends, in part, on:



| |  |  | our current debt levels, which were $390.8 million of consolidated debt and $2.2 billion of unconsolidated debt as of September 30, 2008;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | our current cash flow from operating activities, which was $4.0 million for the nine months ended September 30, 2008;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | our current and expected future earnings;
| | - |  | -----------------------------------------



| |  |  | the markets perception of our growth potential;
| | - |  | ------------------------------------------------



| |  |  | the market price per share of our common stock;
| | - |  | -----------------------------------------------



| |  |  | the perception of the value of an investment in our common stock; and
| | - |  | ---------------------------------------------------------------------



| |  |  | general market conditions.
| | - |  | --------------------------

If we
cannot obtain capital from third-party sources, we may not be able to acquire or develop properties when strategic opportunities exist, satisfy our debt service obligations or continue to fund operations.

As a result of the limited time during which we have to perform due diligence of many of our acquired properties, we may become subject to significant unexpected
liabilities and our properties may not meet projections.

When we enter into an agreement to acquire a property or portfolio of
properties, we often have limited time to complete our due diligence prior to acquiring the property. To the extent we underestimate or fail to investigate or identify risks and liabilities associated with the properties we acquire, we may incur
unexpected liabilities or the property may fail to perform as we expected. If we do not accurately assess the liabilities associated with properties prior to their acquisition, we may pay a purchase price that exceeds the current fair value of the
net identifiable assets of the acquired property. As a result, intangible assets would be required to be recorded, which could result in significant accounting charges in future periods. These charges, in addition to the financial impact of
significant liabilities that we may assume, could adversely impact our revenue and profitability, causing a significant downturn in our financial condition, results of operations, trading price of our common stock and impairing our ability to
satisfy our debt service obligations.

Our efforts to expand our geographic presence and diversify into other regional real estate markets may not be
successful, thereby constraining our growth to markets in which we currently operate.

We intend to expand our business to new
geographic regions where we expect the development, ownership and management of property to result in favorable risk-adjusted investment returns. In order for us to achieve economies of scale, we generally target ownership of 500,000 or more
rentable square feet in a market. It may be difficult for us to achieve this level of ownership and our initial entry into a particular market may result in higher administrative expenses for us initially. Presently, we do not possess the same level
of familiarity with the development, ownership and management of properties in locations other than the West Coast, Southwest and Mid-Atlantic regions in the United States, which could adversely affect our ability to develop properties outside these
regions successfully or at all or to achieve expected performance.

We could incur significant costs related to government regulation and private
litigation over environmental matters, including with respect to clean-up of contaminated properties and litigation from any harm caused by environmental hazards on our properties.

Under various federal, state and local environmental laws and regulations, a current or previous owner, manager or tenant of real estate may be required
to investigate and clean up hazardous or toxic substances at the property, and may be held liable to a government entity or to third parties for property damage and for investigation, clean-up and monitoring costs incurred by the parties in
connection with the actual or threatened contamination. These laws typically impose clean-up responsibility and liability without regard to fault, or whether or not the owner, operator or tenant knew of or caused the presence of the contamination.
The liability under the laws may be joint and several for the full amount of the investigation, clean-up and monitoring costs incurred or to be incurred or actions to be undertaken, although a party held jointly and severally liable may obtain
contributions from other identified, solvent, responsible parties of their fair share toward these costs to the extent such contributions are possible to obtain. These costs may be substantial, and may exceed the value of the property. The presence
of contamination, or the failure to properly remediate contamination on a property may limit the ability of the owner, operator or tenant to sell or rent that property or to borrow using the property as collateral, and may cause our investment in
that property to decline in value.

Federal regulations require building owners and those exercising control over a buildings
management to identify and warn of, by signs and labels, potential hazards posed by workplace exposure to installed asbestos-containing materials and potentially asbestos-containing materials in their building. The regulations also set forth
employee training, record keeping and due diligence requirements pertaining to asbestos-containing materials and potentially asbestos-containing materials. Significant fines can be assessed for violation of these regulations. Building owners and
managers may be subject to an increased risk of personal injury lawsuits by workers and others exposed to asbestos-containing materials and potentially asbestos-containing materials as a result of these regulations. The regulations may affect the
value of a building incorporating asbestos-containing materials or potentially asbestos-containing materials that we own or manage.



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We are aware of potentially environmentally hazardous or toxic materials at three of our properties in
which we hold an ownership interest. Prior to commencing construction at our Murano development property, we engaged in remediation efforts as a result of a gasoline spill that occurred on the premises in April 2002, due to an accident caused by the
former tenants agent. All soil remediation work has been completed. We are operating under a regulatory requirement to monitor the ground water to achieve four consecutive quarters of acceptable sample results.

With respect to asbestos-containing materials present at our City National Plaza and Brookhollow properties, these materials have been removed or abated
from certain tenant and common areas of the building structures. We continue to remove or abate asbestos-containing materials from various areas of the building structures and as of September 30, 2008, have accrued $2.1 million and $0.2 million
for estimated future costs of such removal or abatement at City National Plaza and Brookhollow, respectively.

Federal, state and local
laws and regulations also govern the removal, encapsulation, disturbance, handling and/or disposal of asbestos-containing materials and potentially asbestos-containing materials. These laws may impose liability for improper handling or a release to
the environment of asbestos-containing materials and potentially asbestos-containing materials. In addition, fines may be imposed on owners or managers of real properties for personal injury or improper work exposure associated with
asbestos-containing materials and potentially asbestos-containing materials.

Tax indemnification obligations that may arise in the event we or our
Operating Partnership sell an interest in either of two of our properties could limit our operating flexibility.

We and our Operating
Partnership have agreed to indemnify Mr. Thomas against adverse direct and indirect tax consequences in the event that our Operating Partnership or the underlying property joint venture directly or indirectly sells, exchanges or otherwise
disposes (including by way of merger, sale of assets or otherwise) of any portion of its interests, in a taxable transaction, in either One Commerce Square or Two Commerce Square. These two properties represented 26.9% of annualized rent for
properties in which we hold an ownership interest as of September 30, 2008. During the quarter ended September 30, 2008, we purchased the remaining 11% interest owned by affiliates of Mr. Thomas in Two Commerce Square, which extended the
indemnification period to October 13, 2013, which may be further extended to October 13, 2016 provided Mr. Thomas and his controlled entities collectively retain at least 50% of the Operating Partnership units received by them in
connection with our formation transactions at the time of our initial public offering. We had previously acquired the remaining 11% interest owned by affiliates of Mr. Thomas in One Commerce Square.

We have also agreed to use commercially reasonable efforts to make approximately $210 million of debt available to be guaranteed by entities controlled
by Mr. Thomas, by Mr. Fox, a non-employee member of our board of directors, and by Mr. Gilchrist, an individual formerly affiliated with Maguire Thomas Partners. We agreed to make this debt available for guarantee in order to assist
Mr. Thomas and these other persons in preserving their tax position after their contributions at the time of our initial public offering.

Risks
Related to the Real Estate Industry

The current economic environment for real estate companies and credit crisis may significantly adversely impact
our results of operations and business prospects.

The success of our business and profitability of our operations are dependent on
continued investment in the real estate markets and access to capital and debt financing. A long term crisis of confidence in real estate investing and lack of available credit for acquisitions would be likely to constrain our business growth. As
part of our business goals, we intend to grow our properties portfolio with strategic acquisitions of core properties at advantageous prices, and core plus and value added properties where we believe we can bring necessary expertise to bear to
increase property values. In order to pursue acquisitions, we need access to equity capital and also property-level debt financing. Current disruptions in the financial markets, including the bankruptcy and restructuring of major financial
institutions, may adversely impact our ability to refinance existing debt and the availability and cost of credit in the near future. Presently, access to capital and debt financing options are severely restricted and it is uncertain how long
current economic circumstances may last. Any consideration of sales of existing properties or portfolio interests may be tempered by the depressed nature of property values at present. Our ability to make scheduled payments or to refinance our
obligations with respect to indebtedness depends on our operating and financial performance, which in turn is subject to prevailing economic conditions. There can be no assurances that government responses to the disruptions in the financial markets
will restore investor confidence, stabilize the markets or increase liquidity and the availability of credit.



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Illiquidity of real estate investments and the susceptibility of the real estate industry to economic conditions could
significantly impede our ability to respond to adverse changes in the performance of our properties.

Our ability to achieve desired and
projected results for growth of our business depends on our ability to generate revenues in excess of expenses, and make scheduled principal payments on debt and fund capital expenditure requirements. Events and conditions generally applicable to
owners and operators of real property that are beyond our control may adversely impact results of operations and the value of our properties. These events include:



| |  |  | vacancies or our inability to rent space on favorable terms;
| | - |  | ------------------------------------------------------------



| |  |  | inability to collect rent from tenants;
| | - |  | ---------------------------------------



| |  |  | difficulty in accessing credit in the present economic environment, in particular for larger mortgage loans;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | inability to finance property development and acquisitions on favorable terms;
| | - |  | ------------------------------------------------------------------------------



| |  |  | increased operating costs, including real estate taxes, insurance premiums and utilities;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | local oversupply, increased competition or reduction in demand for office space;
| | - |  | --------------------------------------------------------------------------------



| |  |  | costs of complying with changes in governmental regulations;
| | - |  | ------------------------------------------------------------



| |  |  | the relative illiquidity of real estate investments;
| | - |  | ----------------------------------------------------



| |  |  | changing submarket demographics; and
| | - |  | ------------------------------------



| |  |  | the significant transaction costs related to property sales, including a high transfer tax rate in the City of Philadelphia.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------

In addition, periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or the public perception that any of
these events may occur, could result in a general decline in rents or an increased incidence of defaults under existing leases. If any of these events were to happen, our revenue and profitability could be impaired, causing a significant downturn in
our financial condition, results of operations, cash flow, and trading price of our common stock and our ability to satisfy our debt service obligations could be impaired.

Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make unintended expenditures that adversely impact our financial condition.

All of our commercial properties are required to comply with the Americans with Disabilities Act, or ADA. The ADA has separate compliance requirements for
public accommodations and commercial facilities, but generally requires that buildings be made accessible to people with disabilities. The obligation to make readily achievable accommodations is an ongoing one, and we assess
our properties and make alterations as appropriate. Compliance with the ADA requirements could require removal of access barriers. Non-compliance could result in imposition of fines by the U.S. government or an award of damages to private litigants,
or both. Typically, we are responsible for changes to a building structure that are required by the ADA, which can be costly. In addition, we are required to operate our properties in compliance with fire and safety regulations, building codes and
other land use regulations. We may be required to make substantial capital expenditures to comply with these requirements thereby limiting the funds available to operate, develop and redevelop our properties and acquire additional properties. As a
result, these expenditures could negatively impact our revenue and profitability.

Potential losses may not be covered by insurance and may result in
our inability to repair damaged properties and we could lose invested capital.

We carry comprehensive liability, fire, flood, extended
coverage, wind, earthquake, terrorism, pollution legal liability, business interruption and rental loss insurance under our blanket policy covering all of the properties which we own an interest in or manage for third parties, including our
development properties (although we carry only liability insurance for the CalEPA headquarters building under our blanket policy because the tenant has the right to provide all other forms of coverage it deems necessary, and it has elected to do
so). We believe the policy specifications and insured limits are appropriate and adequate given the relative risk of loss, the cost of the coverage and industry practice. We carry earthquake insurance on our properties located in seismically active
areas, which includes our Southern California properties, and terrorism insurance on all of our properties. Our terrorism insurance is subject to exclusions for loss or damage caused by nuclear substances, pollutants, contaminants, and biological
and chemical weapons as more specifically excluded under the actual terrorism policies. Some of our policies, like those covering losses due to earthquakes and terrorism, are subject to limitations involving deductibles and policy limits which may
not be sufficient to cover losses. We either own or have interests in a number of properties in Southern California, an area especially prone to earthquakes.



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Under their leases, tenants are generally required to indemnify us from liabilities resulting from injury
to persons, air, water, land or property, on or off the premises due to activities conducted by them on our properties. There is an exception for claims arising from the negligence or intentional misconduct by us or our agents. Additionally, tenants
are generally required, with the exception of governmental entities and other entities that are self-insured, to obtain and keep in force during the term of the lease liability and property damage insurance policies issued by companies holding
ratings at a minimum level at their own expense.

Although we have not experienced such a loss to date, if we experience a loss that is
uninsured or that exceeds policy limits, we could lose the capital invested in the damaged property as well as the anticipated future cash flows from that property, including lost revenue from unpaid rent from tenants. In addition, if the damaged
property is subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if this property was irreparably damaged. In the event of a significant loss at one or more of the properties covered by the blanket policy, the
remaining insurance under our policy, if any, could be insufficient to adequately insure our remaining properties. In this event, securing additional insurance, if possible, could be significantly more expensive than our current policy.

Risks Related to Our Organization and Structure

Our senior
management has existing conflicts of interest with us and our public stockholders that could result in decisions adverse to our company.

As of September 30, 2008, Mr. Thomas owns or controls a significant interest in our Operating Partnership consisting of 14,496,666 units, or a 37.1% interest (including units beneficially owned by other senior executive officers)
as of such date. In addition, our senior executive officers, excluding Mr. Thomas, collectively hold an interest in Operating Partnership units and incentive units (vested and unvested) aggregating a 4.7% interest in our company.

The various terms of these equity and incentive interests could create conflicts of interest with our public stockholders. Members of executive
management could be required to make decisions that could have different implications for our Operating Partnership and for us, including:



| |  |  | potential acquisitions or sales of properties;
| | - |  | ----------------------------------------------



| |  |  | the issuance or disposition of shares of our common stock or units in our Operating Partnership; and
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | the payment of dividends by us.
| | - |  | -------------------------------

For
example, an acquisition in exchange for the issuance by our Operating Partnership of additional Operating Partnership units would dilute the interests of members of our management team as limited partners in our Operating Partnership. Dispositions
could trigger our tax indemnification obligations with respect to Mr. Thomas. Dividends paid by us to our public stockholders decrease our funds available to reinvest in our business.

We have a holding company structure and rely upon funds received from our Operating Partnership to pay liabilities.

We are a holding company. Our primary asset is our general partnership interest in our Operating Partnership. We have no independent means of generating
revenues. To the extent we require funds to pay taxes or other liabilities incurred by us, to pay dividends or for any other purpose, we must rely on funds received from our Operating Partnership. If our Operating Partnership should become unable to
distribute funds to us, we would be unable to continue operations after a short period. Most of the properties owned by our subsidiaries and joint ventures are encumbered by loans that restrict the distribution of funds to our Operating Partnership.
The loans generally contain lockbox arrangements, reserve requirements, financial covenants and other restrictions and provisions that prior to an event of default may prevent the distribution of funds from the subsidiaries who own these properties
to our Operating Partnership. In the event of a default under these loans, the defaulting subsidiary or joint venture would be prohibited from distributing cash to our Operating Partnership. As a result, our Operating Partnership may be unable to
distribute funds to us and we may be unable to use funds from one property to support the operation of another property. As we acquire new properties and refinance our existing properties, we may finance these properties with new loans that contain
similar provisions. Some of the loans to our subsidiaries and joint ventures may contain provisions that restrict us from loaning funds to our subsidiaries or joint ventures. If we are permitted to loan funds to our subsidiaries or joint ventures,
our loans generally will be subordinated to the existing debt on our properties.

Mr. Thomas has a significant vote in certain matters as a result
of his control of 100% of our limited voting stock.

Each entity that received Operating Partnership units in our formation transactions
received shares of our limited voting stock that are paired with units in our Operating Partnership on a one-for-one basis. All of these entities are directly or indirectly controlled by Mr. Thomas, and, as a result, Mr. Thomas controls
100% of our outstanding limited voting stock, or 38.4% of our outstanding voting stock (including outstanding shares of common stock owned by Mr. Thomas and his affiliates) as of September 30, 2008.



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These limited voting shares are entitled to vote in the election of directors, for the approval of certain extraordinary transactions including any merger or
sale of the company, amendments to our certificate of incorporation and any other matter required to be submitted to a separate class vote under Delaware law. Mr. Thomas may have interests that differ from that of our public stockholders,
including by reason of his interests held in Operating Partnership units, and may accordingly vote as a stockholder in ways that may not be consistent with the interests of our public stockholders. This significant voting influence over certain
matters may have the effect of delaying, preventing or deterring a change of control of our company, or could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company.

Our success depends on key personnel, the loss of whom could impair our ability to operate our business successfully.

We depend on the efforts of key personnel, particularly Mr. Thomas, our Chairman, Chief Executive Officer, and President. Among the reasons that
Mr. Thomas is important to our success is that he has an industry reputation developed over more than 25 years in the real estate industry that attracts business and investment opportunities and assists us in negotiations with lenders, existing
and potential tenants and industry personnel. If we lost his services, our relationships with these parties could diminish. Mr. Thomas is 71 and, although he has informed us that he does not currently plan to retire, we cannot be certain how
long he will continue working on a full-time basis.

Many of our other senior executives also have significant real estate industry
experience. Mr. Scott has extensive development and management experience on several large-scale projects, including the development, construction and management of One Commerce Square and Two Commerce Square. Mr. Sischo and Mr. Scott
are jointly responsible for oversight of our relationship with CalSTRS. Mr. Sischo is responsible for our acquisition efforts. Mr. Ricci has been extensively involved in the development of large, mixed-use and commercial projects.
Ms. Laing has served as chief financial officer of two publicly-traded real estate investment trusts. While we believe that we could find acceptable replacements for these executives, the loss of their services could materially and adversely
affect our operations because of diminished relationships with lenders, existing and prospective tenants and industry personnel. A departure of either Mr. Thomas or Mr. Sischo could also have adverse effects on our joint venture
relationship with CalSTRS, including the possible sale of our joint venture interest to CalSTRS at 97% of fair value.

Some provisions of our
certificate of incorporation and bylaws may deter takeover attempts, which may limit the opportunity of our stockholders to sell their shares at a favorable price.

Some of the provisions of our certificate of incorporation and bylaws could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our stockholders by providing them with the
opportunity to possibly sell their shares at a premium over the then market price. Our certificate of incorporation and bylaws contain provisions including the following:



| |  |  | vacancies on our board of directors may only be filled by the remaining directors;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | only the board of directors can change the number of directors;
| | - |  | ---------------------------------------------------------------



| |  |  | there is no provision for cumulative voting for directors;
| | - |  | ----------------------------------------------------------



| |  |  | directors may only be removed for cause; and
| | - |  | --------------------------------------------



| |  |  | our stockholders are not permitted to act by written consent.
| | - |  | -------------------------------------------------------------

In addition, our certificate of incorporation authorizes the board of directors to issue up to 25,000,000 shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which will be
determined at the time of issuance by our board of directors without further action by the stockholders. These terms may include voting rights, including the right to vote as a series on particular matters, preferences as to dividends and
liquidation, conversion rights, redemption rights and sinking fund provisions. The issuance of any preferred stock could diminish the rights of holders of our common stock, and therefore could reduce the value of our common stock. In addition,
specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of our board of directors to issue preferred stock could make it more difficult, delay,
discourage, prevent or make it more costly to acquire or effect a change in control, thereby preserving the current stockholders control of our company.

Finally, we are also subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits a Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that the stockholder became an interested stockholder.

The
provisions of our certificate of incorporation and bylaws, described above, as well as Section 203 of the Delaware General Corporation Law, could discourage potential acquisition proposals, delay or prevent a change of control and prevent
changes in our management, even if these events would be in the best interests of our stockholders.



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We could authorize and issue stock without stockholder approval, which could cause our stock price to decline and
dilute the holdings of our existing stockholders.

Our certificate of incorporation authorizes our board of directors to issue
authorized but unissued shares of our common stock or preferred stock and to classify or reclassify any unissued shares of our common stock or preferred stock and to set the preferences, rights and other terms of the classified or unclassified
shares. Although our board of directors has no intention at the present time, it could establish a series of preferred stock that could, depending on the terms of the series, delay, defer or prevent a transaction or a change of control that might
involve a premium price for our common stock or otherwise be in the best interest of our stockholders.



|ITEM 6. | EXHIBITS
|------- | --------



|(a) | Exhibits
|--- | --------



|     |  |                                                                                                    
|---- |  | ---------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|     | 
|31.2 |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.1 |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.2 |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

Dated: November 10, 2008



THOMAS PROPERTIES GROUP, INC.By:

/s/ James A. ThomasJames A. Thomas Chief Executive OfficerBy:

/s/ Diana M. LaingDiana M. Laing Chief Financial Officer




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