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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, 2005.



| ̈ | 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 an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ̈No  x



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange 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 11, 2005
|Common Stock, $.01 par value per share |  | 14,347,465                      



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##### Table of Contents

THOMAS PROPERTIES GROUP, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2005

TABLE OF CONTENTS



|                              |  |                                                                                                                            |  |         
|----------------------------- |  | -------------------------------------------------------------------------------------------------------------------------- |  | --------
|                              |  |                                                                                                                            |  | PAGE NO.
|PART I. FINANCIAL INFORMATION |  |                                                                                                                           
|                              |  |                                                                                                                           
|ITEM 1.                       |  | Consolidated/Combined Financial Statements of Thomas Properties Group, Inc. and Thomas Properties Group, Inc. Predecessor  |  | 1       
|                              |  |                                                                                                                           
|                              |  | Consolidated Balance Sheets as of September 30, 2005 (unaudited) and December 31, 2004                                     |  | 1       
|                              |  |                                                                                                                           
|                              |  | Consolidated/Combined Statements of Operations for the three and nine months ended September 30, 2005 and 2004 (unaudited) |  | 2       
|                              |  |                                                                                                                           
|                              |  | Consolidated/Combined Statements of Cash Flows for the nine months ended September 30, 2005 and 2004 (unaudited)           |  | 3       
|                              |  |                                                                                                                           
|                              |  | Notes to Consolidated/Combined Financial Statements (unaudited)                                                            |  | 4       
|                              |  |                                                                                                                           
|ITEM 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                      |  | 17      
|                              |  |                                                                                                                           
|ITEM 3.                       |  | Quantitative and Qualitative Disclosure about Market Risk                                                                  |  | 28      
|                              |  |                                                                                                                           
|ITEM 4.                       |  | Controls and Procedures                                                                                                    |  | 29      
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                           
|                              |  |                                                                                                                           
|ITEM 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                |  | 30      
|                              |  |                                                                                                                           
|ITEM 6.                       |  | Exhibits                                                                                                                   |  | 31      
|                              | 
|Signatures                    |  | 32                                                                                                                        



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##### Table of Contents

|PART  I.  FINANCIAL | INFORMATION
|------------------- | -----------



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



THOMAS PROPERTIES GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



|                                                                                                                                                                                 |  |                    |          |   |                   |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | -------- | - | ----------------- | - | ------- | -
|                                                                                                                                                                                 |  | September 30, 2005 |          |   | December 31, 2004 |  
|                                                                                                                                                                                 |  | (Unaudited)        |          |   |                   |  
|ASSETS                                                                                                                                                                           |  |                    |          |   |                   |   |         |  
|Investments in real estate:                                                                                                                                                      |  |                    |          |   |                   |   |         |  
|Land and improvements                                                                                                                                                            |  | $                  | 62,527   |   |                   | $ | 60,882  |  
|Buildings and improvements                                                                                                                                                       |  |                    | 252,665  |   |                   |   | 252,009 |  
|Tenant improvements                                                                                                                                                              |  |                    | 66,126   |   |                   |   | 64,638  |  
|                                                                                                                                                                                 |  |                    |          |   |                   |   |         |  
|                                                                                                                                                                                 |  |                    | 381,318  |   |                   |   | 377,529 |  
|Less accumulated depreciation                                                                                                                                                    |  |                    | (102,067 | ) |                   |   | (95,044 | )
|                                                                                                                                                                                 |  |                    |          |   |                   |   |         |  
|                                                                                                                                                                                 |  |                    | 279,251  |   |                   |   | 282,485 |  
|Investments in unconsolidated real estate entities                                                                                                                               |  |                    | 46,843   |   |                   |   | 31,624  |  
|Cash and cash equivalents                                                                                                                                                        |  |                    | 28,818   |   |                   |   | 56,506  |  
|Restricted cash                                                                                                                                                                  |  |                    | 13,893   |   |                   |   | 12,949  |  
|Short-term investments                                                                                                                                                           |  |                    |         |   |                   |   | 14,000  |  
|Rents and other receivables, net                                                                                                                                                 |  |                    | 1,957    |   |                   |   | 2,731   |  
|Receivablesunconsolidated real estate entities                                                                                                                                  |  |                    | 899      |   |                   |   | 381     |  
|Deferred rents                                                                                                                                                                   |  |                    | 24,344   |   |                   |   | 28,453  |  
|Deferred leasing and loan costs, net                                                                                                                                             |  |                    | 15,052   |   |                   |   | 16,871  |  
|Deferred tax asset                                                                                                                                                               |  |                    | 37,327   |   |                   |   | 40,138  |  
|Other assets, net                                                                                                                                                                |  |                    | 4,653    |   |                   |   | 5,464   |  
|                                                                                                                                                                                 |  |                    |          |   |                   |   |         |  
|Total assets                                                                                                                                                                     |  | $                  | 453,037  |   |                   | $ | 491,602 |  
|                                                                                                                                                                                 |  |                    |          |   |                   |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                             |  |                    |          |   |                   |   |         |  
|Liabilities:                                                                                                                                                                     |  |                    |          |   |                   |   |         |  
|Mortgage loans                                                                                                                                                                   |  | $                  | 199,162  |   |                   | $ | 207,931 |  
|Other secured loans                                                                                                                                                              |  |                    | 48,297   |   |                   |   | 87,959  |  
|Accounts payable and other liabilities, net                                                                                                                                      |  |                    | 11,245   |   |                   |   | 9,177   |  
|Dividends and distributions payable                                                                                                                                              |  |                    | 1,905    |   |                   |   |        |  
|Due to affiliate                                                                                                                                                                 |  |                    |         |   |                   |   | 1,852   |  
|Prepaid rent                                                                                                                                                                     |  |                    | 2,900    |   |                   |   | 841     |  
|                                                                                                                                                                                 |  |                    |          |   |                   |   |         |  
|Total liabilities                                                                                                                                                                |  |                    | 263,509  |   |                   |   | 307,760 |  
|                                                                                                                                                                                 |  |                    |          |   |                   |   |         |  
|Minority interests:                                                                                                                                                              |  |                    |          |   |                   |   |         |  
|Unitholders in the Operating Partnership                                                                                                                                         |  |                    | 80,906   |   |                   |   | 76,458  |  
|Minority interests in consolidated real estate entities                                                                                                                          |  |                    | 1,533    |   |                   |   | 1,451   |  
|                                                                                                                                                                                 |  |                    |          |   |                   |   |         |  
|Total minority interests                                                                                                                                                         |  |                    | 82,439   |   |                   |   | 77,909  |  
|                                                                                                                                                                                 |  |                    |          |   |                   |   |         |  
|Commitments and contingencies                                                                                                                                                    |  |                    |          |   |                   |   |         |  
|Stockholders equity:                                                                                                                                                            |  |                    |          |   |                   |   |         |  
|Preferred stock, $.01 par value, 25,000,000 shares authorized, none issued or outstanding as of September 30, 2005 and December 31,
2004                                         |  |                    |         |   |                   |   |        |  
|Common stock, $.01 par value, 75,000,000 shares authorized, 14,347,465 and 14,342,841 shares issued and outstanding as of September 30,
2005 and December 31, 2004, respectively |  |                    | 143      |   |                   |   | 143     |  
|Limited voting stock, $.01 par value, 20,000,000 shares authorized, 16,666,666 shares issued and outstanding as of September 30, 2005 and
December 31, 2004                      |  |                    | 167      |   |                   |   | 167     |  
|Additional paid-in capital                                                                                                                                                       |  |                    | 106,714  |   |                   |   | 106,673 |  
|Retained earnings (deficit)                                                                                                                                                      |  |                    | 382      |   |                   |   | (581    | )
|Unearned compensation, net                                                                                                                                                       |  |                    | (317     | ) |                   |   | (469    | )
|                                                                                                                                                                                 |  |                    |          |   |                   |   |         |  
|Total stockholders equity                                                                                                                                                       |  |                    | 107,089  |   |                   |   | 105,933 |  
|                                                                                                                                                                                 |  |                    |          |   |                   |   |         |  
|Total liabilities and stockholders equity                                                                                                                                       |  | $                  | 453,037  |   |                   | $ | 491,602 |  
|                                                                                                                                                                                 |  |                    |          |   |                   |   |         |  



See accompanying notes
to consolidated and combined financial statements.



1



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THOMAS PROPERTIES GROUP, INC. AND THOMAS PROPERTIES GROUP, INC.

PREDECESSOR

CONSOLIDATED/COMBINED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)



|                                                                                                                                                                                                        |  |                                 |            |   |                                |   |        |            |  |   |                 |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ---------- | - | ------------------------------ | - | ------ | ---------- |  | - | --------------- | - |  | - | ------ | -
|                                                                                                                                                                                                        |  | TheCompany                      |            |   | TPGIPredecessor                |   |        | TheCompany |  |   | TPGIPredecessor |  
|                                                                                                                                                                                                        |  | Three Months EndedSeptember 30, |            |   | Nine Months EndedSeptember 30, |  
|                                                                                                                                                                                                        |  | 2005                            |            |   | 2004                           |   |        | 2005       |  |   | 2004            |  
|Revenues:                                                                                                                                                                                               |  |                                 |            |   |                                |   |        |            |  |   |                 |   |  |   |        |  
|Rental                                                                                                                                                                                                  |  | $                               | 7,676      |   |                                | $ | 8,317  |            |  | $ | 24,229          |   |  | $ | 19,526 |  
|Tenant reimbursements                                                                                                                                                                                   |  |                                 | 4,704      |   |                                |   | 4,399  |            |  |   | 14,286          |   |  |   | 10,090 |  
|Parking and other                                                                                                                                                                                       |  |                                 | 870        |   |                                |   | 935    |            |  |   | 3,266           |   |  |   | 2,071  |  
|Investment advisory, management, leasing, and development services                                                                                                                                      |  |                                 | 1,148      |   |                                |   | 2,413  |            |  |   | 3,601           |   |  |   | 5,023  |  
|Investment advisory, management, leasing, and development servicesunconsolidated/uncombined real estate entities                                                                                       |  |                                 | 2,887      |   |                                |   | 2,343  |            |  |   | 6,124           |   |  |   | 4,394  |  
|                                                                                                                                                                                                        |  |                                 |            |   |                                |   |        |            |  |   |                 |   |  |   |        |  
|Total revenues                                                                                                                                                                                          |  |                                 | 17,285     |   |                                |   | 18,407 |            |  |   | 51,506          |   |  |   | 41,104 |  
|                                                                                                                                                                                                        |  |                                 |            |   |                                |   |        |            |  |   |                 |   |  |   |        |  
|Expenses:                                                                                                                                                                                               |  |                                 |            |   |                                |   |        |            |  |   |                 |   |  |   |        |  
|Rental property operating and maintenance                                                                                                                                                               |  |                                 | 3,265      |   |                                |   | 3,365  |            |  |   | 10,909          |   |  |   | 7,822  |  
|Real estate taxes                                                                                                                                                                                       |  |                                 | 1,451      |   |                                |   | 1,457  |            |  |   | 4,343           |   |  |   | 3,204  |  
|Investment advisory, management, leasing, and development services                                                                                                                                      |  |                                 | 1,554      |   |                                |   | 1,665  |            |  |   | 4,482           |   |  |   | 4,588  |  
|Rentunconsolidated/uncombined real estate entities                                                                                                                                                     |  |                                 | 58         |   |                                |   | 96     |            |  |   | 175             |   |  |   | 217    |  
|Interest                                                                                                                                                                                                |  |                                 | 4,971      |   |                                |   | 6,760  |            |  |   | 16,224          |   |  |   | 17,767 |  
|Depreciation and amortization                                                                                                                                                                           |  |                                 | 2,957      |   |                                |   | 2,674  |            |  |   | 9,384           |   |  |   | 5,862  |  
|General and administrative                                                                                                                                                                              |  |                                 | 3,722      |   |                                |   | 1,459  |            |  |   | 9,649           |   |  |   | 4,161  |  
|                                                                                                                                                                                                        |  |                                 |            |   |                                |   |        |            |  |   |                 |   |  |   |        |  
|Total expenses                                                                                                                                                                                          |  |                                 | 17,978     |   |                                |   | 17,476 |            |  |   | 55,166          |   |  |   | 43,621 |  
|                                                                                                                                                                                                        |  |                                 |            |   |                                |   |        |            |  |   |                 |   |  |   |        |  
|(Loss) income before gain on sale of real estate, gain on purchase of other secured loan, interest income, equity in net loss of
unconsolidated/uncombined real estate entities, and minority interests |  |                                 | (693       | ) |                                |   | 931    |            |  |   | (3,660          | ) |  |   | (2,517 | )
|Gain on sale of real estate                                                                                                                                                                             |  |                                 |           |   |                                |   |       |            |  |   |                |   |  |   | 975    |  
|Gain on purchase of other secured loan                                                                                                                                                                  |  |                                 |           |   |                                |   |       |            |  |   | 25,776          |   |  |   |       |  
|Interest income                                                                                                                                                                                         |  |                                 | 363        |   |                                |   | 17     |            |  |   | 1,084           |   |  |   | 19     |  
|Equity in net loss of unconsolidated/uncombined real estate entities                                                                                                                                    |  |                                 | (5,639     | ) |                                |   | (502   | )          |  |   | (9,377          | ) |  |   | (1,031 | )
|Minority interests  unitholders in the Operating Partnership                                                                                                                                           |  |                                 | 3,270      |   |                                |   |       |            |  |   | (7,386          | ) |  |   |       |  
|Minority interests in consolidated/combined real estate entities                                                                                                                                        |  |                                 | (115       | ) |                                |   | (1,219 | )          |  |   | (82             | ) |  |   | (1,622 | )
|                                                                                                                                                                                                        |  |                                 |            |   |                                |   |        |            |  |   |                 |   |  |   |        |  
|(Loss) income before benefit (provision) for income taxes                                                                                                                                               |  |                                 | (2,814     | ) |                                |   | (773   | )          |  |   | 6,355           |   |  |   | (4,176 | )
|Benefit (provision) for income taxes                                                                                                                                                                    |  |                                 | 1,068      |   |                                |   |       |            |  |   | (2,811          | ) |  |   |       |  
|                                                                                                                                                                                                        |  |                                 |            |   |                                |   |        |            |  |   |                 |   |  |   |        |  
|Net (loss) income                                                                                                                                                                                       |  | $                               | (1,746     | ) |                                | $ | (773   | )          |  | $ | 3,544           |   |  | $ | (4,176 | )
|                                                                                                                                                                                                        |  |                                 |            |   |                                |   |        |            |  |   |                 |   |  |   |        |  
|(Loss) earnings per share  basic and diluted                                                                                                                                                           |  | $                               | (0.12      | ) |                                |   |        |            |  |   | 0.25            |   |  |   |        |  
|                                                                                                                                                                                                        |  |                                 |            |  
|Weighted average common shares outstanding - basic                                                                                                                                                      |  |                                 | 14,303,774 |   |                                |   |        |            |  |   | 14,298,532      |   |  |   |        |  
|Weighted average common shares outstanding - diluted                                                                                                                                                    |  |                                 | 14,303,774 |   |                                |   |        |            |  |   | 14,307,584      |   |  |   |        |  



See accompanying notes
to consolidated and combined financial statements.



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THOMAS PROPERTIES GROUP, INC. AND THOMAS PROPERTIES GROUP, INC.

PREDECESSOR

CONSOLIDATED/COMBINED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                                                                                           |  |                                |         |   |                 |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------ | ------- | - | --------------- | - | ------- | -
|                                                                                                                                           |  | The Company                    |         |   | TPGIPredecessor |  
|                                                                                                                                           |  | Nine Months EndedSeptember 30, |        
|                                                                                                                                           |  | 2005                           |         |   | 2004            |  
|Cash flows from operating activities:                                                                                                      |  |                                |         |   |                 |   |         |  
|Net income (loss)                                                                                                                          |  | $                              | 3,544   |   |                 | $ | (4,176  | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities:                                                   |  |                                |         |   |                 |   |         |  
|Gain on sale of real estate                                                                                                                |  |                                |        |   |                 |   | (975    | )
|Gain on purchase of other secured loan                                                                                                     |  |                                | (25,776 | ) |                 |   |        |  
|Reversal of deferred interest on other secured loan                                                                                        |  |                                | (515    | ) |                 |   |        |  
|Write-off of unamortized deferred loan costs                                                                                               |  |                                | 268     |   |                 |   |        |  
|Equity in net loss of unconsolidated/uncombined real estate entities                                                                       |  |                                | 9,377   |   |                 |   | 1,031   |  
|Deferred rents                                                                                                                             |  |                                | 4,118   |   |                 |   | 3,880   |  
|Depreciation and amortization expense                                                                                                      |  |                                | 9,384   |   |                 |   | 5,862   |  
|Bad debt expense reversal                                                                                                                  |  |                                |        |   |                 |   | (225    | )
|Amortization of loan costs                                                                                                                 |  |                                | 448     |   |                 |   | 293     |  
|Amortization of loan premium                                                                                                               |  |                                | (342    | ) |                 |   |        |  
|Amortization of above and below market leases, net                                                                                         |  |                                | (195    | ) |                 |   |        |  
|Vesting of stock options and restricted stock                                                                                              |  |                                | 389     |   |                 |   |        |  
|Minority interests                                                                                                                         |  |                                | 7,468   |   |                 |   | 1,622   |  
|Distributions from operations of unconsolidated real estate entities                                                                       |  |                                | 1,875   |   |                 |   |        |  
|Changes in assets and liabilities:                                                                                                         |  |                                |         |   |                 |   |         |  
|Rents and other receivables                                                                                                                |  |                                | 774     |   |                 |   | (1,352  | )
|Receivablesunconsolidated/uncombined real estate entities                                                                                 |  |                                | (518    | ) |                 |   | (311    | )
|Deferred leasing costs                                                                                                                     |  |                                | (230    | ) |                 |   | (799    | )
|Deferred tax asset                                                                                                                         |  |                                | 2,811   |   |                 |   |        |  
|Other assets                                                                                                                               |  |                                | 811     |   |                 |   | (7,001  | )
|Deferred interest payable                                                                                                                  |  |                                | 151     |   |                 |   | 2,582   |  
|Accounts payable and other liabilities                                                                                                     |  |                                | 1,006   |   |                 |   | 6,571   |  
|Due to affiliate                                                                                                                           |  |                                | (1,852  | ) |                 |   |        |  
|Prepaid rent                                                                                                                               |  |                                | 2,059   |   |                 |   | (130    | )
|                                                                                                                                           |  |                                |         |   |                 |   |         |  
|Net cash provided by operating activities                                                                                                  |  |                                | 15,055  |   |                 |   | 6,872   |  
|                                                                                                                                           |  |                                |         |   |                 |   |         |  
|Cash flows from investing activities:                                                                                                      |  |                                |         |   |                 |   |         |  
|Expenditures for improvements to real estate                                                                                               |  |                                | (3,569  | ) |                 |   | (2,700  | )
|Proceeds from sale of real estate                                                                                                          |  |                                |        |   |                 |   | 3,321   |  
|Purchases of interests in unconsolidated real estate entities                                                                              |  |                                | (24,075 | ) |                 |   |        |  
|Return of capital from unconsolidated/uncombined real estate entities                                                                      |  |                                | 8,373   |   |                 |   | 2,445   |  
|Contributions to unconsolidated/uncombined real estate entities                                                                            |  |                                | (10,769 | ) |                 |   | (96     | )
|Escrow deposits in connection with the purchase transaction for One Commerce Square                                                        |  |                                |        |   |                 |   | (6,000  | )
|Cash acquired from One Commerce Square investment                                                                                          |  |                                |        |   |                 |   | 2,619   |  
|Proceeds from maturity of short-term investments                                                                                           |  |                                | 14,000  |   |                 |   |        |  
|Change in restricted cash                                                                                                                  |  |                                | (944    | ) |                 |   | (538    | )
|                                                                                                                                           |  |                                |         |   |                 |   |         |  
|Net cash used in investing activities                                                                                                      |  |                                | (16,984 | ) |                 |   | (949    | )
|                                                                                                                                           |  |                                |         |   |                 |   |         |  
|Cash flows from financing activities:                                                                                                      |  |                                |         |   |                 |   |         |  
|Contributions from owners of TPGI Predecessor                                                                                              |  |                                |        |   |                 |   | 3,749   |  
|Distributions to owners of TPGI Predecessor                                                                                                |  |                                |        |   |                 |   | (1,417  | )
|Minority interest distributions                                                                                                            |  |                                |        |   |                 |   | (395    | )
|Payment of dividends to common stockholders and distributions to limited partners of the operating partnership                             |  |                                | (3,810  | ) |                 |   |        |  
|Repayment of One Commerce Square mezzanine loan                                                                                            |  |                                | (9,250  | ) |                 |   |        |  
|Purchase of Two Commerce Square Junior B mezzanine loan                                                                                    |  |                                | (2,500  | ) |                 |   |        |  
|Principal payments of mortgage and other secured loans                                                                                     |  |                                | (10,199 | ) |                 |   | (6,927  | )
|Proceeds from mortgage and other secured loans                                                                                             |  |                                |        |   |                 |   | 93      |  
|                                                                                                                                           |  |                                |         |   |                 |   |         |  
|Net cash used in financing activities                                                                                                      |  |                                | (25,759 | ) |                 |   | (4,897  | )
|                                                                                                                                           |  |                                |         |   |                 |   |         |  
|Net (decrease) increase in cash and cash equivalents                                                                                       |  |                                | (27,688 | ) |                 |   | 1,026   |  
|Cash and cash equivalents at beginning of period                                                                                           |  |                                | 56,506  |   |                 |   | 3,590   |  
|                                                                                                                                           |  |                                |         |   |                 |   |         |  
|Cash and cash equivalents at end of period                                                                                                 |  | $                              | 28,818  |   |                 | $ | 4,616   |  
|Supplemental disclosure of cash flow information:                                                                                          |  |                                |         |   |                 |   |         |  
|Cash paid for interest, net of capitalized interest of $1,206 and $116 for the nine months ended September 30, 2005 and 2004,
respectively |  | $                              | 20,966  |   |                 | $ | 14,655  |  
|Supplemental disclosure of non-cash investing and financing activities:                                                                    |  |                                |         |   |                 |   |         |  
|Consolidation of One Commerce Square:                                                                                                      |  |                                |         |   |                 |   |         |  
|Assets acquired, net of cash                                                                                                               |  | $                              |        |   |                 | $ | 105,101 |  
|Elimination of One Commerce Square investment                                                                                              |  |                                |        |   |                 |   | (9,804  | )
|Liabilities assumed                                                                                                                        |  |                                |        |   |                 |   | (97,916 | )
|                                                                                                                                           |  |                                |         |   |                 |   |         |  
|Cash acquired                                                                                                                              |  | $                              |        |   |                 | $ | (2,619  | )
|                                                                                                                                           |  |                                |         |   |                 |   |         |  
|Accrual for dividends and distributions declared                                                                                           |  | $                              | 1,905   |   |                 | $ |        |  
|Investments in real estate included in accounts payable and other liabilities                                                              |  |                                | 1,257   |   |                 |   |        |  
|Contribution of land from owners                                                                                                           |  |                                |        |   |                 |   | 817     |  



See accompanying notes
to consolidated and combined financial statements.



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THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES AND THOMAS PROPERTIES

GROUP, INC. PREDECESSOR

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(Unaudited)

(Tabular amounts in thousands)



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., or the Operating Partnership.



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 ultimate 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), which consisted of the sale of 14,285,714 shares of common stock at $12.00 per share, resulting in net proceeds of $151.9 million, after underwriting
discounts and expenses of 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). 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 the 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, 2005, we held a 46.3% interest in the Operating Partnership which we consolidated, as we have control over the major decisions of the Operating Partnership.



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THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES AND THOMAS PROPERTIES

GROUP, INC. PREDECESSOR

NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(Unaudited)

(Tabular amounts in thousands)



As of September 30, 2005, we were invested in the following real estate entities:



|                                                  |  |                                                                                     |  |                                                              
|------------------------------------------------- |  | ----------------------------------------------------------------------------------- |  | -------------------------------------------------------------
|Entity                                            |  | Type; Possible Planned Development                                                  |  | Location                                                     
|                                                  |  |                                                                                    
|Consolidated entities:                            |  |                                                                                     |  |                                                              
|One Commerce Square                               |  | High-rise office                                                                    |  | Philadelphia Central Business District, Pennsylvania (PCBD)
|Two Commerce Square                               |  | High-rise office                                                                    |  | PCBD                                                         
|2101 Market Street                                |  | Undeveloped land; Residential/Office/Retail                                         |  | PCBD                                                         
|Four Points Centre                                |  | Undeveloped land; Office/Retail/Research and Development/Hotel                      |  | Austin, Texas                                                
|Campus El Segundo (1)                             |  | Contract to purchase undeveloped land; Office/Retail/Research and Development/Hotel |  | El Segundo, California                                       
|                                                  |  |                                                                                    
|Unconsolidated entities:                          |  |                                                                                     |  |                                                              
|                                                  |  |                                                                                    
|2121 Market Street and Harris Building Associates |  | 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                                
|Valley Square Office Park                         |  | Suburban office                                                                     |  | Blue Bell, 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                                               
|Intercontinental Center                           |  | Suburban office                                                                     |  | Houston, Texas                                               
|                                                  |  |                                                                                    
|TPG/P&A 2101 Market, LLC (2)                      |  | Undeveloped land; Residential/Office/Retail                                         |  | PCBD                                                         



|(1) | In October 2005, we exercised this option to acquire the undeveloped land (see note 8).
|--- | ---------------------------------------------------------------------------------------



|(2) | We hold a 50% interest in this company, which was formed to hold a general partnership interest in the 2101 Market Street development project.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------



2. Summary of Significant Accounting Policies



Principles of Consolidation and Combination



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 owned by Mr. Thomas and entities majority owned by him were contributed to the Operating
Partnership in exchange for Units and 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



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THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES AND THOMAS PROPERTIES

GROUP, INC. PREDECESSOR

NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(Unaudited)

(Tabular amounts in thousands)



Predecessors historical cost basis. 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; therefore, the
combined operations for periods prior to October 13, 2004 represent primarily the operations of TPGI Predecessor. 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, have been accounted for as a purchase, and the excess of the purchase price over the related historical cost basis has been allocated to the assets acquired and liabilities assumed.



The accompanying combined financial statements of TPGI
Predecessor include interests in certain of our properties and the property management, leasing, acquisition and real estate development business of Thomas Development Partners, Ltd.



The real estate entities included in the consolidated and combined financial statements have been consolidated or combined
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 or TPGI
Predecessor 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 and combined financial statements.



The interests
in One Commerce Square (beginning June 1, 2004), Two Commerce Square (beginning October 13, 2004), and Campus El Segundo (for all periods presented), not owned by us or TPGI Predecessor are reflected as minority interest. For periods
subsequent to October 13, 2004, no losses of Two Commerce Square have been allocated to the minority partner, as no further contributions are required from the minority partner. Effective October 13, 2004, Mr. Thomas owns an 11%
ownership interest in each of One Commerce Square and Two Commerce Square. An unrelated party owned a 29% ownership interest in Campus El Segundo through October 2005, at which time we purchased its entire interest for $5,000,000 (see note 8).



Earnings (loss) per share



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



Reclassifications



Certain prior period amounts have been reclassified to conform to the current period presentation.



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.



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THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES AND THOMAS PROPERTIES

GROUP, INC. PREDECESSOR

NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(Unaudited)

(Tabular amounts in thousands)



3. Unconsolidated/Uncombined Real Estate Entities



The unconsolidated/uncombined real estate entities include the entities that
own One Commerce Square (through May 31, 2004, as this entity was considered to be a variable interest entity on June 1, 2004), 2121 Market Street, Harris Building Associates, TPG/CalSTRS, LLC, a joint venture with the California State
Teachers Retirement System (CalSTRS) and TPG/P&A 2101 Market, LLC. TPG/CalSTRS, LLC owns the following properties:



City National Plaza, including the off-site garage, which serves City National Plaza, (purchased January 28, 2003)

Reflections I (purchased October 13, 2004)

Reflections II (purchased October 13, 2004)

Four Falls Corporate Center (purchased March 2, 2005)

Oak Hill Plaza (purchased March 2, 2005)

Walnut Hill Plaza (purchased March 2, 2005)

Valley Square Office Park (purchased March 2, 2005)

San Felipe Plaza (purchased August 4, 2005)

2500 City West (purchased August 4, 2005)

Brookhollow Central I, II and III (purchased August 4, 2005)

Intercontinental Center (purchased August 4, 2005)



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 May 31, 2004 for One Commerce Square (after which date this entity was combined or consolidated) and as of
September 30, 2005 for all other entities:



|                           |  |          
|-------------------------- |  | ---------
|One Commerce Square        |  | 50.0% (1)
|2121 Market Street         |  | 50.0%    
|Harris Building Associates |  | 0.1%(2)  
|TPG/CalSTRS, LLC:          |  |          
|City National Plaza        |  | 21.3%(3) 
|All other properties       |  | 25.0%(4) 
|TPG/P&A 2101 Market, LLC   |  | 50.0%    



| | (1) | Prior to October 13, 2004, TPGI Predecessor and an unaffiliated third party each owned 50.0% of the Series A preferred capital and non-preferred capital of the partnership that
owned One Commerce Square. In addition, an unaffiliated third party owned the $6.75 million Series B preferred capital. In accordance with the partnership agreement, the holder of the Series B preferred capital was entitled to preferred cumulative
distributions of 17.5% per annum, after the holders of the Series A preferred capital received their preferred cumulative distributions. Thereafter, distributions went to the holders of the non-preferred capital.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In March 2004, TPGI Predecessor entered into an agreement to purchase the
50% partnership interest in One Commerce Square not owned by it for a purchase price of $24,000,000, subject to certain adjustments. Based on the terms of the purchase agreement, TPGI Predecessor considered One Commerce Square to be a variable
interest entity as of June 1, 2004, and had combined the accounts of that property with TPGI Predecessor beginning June 1, 2004.



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THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES AND THOMAS PROPERTIES

GROUP, INC. PREDECESSOR

NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(Unaudited)

(Tabular amounts in thousands)



On October 13, 2004, at the consummation of the Offering, we acquired the 50% ownership interest
from the unaffiliated third party, and redeemed the preferred equity interests. In addition, TPGI Predecessor contributed a 39% ownership interest in the property to us, resulting in an 89% ownership interest, and we have consolidated the accounts
of that property.



| | (2) | The partnership that owns 2121 Market Street entered into a master lease for the property with Harris Building Associates designed to allow a third party investor to take advantage
of the historic tax credits for the property. The Operating Partnership and an unrelated party each hold a 0.05% general partnership interest in Harris Building Associates. The 99.9% limited partner of Harris Building Associates contributed $3.5
million and no further contributions are required. In addition, this partner is entitled to various distributions, fees, and priority returns. During 2004, the accumulated losses and distributions for this limited partner equaled their contribution
amount and priority return. As such, net income/loss is allocated equally to the general partners, resulting in an allocation of 50% net income/loss to us.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | On October 13, 2004, at the consummation of the Offering, we increased our ownership interest in the property from 4.3% to 21.3%.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------



In accordance with the limited liability agreement, the minority owner of
City National Plaza and the Operating Partnership are initially allocated depreciation expense of City National Plaza ahead of CalSTRS. This resulted in the allocation to us of 22.5% of City National Plazas depreciation expense and 4.3% of
City National Plazas net income/loss (excluding depreciation expense) for periods prior to October 13, 2004, and an allocation of 22.5% of City National Plazas depreciation expense and 21.3% of City National Plazas net
income/loss (excluding depreciation expense) for periods subsequent to October 13, 2004.



| | (4) | In accordance with the limited liability agreement, the Operating Partnership is initially allocated depreciation expense of the properties ahead of CalSTRS. This resulted in the
allocation to us of 100% of depreciation expense and 25% of net income (excluding depreciation expense) of the properties.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Investments in unconsolidated real estate entities as of September 30, 2005 and December 31, 2004 are as follows:



|                                                  |  |                   |        |   |                  |   |        |  
|------------------------------------------------- |  | ----------------- | ------ | - | ---------------- | - | ------ | -
|                                                  |  | September 30,2005 |        |   | December 31,2004 |  
|2121 Market Street and Harris Building Associates |  | $                 | (1,011 | ) |                  | $ | (932   | )
|TPG/CalSTRS, LLC:                                 |  |                   |        |   |                  |   |        |  
|City National Plaza                               |  |                   | 21,758 |   |                  |   | 20,832 |  
|Reflections I                                     |  |                   | 1,353  |   |                  |   | 7,492  |  
|Reflections II                                    |  |                   | 1,630  |   |                  |   | 4,232  |  
|Four Falls Corporate Center                       |  |                   | 2,634  |   |                  |   |       |  
|Oak Hill Plaza                                    |  |                   | 1,168  |   |                  |   |       |  
|Walnut Hill Plaza                                 |  |                   | 1,078  |   |                  |   |       |  
|Valley Square Office Park                         |  |                   | 1,440  |   |                  |   |       |  
|San Felipe Plaza                                  |  |                   | 8,284  |   |                  |   |       |  
|2500 City West                                    |  |                   | 3,787  |   |                  |   |       |  
|Brookhollow Central I, II and III                 |  |                   | 2,757  |   |                  |   |       |  
|Intercontinental Center                           |  |                   | 268    |   |                  |   |       |  
|TPG/P&A 2101 Market, LLC                          |  |                   | 1,697  |   |                  |   |       |  
|                                                  |  |                   |        |   |                  |   |        |  
|                                                  |  | $                 | 46,843 |   |                  | $ | 31,624 |  
|                                                  |  |                   |        |   |                  |   |        |  



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THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES AND THOMAS PROPERTIES

GROUP, INC. PREDECESSOR

NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(Unaudited)

(Tabular amounts in thousands)



The following is a summary of the investments in unconsolidated real estate entities for the nine
months ended September 30, 2005:



|                                                                   |  |   |         |  
|------------------------------------------------------------------ |  | - | ------- | -
|Investment balance, December 31, 2004                              |  | $ | 31,624  |  
|Contributions, including $24,075 for acquisition of new properties |  |   | 34,844  |  
|Equity in net loss of unconsolidated real estate entities          |  |   | (9,377  | )
|Distributions                                                      |  |   | (10,248 | )
|                                                                   |  |   |         |  
|Investment balance, September 30, 2005                             |  | $ | 46,843  |  
|                                                                   |  |   |         |  



TPG/CalSTRS, LLC, 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. Under the joint venture agreement, we have an exclusive obligation until the earlier of May 1, 2007 and the date CalSTRS has contributed its full capital commitment to the joint venture to first
present all acquisition opportunities involving core plus and value-add properties to the joint venture before we may pursue them individually or in a joint venture with other parties. We are required to use diligent efforts to sell each joint
venture property within five years of that property reaching stabilization, except that for Reflections I and II, which are 100% leased, 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.



As of
September 30, 2005, the unfunded capital commitments of CalSTRS and the Company were $73,130,000 and $24,377,000, respectively.



Upon the earlier to occur of certain events or January 1, 2006, 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 either elect to 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. Upon the earlier to occur of certain events or January 1, 2006,
the minority owners of City National Plaza have the option to require the joint venture to purchase its interest for an amount equal to what would be payable to them upon liquidation of the assets at fair market value.



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THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES AND THOMAS PROPERTIES

GROUP, INC. PREDECESSOR

NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(Unaudited)

(Tabular amounts in thousands)



Following is summarized financial information for the unconsolidated/uncombined real estate entities
as of September 30, 2005 and December 31, 2004 and the three and nine months ended September 30, 2005 and 2004:



Summarized Balance Sheets



|                                                                                                    |  |                   |         |                  |   |        
|--------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | ---------------- | - | -------
|                                                                                                    |  | September 30,2005 |         | December 31,2004
|ASSETS                                                                                              |  |                   |         |                  |   |        
|Investments in real estate                                                                          |  | $                 | 713,266 |                  | $ | 351,157
|Receivables including deferred rents                                                                |  |                   | 15,336  |                  |   | 14,397 
|Other assets                                                                                        |  |                   | 165,684 |                  |   | 39,142 
|                                                                                                    |  |                   |         |                  |   |        
|Total assets                                                                                        |  | $                 | 894,286 |                  | $ | 404,696
|                                                                                                    |  |                   |         |                  |   |        
|LIABILITIES AND OWNERS EQUITY                                                                      |  |                   |         |                  |   |        
|Mortgage and other secured loans                                                                    |  | $                 | 671,711 |                  | $ | 266,256
|Other liabilities                                                                                   |  |                   | 42,953  |                  |   | 27,718 
|                                                                                                    |  |                   |         |                  |   |        
|Total liabilities                                                                                   |  |                   | 714,664 |                  |   | 293,974
|                                                                                                    |  |                   |         |                  |   |        
|Minority interest                                                                                   |  |                   |        |                  |   | 1,566  
|Owners equity:                                                                                     |  |                   |         |                  |   |        
|Thomas Properties, including $27 and $34 of other comprehensive loss in 2005 and 2004, respectively |  |                   | 48,610  |                  |   | 31,728 
|Other owners, including $82 and $342 of other comprehensive loss in 2005 and 2004, respectively     |  |                   | 131,012 |                  |   | 77,428 
|                                                                                                    |  |                   |         |                  |   |        
|Total owners equity                                                                                |  |                   | 179,622 |                  |   | 109,156
|                                                                                                    |  |                   |         |                  |   |        
|Total liabilities and owners equity                                                                |  | $                 | 894,286 |                  | $ | 404,696
|                                                                                                    |  |                   |         |                  |   |        



Summarized Statements
of Operations



|                                                         |  |                                 |         |   |                                |   |        |      |  |   |         |   |  |   |        |  
|-------------------------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------ | - | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                                         |  | Three months endedSeptember 30, |         |   | Nine months endedSeptember 30, |  
|                                                         |  | 2005                            |         |   | 2004                           |   |        | 2005 |  |   | 2004    |  
|Revenues                                                 |  | $                               | 20,637  |   |                                | $ | 12,168 |      |  | $ | 51,679  |   |  | $ | 46,840 |  
|                                                         |  |                                 |         |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Expenses:                                                |  |                                 |         |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Operating and other expenses                             |  |                                 | 14,163  |   |                                |   | 8,771  |      |  |   | 34,582  |   |  |   | 29,667 |  
|Interest expense                                         |  |                                 | 8,876   |   |                                |   | 3,712  |      |  |   | 20,058  |   |  |   | 10,511 |  
|Depreciation and amortization                            |  |                                 | 11,264  |   |                                |   | 2,518  |      |  |   | 21,731  |   |  |   | 8,981  |  
|                                                         |  |                                 |         |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Total expenses                                           |  |                                 | 34,303  |   |                                |   | 15,001 |      |  |   | 76,371  |   |  |   | 49,159 |  
|                                                         |  |                                 |         |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Net loss                                                 |  | $                               | (13,666 | ) |                                | $ | (2,833 | )    |  | $ | (24,692 | ) |  | $ | (2,319 | )
|                                                         |  |                                 |         |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Thomas Properties / TPGI Predecessors share of net loss |  | $                               | (5,913  | ) |                                | $ | (530   | )    |  | $ | (9,894  | ) |  | $ | (1,298 | )
|                                                         |  |                                 |         |   |                                |   |        |      |  |   |         |   |  |   |        |  



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THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES AND THOMAS PROPERTIES

GROUP, INC. PREDECESSOR

NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(Unaudited)

(Tabular amounts in thousands)



Included in the preceding summarized balance sheets as of September 30, 2005 and
December 31, 2004, are the following balance sheets of TPG/CalSTRS, LLC:



|                                                                                                    |  |                   |         |                  |   |        
|--------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | ---------------- | - | -------
|                                                                                                    |  | September 30,2005 |         | December 31,2004
|ASSETS                                                                                              |  |                   |         |                  |   |        
|Investments in real estate                                                                          |  | $                 | 692,116 |                  | $ | 331,140
|Receivables including deferred rents                                                                |  |                   | 12,885  |                  |   | 9,530  
|Other assets                                                                                        |  |                   | 162,401 |                  |   | 38,764 
|                                                                                                    |  |                   |         |                  |   |        
|Total assets                                                                                        |  | $                 | 867,402 |                  | $ | 379,434
|                                                                                                    |  |                   |         |                  |   |        
|LIABILITIES AND OWNERS EQUITY                                                                      |  |                   |         |                  |   |        
|Mortgage and other secured loans                                                                    |  | $                 | 651,981 |                  | $ | 246,338
|Other liabilities                                                                                   |  |                   | 36,561  |                  |   | 20,410 
|                                                                                                    |  |                   |         |                  |   |        
|Total liabilities                                                                                   |  |                   | 688,542 |                  |   | 266,748
|                                                                                                    |  |                   |         |                  |   |        
|Minority interest                                                                                   |  |                   |        |                  |   | 1,566  
|Owners equity:                                                                                     |  |                   |         |                  |   |        
|Thomas Properties, including $19 and $34 of other comprehensive loss in 2005 and 2004, respectively |  |                   | 47,203  |                  |   | 32,785 
|Other owners, including $59 and $342 of other comprehensive loss in 2005 and 2004, respectively     |  |                   | 131,657 |                  |   | 78,335 
|                                                                                                    |  |                   |         |                  |   |        
|Total owners equity                                                                                |  |                   | 178,860 |                  |   | 111,120
|                                                                                                    |  |                   |         |                  |   |        
|Total liabilities and owners equity                                                                |  | $                 | 867,402 |                  | $ | 379,434
|                                                                                                    |  |                   |         |                  |   |        



11



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THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES AND THOMAS PROPERTIES

GROUP, INC. PREDECESSOR

NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(Unaudited)

(Tabular amounts in thousands)



Following is summarized financial information by real estate entity for the unconsolidated/uncombined
real estate entities for the three and nine months ended September 30, 2005 and 2004:



|                                                          |  |                                                   |       |   |                          |   |     |                  |  |   |         |   |  |   |         |  
|--------------------------------------------------------- |  | ------------------------------------------------- | ----- | - | ------------------------ | - | --- | ---------------- |  | - | ------- | - |  | - | ------- | -
|                                                          |  | Three months ended September 30, 2005             |      
|                                                          |  | 2121 Market Street and Harris Building Associates |       |   | TPG/P&A 2101 Market, LLC |   |     | TPG/CalSTRS, LLC |  |   | Total   |  
|Revenues                                                  |  | $                                                 | 1,321 |   |                          | $ |    |                  |  | $ | 19,316  |   |  | $ | 20,637  |  
|                                                          |  |                                                   |       |   |                          |   |     |                  |  |   |         |   |  |   |         |  
|Expenses:                                                 |  |                                                   |       |   |                          |   |     |                  |  |   |         |   |  |   |         |  
|Operating and other                                       |  |                                                   | 814   |   |                          |   | 68  |                  |  |   | 13,281  |   |  |   | 14,163  |  
|Interest                                                  |  |                                                   | 303   |   |                          |   |    |                  |  |   | 8,573   |   |  |   | 8,876   |  
|Depreciation and amortization                             |  |                                                   | 284   |   |                          |   |    |                  |  |   | 10,980  |   |  |   | 11,264  |  
|                                                          |  |                                                   |       |   |                          |   |     |                  |  |   |         |   |  |   |         |  
|Total expenses                                            |  |                                                   | 1,401 |   |                          |   | 68  |                  |  |   | 32,834  |   |  |   | 34,303  |  
|                                                          |  |                                                   |       |   |                          |   |     |                  |  |   |         |   |  |   |         |  
|Net loss                                                  |  | $                                                 | (80   | ) |                          | $ | (68 | )                |  | $ | (13,518 | ) |  | $ | (13,666 | )
|                                                          |  |                                                   |       |   |                          |   |     |                  |  |   |         |   |  |   |         |  
|Thomas Properties share of net loss                      |  | $                                                 | (53   | ) |                          | $ | (34 | )                |  | $ | (5,826  | ) |  | $ | (5,913  | )
|                                                          |  |                                                   |       |   |                          |   |     |                  |  |   |         |   |  |   |         |  
|Intercompany eliminations                                 |  |                                                   |       |   |                          |   |     |                  |  |   |         |   |  |   | 274     |  
|                                                          |  |                                                   |       |   |                          |   |     |                  |  |   |         |   |  |   |         |  
|Equity in net loss of unconsolidated real estate entities |  |                                                   |       |   |                          |   |     |                  |  |   |         |   |  | $ | (5,639  | )
|                                                          |  |                                                   |       |   |                          |   |     |                  |  |   |         |   |  |   |         |  



|                                                      |  |                                                   |       |   |                  |   |        |       |  |   |        |  
|----------------------------------------------------- |  | ------------------------------------------------- | ----- | - | ---------------- | - | ------ | ----- |  | - | ------ | -
|                                                      |  | Three months ended September 30, 2004             |      
|                                                      |  | 2121 Market Street and Harris Building Associates |       |   | TPG/CalSTRS, LLC |   |        | Total | 
|Revenues                                              |  | $                                                 | 1,254 |   |                  | $ | 10,914 |       |  | $ | 12,168 |  
|                                                      |  |                                                   |       |   |                  |   |        |       |  |   |        |  
|Expenses:                                             |  |                                                   |       |   |                  |   |        |       |  |   |        |  
|Operating and other                                   |  |                                                   | 834   |   |                  |   | 7,937  |       |  |   | 8,771  |  
|Interest                                              |  |                                                   | 309   |   |                  |   | 3,403  |       |  |   | 3,712  |  
|Depreciation and amortization                         |  |                                                   | 283   |   |                  |   | 2,235  |       |  |   | 2,518  |  
|                                                      |  |                                                   |       |   |                  |   |        |       |  |   |        |  
|Total expenses                                        |  |                                                   | 1,426 |   |                  |   | 13,575 |       |  |   | 15,001 |  
|                                                      |  |                                                   |       |   |                  |   |        |       |  |   |        |  
|Net loss                                              |  | $                                                 | (172  | ) |                  | $ | (2,661 | )     |  | $ | (2,833 | )
|                                                      |  |                                                   |       |   |                  |   |        |       |  |   |        |  
|TPGI Predecessors share of net loss                  |  | $                                                 | (39   | ) |                  | $ | (491   | )     |  | $ | (530   | )
|                                                      |  |                                                   |       |   |                  |   |        |       |  |   |        |  
|Intercompany eliminations and other adjustments       |  |                                                   |       |   |                  |   |        |       |  |   | 28     |  
|                                                      |  |                                                   |       |   |                  |   |        |       |  |   |        |  
|Equity in net loss of uncombined real estate entities |  |                                                   |       |   |                  |   |        |       |  | $ | (502   | )
|                                                      |  |                                                   |       |   |                  |   |        |       |  |   |        |  



12



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THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES AND THOMAS PROPERTIES

GROUP, INC. PREDECESSOR

NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(Unaudited)

(Tabular amounts in thousands)



|                                                          |  |                                                 |       |   |                       |   |     |                 |  |   |         |   |  |   |         |  
|--------------------------------------------------------- |  | ----------------------------------------------- | ----- | - | --------------------- | - | --- | --------------- |  | - | ------- | - |  | - | ------- | -
|                                                          |  | Nine months ended September 30, 2005            |      
|                                                          |  | 2121 Market Streetand Harris BuildingAssociates |       |   | TPG/P&A2101Market,LLC |   |     | TPG/CalSTRS,LLC |  |   | Total   |  
|Revenues                                                  |  | $                                               | 3,985 |   |                       | $ |    |                 |  | $ | 47,694  |   |  | $ | 51,679  |  
|                                                          |  |                                                 |       |   |                       |   |     |                 |  |   |         |   |  |   |         |  
|Expenses:                                                 |  |                                                 |       |   |                       |   |     |                 |  |   |         |   |  |   |         |  
|Operating and other                                       |  |                                                 | 2,602 |   |                       |   | 68  |                 |  |   | 31,912  |   |  |   | 34,582  |  
|Interest                                                  |  |                                                 | 908   |   |                       |   |    |                 |  |   | 19,150  |   |  |   | 20,058  |  
|Depreciation and amortization                             |  |                                                 | 852   |   |                       |   |    |                 |  |   | 20,879  |   |  |   | 21,731  |  
|                                                          |  |                                                 |       |   |                       |   |     |                 |  |   |         |   |  |   |         |  
|Total expenses                                            |  |                                                 | 4,362 |   |                       |   | 68  |                 |  |   | 71,941  |   |  |   | 76,371  |  
|                                                          |  |                                                 |       |   |                       |   |     |                 |  |   |         |   |  |   |         |  
|Net loss                                                  |  | $                                               | (377  | ) |                       | $ | (68 | )               |  | $ | (24,247 | ) |  | $ | (24,692 | )
|                                                          |  |                                                 |       |   |                       |   |     |                 |  |   |         |   |  |   |         |  
|Thomas Properties share of net loss                      |  | $                                               | (176  | ) |                       | $ | (34 | )               |  | $ | (9,684  | ) |  | $ | (9,894  | )
|                                                          |  |                                                 |       |   |                       |   |     |                 |  |   |         |   |  |   |         |  
|Intercompany eliminations                                 |  |                                                 |       |   |                       |   |     |                 |  |   |         |   |  |   | 517     |  
|                                                          |  |                                                 |       |   |                       |   |     |                 |  |   |         |   |  |   |         |  
|Equity in net loss of unconsolidated real estate entities |  |                                                 |       |   |                       |   |     |                 |  |   |         |   |  | $ | (9,377  | )
|                                                          |  |                                                 |       |   |                       |   |     |                 |  |   |         |   |  |   |         |  



|                                                      |  |                                      |       |   |                                                 |   |       |                 |  |   |        |   |  |   |        |  
|----------------------------------------------------- |  | ------------------------------------ | ----- | - | ----------------------------------------------- | - | ----- | --------------- |  | - | ------ | - |  | - | ------ | -
|                                                      |  | Nine months ended September 30, 2004 |      
|                                                      |  | One CommerceSquare                   |       |   | 2121 Market Streetand Harris BuildingAssociates |   |       | TPG/CalSTRS,LLC |  |   | Total  |  
|Revenues                                              |  | $                                    | 9,629 |   |                                                 | $ | 3,784 |                 |  | $ | 33,427 |   |  | $ | 46,840 |  
|                                                      |  |                                      |       |   |                                                 |   |       |                 |  |   |        |   |  |   |        |  
|Expenses:                                             |  |                                      |       |   |                                                 |   |       |                 |  |   |        |   |  |   |        |  
|Operating and other                                   |  |                                      | 4,531 |   |                                                 |   | 2,530 |                 |  |   | 22,606 |   |  |   | 29,667 |  
|Interest                                              |  |                                      | 2,373 |   |                                                 |   | 925   |                 |  |   | 7,213  |   |  |   | 10,511 |  
|Depreciation and amortization                         |  |                                      | 2,035 |   |                                                 |   | 849   |                 |  |   | 6,097  |   |  |   | 8,981  |  
|                                                      |  |                                      |       |   |                                                 |   |       |                 |  |   |        |   |  |   |        |  
|Total expenses                                        |  |                                      | 8,939 |   |                                                 |   | 4,304 |                 |  |   | 35,916 |   |  |   | 49,159 |  
|                                                      |  |                                      |       |   |                                                 |   |       |                 |  |   |        |   |  |   |        |  
|Net income (loss)                                     |  | $                                    | 690   |   |                                                 | $ | (520  | )               |  | $ | (2,489 | ) |  | $ | (2,319 | )
|                                                      |  |                                      |       |   |                                                 |   |       |                 |  |   |        |   |  |   |        |  
|TPGI Predecessors share of net loss                  |  | $                                    | (33   | ) |                                                 | $ | (103  | )               |  | $ | (1,162 | ) |  | $ | (1,298 | )
|                                                      |  |                                      |       |   |                                                 |   |       |                 |  |   |        |   |  |   |        |  
|Intercompany eliminations                             |  |                                      |       |   |                                                 |   |       |                 |  |   |        |   |  |   | 267    |  
|                                                      |  |                                      |       |   |                                                 |   |       |                 |  |   |        |   |  |   |        |  
|Equity in net loss of uncombined real estate entities |  |                                      |       |   |                                                 |   |       |                 |  |   |        |   |  | $ | (1,031 | )
|                                                      |  |                                      |       |   |                                                 |   |       |                 |  |   |        |   |  |   |        |  



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THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES AND THOMAS PROPERTIES

GROUP, INC. PREDECESSOR

NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(Unaudited)

(Tabular amounts in thousands)



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, 2005 and December 31, 2004:



|                                                                            |  |                   |        |   |                  |   |        |  
|--------------------------------------------------------------------------- |  | ----------------- | ------ | - | ---------------- | - | ------ | -
|                                                                            |  | September 30,2005 |        |   | December 31,2004 |  
|Our share of owners equity recorded by unconsolidated real estate entities |  | $                 | 48,610 |   |                  | $ | 31,728 |  
|Intercompany eliminations and other adjustments                             |  |                   | (1,767 | ) |                  |   | (104   | )
|                                                                            |  |                   |        |   |                  |   |        |  
|Investments in unconsolidated real estate entities                          |  | $                 | 46,843 |   |                  | $ | 31,624 |  
|                                                                            |  |                   |        |   |                  |   |        |  



4. Debt



A summary of the outstanding debt as of September 30, 2005 is as
follows:



|                                      |  |               |   |  |                  |         |               |        
|------------------------------------- |  | ------------- | - |  | ---------------- | ------- | ------------- | -------
|                                      |  | Interest rate |   |  | Outstanding debt |         | Maturity date
|One Commerce Square mortgage loan (1) |  | 7.0           | % |  | $                | 72,544  |               | 4/11/28
|Two Commerce Square:                  |  |               |   |  |                  |         |               |        
|Mortgage loan (2)                     |  | 6.3           |   |  |                  | 121,402 |               | 5/09/13
|Senior mezzanine loan (3) (4)         |  | 17.2          |   |  |                  | 44,412  |               | 1/09/10
|Junior A mezzanine loan (3) (5)       |  | 15.0          |   |  |                  | 3,885   |               | 1/09/10
|Four Points Centre mortgage loan (6)  |  | Prime rate    |   |  |                  | 4,000   |               | 8/28/06
|                                      |  |               |   |  |                  |         |               |        
|Total principal outstanding           |  |               |   |  |                  | 246,243 |               |        
|Loan premium (7)                      |  |               |   |  |                  | 1,216   |               |        
|                                      |  |               |   |  |                  |         |               |        
|Total debt                            |  |               |   |  | $                | 247,459 |               |        
|                                      |  |               |   |  |                  |         |               |        



|(1) | The mortgage loan is prepayable without penalty after March 11, 2008, at which date the outstanding principal amount of this debt will be approximately $68.9 million. The
interest rate will increase by 2.0% on April 11, 2008, which additional amount may be deferred until maturity. Any deferred amounts are added to the principal balance of the loan and accrue interest at 9.0%. Provided there is no deferred
interest, the loan balance will be fully amortized on April 11, 2028, the maturity date of the loan.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The mortgage loan may be defeased after October 2005, and may be prepaid after February 2013.
|--- | ---------------------------------------------------------------------------------------------



|(3) | These loans are guaranteed by Mr. Thomas up to an aggregate maximum of $7,500,000. We have agreed to indemnify Mr. Thomas in the event these 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, 2005 was 17.2% 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 the greater of 3% of
the principal amount or a yield maintenance premium for any prepayments. The loan is secured by our ownership interest in the real estate entities that own Two Commerce Square.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | The prime rate as of September 30, 2005 was 6.75% per annum.
|--- | ------------------------------------------------------------



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THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES AND THOMAS PROPERTIES

GROUP, INC. PREDECESSOR

NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(Unaudited)

(Tabular amounts in thousands)



|(7) | In connection with the acquisition of a 50% third-party interest in One Commerce Square, a premium was recorded to mark 50% of the assumed mortgage loan to market value.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We purchased the Two Commerce Square Junior B
mezzanine loan from the lender for $2,500,000, which resulted in a gain of $25,776,000 in April 2005.



In April 2005, we repaid the outstanding principal of the One Commerce Square mezzanine loan in the amount of $9,250,000. Based on an agreement with the
lender, $515,000 of accrued interest was reversed and credited to interest expense in the second quarter of 2005.



In September 2005, we repaid the $3,500,000 mortgage loan for 2101 Market Street.



5. Earnings (Loss) per Share



The following is a summary of the elements used in calculating basic and diluted earnings (loss) per share for the three and nine months ended
September 30, 2005 (in thousands except share and per share amounts):



|                                                              |  |                                            |            |   |                                           |   |           
|------------------------------------------------------------- |  | ------------------------------------------ | ---------- | - | ----------------------------------------- | - | ----------
|                                                              |  | For the threemonths endedSeptember 30,2005 |            |   | For the ninemonths endedSeptember 30,2005
|Net (loss) income available to common shares                  |  | $                                          | (1,746     | ) |                                           | $ | 3,544     
|                                                              |  |                                            |            |   |                                           |   |           
|Weighted average common shares outstanding  basic            |  |                                            | 14,303,774 |   |                                           |   | 14,298,532
|Potentially dilutive common shares(1):                        |  |                                            |            |   |                                           |   |           
|Stock options                                                 |  |                                            |           |   |                                           |   | 6,866     
|Unvested restricted stock                                     |  |                                            |           |   |                                           |   | 2,186     
|                                                              |  |                                            |            |   |                                           |   |           
|Adjusted weighted average common shares outstanding  diluted |  |                                            | 14,303,774 |   |                                           |   | 14,307,584
|                                                              |  |                                            |            |   |                                           |   |           
|(Loss) earnings per share  basic                             |  | $                                          | (0.12      | ) |                                           | $ | 0.25      
|                                                              |  |                                            |            |   |                                           |   |           
|(Loss) earnings per share  diluted                           |  | $                                          | (0.12      | ) |                                           | $ | 0.25      
|                                                              |  |                                            |            |   |                                           |   |           



|(1) | For the three months ended September 30, 2005, the potentially dilutive shares were not included in the loss per share calculation as their effect is antidilutive.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



6. 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, 2005, we held a 46.3% capital interest in the Operating Partnership. For the three and nine months
ended September 30, 2005, we were allocated 46.3% of the losses from the Operating Partnership.



Our effective tax rates are 41.6% and 42.6% for the three and nine months ended September 30, 2005. The higher effective tax rates compared to
the federal statutory rate of 35% are primarily due to state taxes, net of federal tax expense.



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



15



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##### Table of Contents

THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES AND THOMAS PROPERTIES

GROUP, INC. PREDECESSOR

NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(Unaudited)

(Tabular amounts in thousands)



recognized for financial reporting purposes and the amount recognized for tax purposes, as measured by applying the currently enacted tax laws.



The deferred tax asset resulted primarily from the difference between the
financial statement basis, which is at carryover basis, and the tax basis, which represents the amount paid by the stockholders at fair value.



SFAS No. 109, Accounting for Income Taxes, 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.



7. 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, 2005 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, rents and other receivables, due from affiliate, accounts payable and other liabilities approximate fair value because of the short-term nature of these instruments.



As of September 30, 2005, the fair value of our mortgage and other secured loans aggregates $248,692,000, compared to
the aggregated carrying value of $247,459,000, including loan premium of $1,216,000.



8. Subsequent Events



In October 2005, our
subsidiary, TPG-El Segundo Partners, LLC, exercised its option to acquire 46.5 acres of land for our Campus El Segundo development in El Segundo, California. We have entitled Campus El Segundo for a 2.175 million-square-foot mixed-use
project with commercial, retail and community serving components.



The land was acquired for $30,000,000, which was financed in part with a secured mortgage loan in the amount of $19,500,000, with a term of two years with three one-year extension options. The loan bears interest at LIBOR plus 2.25%, or the
prime rate, at our option.



We also purchased the entire
interest of our unaffiliated minority partner in TPG-El Segundo Partners, LLC for consideration of $5,000,000, $3,900,000 of which was financed with an unsecured loan from the minority partner on which principal and interest at 5% is payable on
October 12, 2009. At September 30, 2005 and December 31, 2004, the minority interest in TPG-El Segundo Partners, LLC was $1,099,000 and $1,133,000, respectively.



16



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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. We make statements in this section 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 risk factors 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 risk factors, see the
section in our Form 10-K, filed with the Securities and Exchange Commission for the year ended December 31, 2004, 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 global 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, 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 involve numerous risks and uncertainties 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. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. 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 office, retail and multi-family properties on a nationwide
basis. We conduct our business through our Operating Partnership, of which we own 46.3% and have control over the major decisions of the Operating Partnership.



During the period from our formation until we commenced operations upon consummation of our Offering on October 13, 2004, we did not have any
material corporate activity. Because we believe that a discussion of the results of our company prior to the consummation of our Offering would not be meaningful, we have set forth below a discussion of our results of operations for the three and
nine months ended September 30, 2005 and TPGI Predecessors historical results of operations for the three and nine months ended September 30, 2004.



17



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##### Table of Contents

Results of Operations



The results of operations reflect the consolidation/combination of the affiliates that own One Commerce Square (beginning June 1, 2004), Two Commerce
Square, 2101 Market Street, 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 (for all periods presented)

City National Plaza (for all periods presented)

One Commerce Square (through May 31, 2004)

Reflections I (as of October 13, 2004, the date of acquisition)

Reflections II (as of October 13, 2004, the date of acquisition)

Four Falls Corporate Center (as of March 2, 2005, the date of acquisition)

Oak Hill Plaza (as of
March 2, 2005, the date of acquisition)

Walnut Hill Plaza (as of March 2, 2005, the date of acquisition)

Valley Square Office Park (as of March 2, 2005, the date of acquisition)

San Felipe Plaza (as of August 4, 2005, the date of acquisition)

2500 City West (as of August 4, 2005, the date of acquisition)

Brookhollow Central I, II, and III (as
of August 4, 2005, the date of acquisition)

Intercontinental Center (as of August 4, 2005, the date of acquisition)



Comparison of three months ended September 30, 2005 to three months ended
September 30, 2004



Total revenues. Total
revenues decreased by $1.1 million, or 6.1%, to $17.3 million for the three months ended September 30, 2005 compared to $18.4 million for the three months ended September 30, 2004. The significant components of revenue are discussed below.



Rental revenues. Rental revenue decreased by $641,000
or 7.7% to $7.7 million for the three months ended September 30, 2005 compared to $8.3 million for the three months ended September 30, 2004, which is primarily due to the effect of the straight-line rent calculation for One Commerce
Square.



Tenant reimbursements.Revenues from tenant
reimbursements increased by $305,000, or 6.9%, to $4.7 million for the three months ended September 30, 2005 compared to $4.4 million for the three months ended September 30, 2004, primarily due to the modification of one tenants
lease at One Commerce Square, in which the tenant began paying for its share of operating expenses beginning in January 2005.



Parking and other revenues. Revenues from parking and other decreased by $65,000, or 7.0%, to $870,000 for the three months ended
September 30, 2005 compared to $935,000 for the three months ended September 30, 2004, primarily as a result of a decrease in parking revenues related to the 2101 Market Street development property. Beginning in May 2005, upon commencement
of the development of the property, the incidental parking revenues are accounted for as a reduction of capitalized project costs.



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 $1.3 million, or 52.4%, to $1.1 million for the three months ended September 30, 2005 compared to $2.4 million for the three months ended
September 30, 2004. This decrease was primarily a result of decreased leasing commissions of $1.1 million related to 1835 Market Street, Pacific Financial Plaza, and other unaffiliated properties.



Investment advisory, management, leasing and development services revenues
 unconsolidated/uncombined 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/uncombined real estate entities increased by $544,000, or 23.2%, to $2.9 million for the three months ended September 30, 2005 compared to $2.3 million for the
three months ended September 30, 2004. This increase was primarily a result of fee income related to the property investments in Houston and suburban Philadelphia, which were acquired in August and March 2005, respectively, by our joint venture
with CalSTRS. We earned a one-time acquisition fee of $1.1 million relating to the Houston properties, and investment advisory and management fees during the third quarter of 2005 of $505,000



18



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##### Table of Contents

relating to all of the acquired properties. In addition, a portion of the increase was a result of leasing commissions of $209,000 and reimbursed
compensation costs of $156,000 relating to the acquired properties.



The increase was partially offset by a decrease in leasing commissions at City National Plaza of $1.4 million. Leasing commissions for the three months ended September 30, 2005 were $196,000, compared to leasing commissions for the
three months ended September 30, 2004 of $1.6 million. This decrease was partially due to the fact that in October 2004, we increased our ownership interest in City National Plaza from 4.3% to 21.3%, which had the effect of reducing the
investment advisory, management, leasing and development services revenue recognized by us due to elimination of intercompany revenues. Investment advisory and management fees related to City National Plaza decreased $92,000 during the three months
ended September 30, 2005, and was offset by an increase in development fees of $72,000.



Total expenses. Total expenses increased by $502,000, or 2.9%, to $18.0 million for the three months ended September 30, 2005 compared to $17.5 million for the three months ended September 30, 2004.
The significant components of expense are discussed below.



Rental property operating and maintenance expense.Rental property operating and maintenance expense remained consistent for each of the three month periods ended September 30, 2005 and 2004.



Real estate taxes.Real estate tax expense remained consistent for
each of the three month periods ended September 30, 2005 and 2004.



Investment advisory, management, leasing and development services expenses.Expenses for these services remained consistent for each of the three month periods ended September 30, 2005 and 2004.



Interest expense. Interest expense decreased by $1.8 million or 26.5%
to $5.0 million for the three months ended September 30, 2005 compared to $6.8 million for the three months ended September 30, 2004. This decrease is primarily due to a decrease in interest expense relating to Two Commerce Square of
$602,000 for the three months ended September 30, 2005 as compared to the three months ended September 30, 2004, primarily due to the purchase of the Junior B mezzanine loan in April 2005 and the amortizing loan balances for the mortgage
and mezzanine loans. The decrease was also due to a decrease in interest expense relating to One Commerce Square of $549,000 for the three months ended September 30, 2005 as compared to the three months ended September 30, 2004, primarily
due to the repayment of the mezzanine loan in April 2005 and the credit facility in October 2004. Further, the decrease is also the result of an increase in capitalized interest of $538,000 related to the Four Points Centre, Campus El Segundo, and
2101 Market Street development properties. We began capitalizing interest on Four Points Centre, Campus El Segundo, and 2101 Market Street in October 2004, April 2005, and July 2005, respectively.



Depreciation and amortization expense. Depreciation and amortization
expense increased by $283,000, or 10.6%, to $3.0 million for the three months ended September 30, 2005 compared to $2.7 million for the three months ended September 30, 2004. The increase is primarily a result of additional real estate
improvements and a higher basis resulting from purchase accounting at One Commerce Square.



General and administrative. General and administrative expense increased by $2.2 million, or 155.1%, to $3.7 million for the three months ended September 30, 2005 compared to $1.5 million for the three
months ended September 30, 2004. The increase is primarily due to an increase in salaries and employment related costs and overhead of becoming a public company on October 13, 2004. Overhead expenses include such costs as Sarbanes-Oxley
related costs and directors and officers insurance premiums.



Interest income. Interest income was $363,000 for the three months ended September 30, 2005, primarily due to interest income earned on cash balances.



19



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##### Table of Contents

Equity in net loss of unconsolidated/uncombined real estate entities.Equity in net loss of
unconsolidated/uncombined real estate entities increased by $5.1 million to a net loss of $5.6 million for the three months ended September 30, 2005 compared to a net loss of $502,000 for the three months ended September 30, 2004. Set
forth below is a summary of the unconsolidated/uncombined condensed financial information for the unconsolidated/uncombined real estate entities and our share of net loss and equity in net loss for the three months ended September 30, 2005 and
2004 (in thousands):



|                                                                     |  |                       |         |   |                      |   |        |  
|-------------------------------------------------------------------- |  | --------------------- | ------- | - | -------------------- | - | ------ | -
|                                                                     |  | ThomasProperties 2005 |         |   | TPGIPredecessor 2004 |  
|                                                                     |  |                      
|Revenue                                                              |  | $                     | 20,637  |   |                      | $ | 12,168 |  
|Operating and other expenses                                         |  |                       | (14,163 | ) |                      |   | (8,771 | )
|Interest expense                                                     |  |                       | (8,876  | ) |                      |   | (3,712 | )
|Depreciation and amortization                                        |  |                       | (11,264 | ) |                      |   | (2,518 | )
|                                                                     |  |                       |         |   |                      |   |        |  
|Net loss                                                             |  | $                     | (13,666 | ) |                      | $ | (2,833 | )
|                                                                     |  |                       |         |   |                      |   |        |  
|Thomas Properties and TPGI Predecessors share of net loss          |  | $                     | (5,913  | ) |                      | $ | (530   | )
|Intercompany eliminations                                            |  |                       | 274     |   |                      |   | 28     |  
|                                                                     |  |                       |         |   |                      |   |        |  
|Equity in net loss of unconsolidated/uncombined real estate entities |  | $                     | (5,639  | ) |                      | $ | (502   | )
|                                                                     |  |                       |         |   |                      |   |        |  



Aggregate revenue
attributable to, and operating and other expenses for unconsolidated/uncombined real estate entities for the three months ended September 30, 2005 compared to the three months ended September 30, 2004 increased primarily due to the
acquisition of our interests in Reflections I and Reflections II on October 12, 2004, four properties in suburban Philadelphia on March 2, 2005 and four properties in Houston on August 4, 2005.



Aggregate interest expense increased by $5.2 million, or 139.1%, to $8.9
million for the three months ended September 30, 2005 compared to $3.7 million for the three months ended September 30, 2004 primarily as a result of an increase in interest expense of $1.0 million relating to the refinancing of the City
National Plaza acquisition loan, and interest expense of $4.2 million relating to the debt obligations of Reflections I and Reflections II, the four properties in suburban Philadelphia, and the four properties in Houston.



Aggregate depreciation and amortization expense increased by $8.8 million, or
347.3%, to $11.3 million for the three months ended September 30, 2005 compared to $2.5 million for the three months ended September 30, 2004 primarily as a result of additional depreciation and amortization expense of $8.1 million
due to the acquisition of our interests in Reflections I and Reflections II, the four properties in suburban Philadelphia, and the four properties in Houston. In addition, the increase is a result of additional real estate improvements at City
National Plaza during 2005 and 2004, which resulted in an increase of $676,000 in depreciation and amortization expense for the three months ended September 30, 2005, as compared to three months ended September 30, 2004.



Comparison of nine months ended September 30, 2005 to nine months ended
September 30, 2004



Total revenues. Total
revenues increased by $10.4 million, or 25.3%, to $51.5 million for the nine months ended September 30, 2005 compared to $41.1 million for the nine months ended September 30, 2004. The significant components of revenue are discussed below.



Rental revenues. Rental revenue increased by $4.7
million, or 24.1%, to $24.2 million for the nine months ended September 30, 2005 compared to $19.5 million for the nine months ended September 30, 2004. This increase is primarily a result of five incremental months of revenue in the
amount of $5.2 million due to the combination of the operating results of One Commerce Square as of June 1, 2004, offset by the effect of the straight-line rent calculation for One Commerce Square.



Tenant reimbursements.Revenues from tenant reimbursements increased
by $4.2 million, or 41.6%, to $14.3 million for the nine months ended September 30, 2005 compared to $10.1 million for the nine months ended September 30, 2004. This increase was primarily a result of five incremental months of revenue in
the amount of $4.0 million due to the combination of the operating results of One Commerce Square as of June 1, 2004.



Parking and other revenues. Revenues from parking and other increased by $1.2 million, or 57.7%, to $3.3 million for the nine months ended
September 30, 2005 compared to $2.1 million for the nine months ended September 30, 2004, primarily as a result five incremental months of revenue in the amount of $730,000 due to the combination of the operating results of One Commerce
Square as of June 1, 2004, and a lease termination fee of $434,000 for a tenant in One Commerce Square in 2005.



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



20



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##### Table of Contents

from these services decreased by $1.4 million, or 28.3%, to $3.6 million for the three months ended September 30, 2005 compared to $5.0 million for the
three months ended September 30, 2004. This decrease was primarily a result of decreased leasing commissions of $1.0 million related to 1835 Market Street, Pacific Financial Plaza, and other unaffiliated properties.



Investment advisory, management, leasing and development services revenues
 unconsolidated/uncombined 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/uncombined real estate entities increased by $1.7 million, or 39.4%, to $6.1 million for the nine months ended September 30, 2005 compared to $4.4 million for the
nine months ended September 30, 2004. This increase was primarily a result of fee income related to the investments in Houston and suburban Philadelphia, which were acquired in August and March 2005, respectively, by our joint venture with
CalSTRS. We earned one-time acquisition fees of $1.7 million, and investment advisory and management fees of $782,000 during the nine months ended September 30, 2005 relating to these acquired properties. In addition, the increase was a result
of leasing commissions of $252,000 and reimbursed compensation costs of $250,000 relating to the acquired properties.



The increase was partially offset by a decrease in leasing commission at City National Plaza of $831,000. Leasing commissions for the nine months ended
September 30, 2005 were $754,000, compared to leasing commissions for the nine months ended September 30, 2004 of $1.6 million. This decrease was partially due to the fact that in October 2004, we increased our ownership interest in City
National Plaza from 4.3% to 21.3%, which had the effect of reducing the investment advisory, management, leasing and development services revenue recognized by us due to elimination of intercompany revenues. Investment advisory and management fees
related to City National Plaza decreased $366,000 during the nine months ended September 30, 2005, and was offset by an increase in development fees of $283,000. In addition, the increase was offset by a decrease of $312,000 in investment
advisory, management and leasing fees and reimbursed compensation costs related to One Commerce Square due to the combination of the operating results of One Commerce Square as of June 1, 2004.



Total expenses. Total expenses increased by $11.6 million, or 26.5%,
to $55.2 million for the nine months ended September 30, 2005 compared to $43.6 million for the nine months ended September 30, 2004. The significant components of expense are discussed below.



Rental property operating and maintenance expense.Rental property
operating and maintenance expense increased by $3.1 million, or 39.5%, to $10.9 million for the nine months ended September 30, 2005 as compared to $7.8 million for the nine months ended September 30, 2004, primarily due to five
incremental months of expense in the amount of $3.2 million due to the combination of the operating results of One Commerce Square as of June 1, 2004.



Real estate taxes.Real estate tax expense increased by $1.1 million, or 35.5%, to $4.3 million for the nine months ended September 30, 2005
compared to $3.2 million for the nine months ended September 30, 2004. This increase is primarily a result of five incremental months of expense in the amount of $1.1 million due to the combination of the operating results of One Commerce
Square as of June 1, 2004.



Investment advisory,
management, leasing and development services expenses.Expenses for these services remained consistent for each of the nine month periods ended September 30, 2005 and 2004.



Interest expense. Interest expense decreased by $1.6 million or 8.7% to $16.2 million for the nine months ended
September 30, 2005 compared to $17.8 million for the nine months ended September 30, 2004. This decrease is primarily due to a decrease in interest expense relating to Two Commerce Square of $1.3 million for the nine months ended
September 30, 2005 as compared to the nine months ended September 30, 2004, primarily due to the purchase of the Junior B mezzanine loan in April 2005 and the amortizing loan balances for the mortgage and mezzanine loans, offset by the
write-off of unamortized deferred loan costs associated with the mezzanine loan. The decrease was also due to an agreement with the lender on the One Commerce Square mezzanine loan regarding the calculation of deferred interest. We repaid the
principal amount of this loan in April 2005, and had accrued $1.0 million of deferred interest. The lender agreed to payment of deferred interest of $515,000, and the remaining $515,000 was recorded as a decrease to interest expense in 2005.
Further, the decrease is also the result of an increase in capitalized interest of $1.1 million related to the Four Points Centre, Campus El Segundo, and 2101 Market Street development properties. We began capitalizing interest on Four Points
Centre, Campus El Segundo, and 2101 Market Street in October 2004, April 2005, and July 2005, respectively. This decrease was offset as a



21



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##### Table of Contents

result of five incremental months of expense in the amount of $1.4 million due to the combination of the operating results of One Commerce Square as of
June 1, 2004.



Depreciation and amortization
expense. Depreciation and amortization expense increased by $3.5 million, or 60.1%, to $9.4 million for the nine months ended September 30, 2005 compared to $5.9 million for the nine months ended September 30, 2004. This increase was
primarily the result of five incremental months of expense in the amount of $2.8 million due to the combination of the operating results of One Commerce Square as of June 1, 2004, and a result of additional real estate improvements and a higher
basis resulting from purchase accounting at One Commerce Square.



General and administrative. General and administrative expense increased by $5.4 million, or 131.9%, to $9.6 million for the three months ended September 30, 2005 compared to $4.2 million for the nine months ended
September 30, 2004. The increase is primarily due to an increase in salaries and employment related costs and overhead of becoming a public company on October 13, 2004. Overhead expenses include such costs as Sarbanes-Oxley related costs
and directors and officers insurance premiums.



Gain on sale of real estate. Gain on sale of real estate was $975,000 for the nine months ended September 30, 2004 due to the sale of a parcel of development property at our Four Points Centre project in Austin, Texas, which was
sold to an unaffiliated third party. There were no land sales for the nine months ended September 30, 2005.



Gain on purchase of other secured loan. Gain on purchase of other secured loan was $25.8 million for the nine months ended September 30, 2005
due to the purchase of the Two Commerce Square Junior B mezzanine loan in April 2005 at a discount.



Interest income. Interest income was $1.1 million for the nine months ended September 30, 2005, primarily due to interest income earned on
cash balances.



Equity in net loss of
unconsolidated/uncombined real estate entities.Equity in net loss of unconsolidated/uncombined real estate entities increased by $8.4 million to a net loss of $9.4 million for the nine months ended September 30, 2005 compared to a net loss
of $1.0 million for the nine months ended September 30, 2004. Set forth below is a summary of the unconsolidated/uncombined condensed financial information for the unconsolidated/uncombined real estate entities and our share of net loss and
equity in net loss for the nine months ended September 30, 2005 and 2004 (in thousands):



|                                                                     |  |                       |         |   |                      |   |         |  
|-------------------------------------------------------------------- |  | --------------------- | ------- | - | -------------------- | - | ------- | -
|                                                                     |  | ThomasProperties 2005 |         |   | TPGIPredecessor 2004 |  
|                                                                     |  |                      
|Revenue                                                              |  | $                     | 51,679  |   |                      | $ | 46,840  |  
|Operating and other expenses                                         |  |                       | (34,582 | ) |                      |   | (29,667 | )
|Interest expense                                                     |  |                       | (20,058 | ) |                      |   | (10,511 | )
|Depreciation and amortization                                        |  |                       | (21,731 | ) |                      |   | (8,981  | )
|                                                                     |  |                       |         |   |                      |   |         |  
|Net loss                                                             |  | $                     | (24,692 | ) |                      | $ | (2,319  | )
|                                                                     |  |                       |         |   |                      |   |         |  
|Thomas Properties and TPGI Predecessors share of net loss          |  | $                     | (9,894  | ) |                      | $ | (1,298  | )
|Intercompany eliminations                                            |  |                       | 517     |   |                      |   | 267     |  
|                                                                     |  |                       |         |   |                      |   |         |  
|Equity in net loss of unconsolidated/uncombined real estate entities |  | $                     | (9,377  | ) |                      | $ | (1,031  | )
|                                                                     |  |                       |         |   |                      |   |         |  



Aggregate revenue
attributable to, and operating and other expenses for unconsolidated/uncombined real estate entities for the nine months ended September 30, 2005 compared to the nine months ended September 30, 2004 increased primarily due to the
acquisition of our interests in Reflections I and Reflections II on October 12, 2004, four properties in suburban Philadelphia on March 2, 2005 and four properties in Houston on August 4, 2005. The increase was offset by the
combination of One Commerce Square effective June 1, 2004. As a result, there was five months of revenue and expenses in the nine months ended September 30, 2004 for this property, with no corresponding revenue and expenses in the nine
months ended September 30, 2005.



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Aggregate interest expense increased by $9.6 million, or 90.8%, to $20.1 million for the nine months
ended September 30, 2005 compared to $10.5 million for the nine months ended September 30, 2004 primarily as a result of an increase in interest expense of $5.2 million relating to the refinancing of the City National Plaza acquisition
loan and interest expense of $6.7 million relating to the debt obligations of Reflections I and Reflections II, the four properties in suburban Philadelphia and the four properties in Houston, offset by five months of interest expense in 2004 of
$2.4 million relating to One Commerce Square.



Aggregate
depreciation and amortization expense increased by $12.7 million, or 142.0%, to $21.7 million for the nine months ended September 30, 2005 compared to $9.0 million for the nine months ended September 30, 2004 primarily as a result of
additional depreciation and amortization expense of $13.1 million due to the acquisition of our interests in Reflections I and Reflections II, the four properties in suburban Philadelphia, and the four properties in Houston. In addition, the
increase is a result of additional real estate improvements at City National Plaza during 2005 and 2004, which resulted in an increase of $1.7 million in depreciation and amortization expense for the nine months ended September 30, 2005, as
compared to nine months ended September 30, 2004. The increase was offset by five months of depreciation and amortization expense in 2004 of $2.0 million relating to One Commerce Square, with no corresponding depreciation and amortization
expense in 2005.



Liquidity and Capital Resources



Analysis of liquidity and capital resources



We received net proceeds of $151.9 million from the Offering, and have
utilized a majority of the net proceeds as follows:



| |  |  | acquired a 25% interest in Reflections I and Reflections II for an equity investment of $11.8 million;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | increased our indirect ownership interest in City National Plaza from 4.3% to 21.3% for a payment of $21 million;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | acquired the 50% interest in One Commerce Square owned by an unaffiliated third party for a purchase price of $24 million, plus the assumption of approximately $10 million of debt
principal and interest repayment obligations. In addition, we repaid aggregate indebtedness of $10.7 million relating to One Commerce Square;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | redeemed preferred equity interests related to One Commerce Square held by an unaffiliated mezzanine debt lender on the property for $11.7 million ;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | acquired a 25% interest in four properties in suburban Philadelphia, which were purchased for $136.0 million, of which we provided $8.8 million;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | repaid $9.4 million on the One Commerce Square mezzanine loan, including deferred interest;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | purchased the Two Commerce Square Junior B mezzanine loan from the lender for $2.5 million;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | acquired a 25% interest in four properties in Houston, which were purchased for $280.5 million, of which we provided $15.3 million;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | exercised our option to acquire land for the Campus El Segundo development, including acquiring the entire interest of our unaffiliated minority partner, for $11.6 million in
October 2005; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | funded real estate improvements and development costs of $5.2 million
| | - |  | ---------------------------------------------------------------------



As of September 30, 2005, we have unrestricted cash and cash equivalents of $28.8 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, 2005, we have an unfunded capital commitment to our joint venture with CalSTRS of $24.4 million. Our requirement to fund all or a
portion of this commitment is subject to our identifying properties to acquire that are mutually acceptable to us and CalSTRS.



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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. Both of our consolidated operating properties, One Commerce Square and Two Commerce Square, are subject to debt financing covenants containing lock-box arrangements. For One
Commerce Square, funds generated by the property can only be distributed to us after payment of property level debt and operating expenditures. As a result, there is limited cash available from One Commerce Square for distribution to us. 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, our joint venture with CalSTRS is subject to debt financing with a lockbox
arrangement. 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, future financing arrangements we may enter into may contain restrictions on our use of cash generated from our properties.



Development and Redevelopment Projects



We currently own interests in three development projects and our joint venture with CalSTRS includes redevelopment properties. We have considerable
expertise in the completion of large-scale development and redevelopment projects. We anticipate developing these three development 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 July 2004 a parent of the entity that owns City National Plaza refinanced the loan
for City National Plaza, which provides proceeds to cover the estimated future redevelopment costs. Presently, we have not obtained construction financing for these three development projects. If we finance the 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, our company also owns majority interests in One Commerce Square and Two Commerce Square. These
properties are substantially leased and have significant 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 $6.0 million in capital improvements, tenant improvements, and leasing costs for the One Commerce Square and Two Commerce Square properties collectively during the remainder of 2005 and
2006.



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.



24



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##### Table of Contents

Contractual Obligations



A summary of our contractual obligations at September 30, 2005 is as follows (in thousands):



|                                           |  |                          |       |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|------------------------------------------ |  | ------------------------ | ----- | ---- | - | ------ |  | ---- | ------ | ---- | - | ---------- |  | ----- | ------ |  | - | ------- |  | - | -------
|                                           |  | Payments Due by Period  
|                                           |  | Throughremainder of 2005 |       | 2006 |   | 2007   |  | 2008 |        | 2009 |   | Thereafter |  | Total
|Regularly scheduled principal payments     |  | $                        | 2,156 |      | $ | 9,369  |  | $    | 10,362 |      | $ | 4,763      |  | $     | 2,192  |  | $ | 71,663  |  | $ | 100,505
|Balloon principal payments due at maturity |  |                          |      |      |   | 4,000  |  |      |       |      |   |           |  |       |       |  |   | 141,738 |  |   | 145,738
|Interest paymentsfixed rate debt          |  |                          | 5,268 |      |   | 20,435 |  |      | 19,548 |      |   | 18,905     |  |       | 18,554 |  |   | 76,444  |  |   | 159,154
|Interest paymentsvariable rate debt (1)   |  |                          | 67    |      |   | 180    |  |      |       |      |   |           |  |       |       |  |   |        |  |   | 247    
|Capital commitments (2)                    |  |                          | 1,439 |      |   | 24,578 |  |      | 970    |      |   |           |  |       |       |  |   |        |  |   | 26,987 
|Operating lease (3)                        |  |                          | 32    |      |   | 127    |  |      | 127    |      |   | 127        |  |       | 53     |  |   |        |  |   | 466    
|                                           |  |                          |       |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|Total                                      |  | $                        | 8,962 |      | $ | 58,689 |  | $    | 31,007 |      | $ | 23,795     |  | $     | 20,799 |  | $ | 289,845 |  | $ | 433,097
|                                           |  |                          |       |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        



|(1) | The interest payments on the Four Points Centre mortgage loan are based on the prime rate of 6.75% as of September 30, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------



|(2) | Capital commitments of our company, our operating partnership and other consolidated subsidiaries include approximately $2.6 million of tenant improvement allowances and leasing
commissions for certain tenants in One Commerce Square and Two Commerce Square. In addition, we have an unfunded capital commitment of $24.4 million to our joint venture with CalSTRS. This unfunded commitment is subject to the approval of both us
and CalSTRS to acquire properties not yet identified or other cash uses. As the identification, approval and successful closing of such acquisitions is uncertain, the timing and amount of capital to be contributed is not known. We estimate, however,
that we will fund the remaining capital commitment in 2006.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Capital commitments of at least $20 million required under leases entered into at City National Plaza by City National Bank, Jones Day, and Fulbright & Jaworski are not included in the contractual obligations
table above as City National Plaza is an unconsolidated subsidiary. These capital expenditures must be completed by December 31, 2006 under the Jones Day lease and by December 31, 2008 under the City National Bank and Fulbright &
Jaworski leases. As of September 30, 2005, we have incurred approximately $15.0 million of this capital commitment.



|(3) | Represents the future minimum lease payments on our long-term operating lease for our corporate offices at City National Plaza. The table does not reflect available maturity
extension options.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



As of September 30, 2005, our company had investments in entities
owning unconsolidated properties with stated ownership percentages ranging from 21.3% 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 with outstanding debt as of September 30, 2005 (in thousands):



|                                                                                     |  |               |     |  |                 |         |              |         |    
|------------------------------------------------------------------------------------ |  | ------------- | --- |  | --------------- | ------- | ------------ | ------- | ---
|                                                                                     |  | Interest Rate |     |  | PrincipalAmount |         | MaturityDate |        
|City National Plaza (1)                                                              |  |               |     |  |                 |         |              |         |    
|Senior mortgage loan (2)                                                             |  | LIBOR + 1.75  | %   |  | $               | 200,000 |              | 7/11/06 |    
|Senior mezzanine loan (2)                                                            |  | LIBOR + 4.50  |     |  |                 | 57,464  |              | 7/11/06 |    
|Junior mezzanine loan                                                                |  | LIBOR + 6.15  |     |  |                 | 25,000  |              | 7/11/06 |    
|San Felipe Plaza senior mortgage loan                                                |  | 5.28          |     |  |                 | 101,500 |              | 8/11/10 |    
|2500 City West senior mortgage loan                                                  |  | 5.28          |     |  |                 | 70,000  |              | 8/11/10 |    
|Brookhollow Central I, II and III / Intercontinental Center senior mortgage loan (3) |  | LIBOR + 2.25  |     |  |                 | 53,000  |              | 8/9/07  |    
|2121 Market Street mortgage loan                                                     |  | 6.1           |     |  |                 | 19,731  |              | 8/1/33  | (4)
|Four Falls Corporate Center                                                          |  |               |     |  |                 |         |              |         |    
|Note A                                                                               |  | 5.31          |     |  |                 | 42,200  |              | 3/6/10  |    
|Note B (3) (5)                                                                       |  | LIBOR + 3.25  | (6) |  |                 | 1,600   |              | 3/6/10  |    
|Oak Hill Plaza/Walnut Hill Plaza                                                     |  |               |     |  |                 |         |              |         |    
|Note A                                                                               |  | 5.31          |     |  |                 | 35,300  |              | 3/6/10  |    
|Note B (3) (5)                                                                       |  | LIBOR + 3.25  | (6) |  |                 | 3,044   |              | 3/6/10  |    
|Valley Square Office Park                                                            |  |               |     |  |                 |         |              |         |    
|Note A (3) (5)                                                                       |  | LIBOR + 1.75  | (6) |  |                 | 27,500  |              | 3/1/07  |    
|Note B (3) (5)                                                                       |  | LIBOR + 3.25  | (6) |  |                 | 2,400   |              | 3/1/07  |    
|Reflections I mortgage loan                                                          |  | 5.23          |     |  |                 | 23,274  |              | 4/1/15  |    
|Reflections II mortgage loan                                                         |  | 5.22          |     |  |                 | 9,698   |              | 4/1/15  |    
|                                                                                     |  |               |     |  |                 |         |              |         |    
|                                                                                     |  |               |     |  | $               | 671,711 |              |         |    
|                                                                                     |  |               |     |  |                 |         |              |         |    



|(1) | We have purchased interest rate cap agreements for the outstanding City National Plaza loans. We are also required to purchase interest rate cap agreements for each future advance
under the $125 million senior mezzanine loan.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The mortgage and senior mezzanine loans are subject to exit fees equal to .25% and .5%, respectively, of the loan amounts, however, under certain circumstances the exit fees will be
waived.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | We have purchased interest rate cap agreements for these loans.
|--- | ---------------------------------------------------------------



|(4) | The 2121 Market Street mortgage loan is prepayable without penalty after May 1, 2013, at which date the outstanding principal amount of this debt 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | These loans are subject to exit fees equal to 1% of the loan amounts, however, under certain circumstances the exit fees will be waived.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



|(6) | These loans bear interest at the greater of the one month LIBOR or 2.25%, plus the applicable margin. As of September 30, 2005, one month LIBOR exceeds 2.25%.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Cash Flows



Comparison of nine months ended September 30, 2005 to nine months ended September 30, 2004



Cash and cash equivalents were $28.8 million as of September 30, 2005
and $4.6 million as of September 30, 2004.



Operating
Activities - Net cash provided by operating activities increased by $8.2 million to $15.1 million for the nine months ended September 30, 2005 compared to $6.9 million for the nine months ended September 30, 2004. The increase was
primarily a result of an increase in net income, non-cash expenses and distributions of $1.9 million from unconsolidated real estate entities, offset by a net increase in non-cash income. Net income (loss) changed by $7.7 million, from a net loss of
$4.2 million for the nine months ended September 30, 2004 to net income of $3.5 million for the nine months ended September 30, 2005. The increase in non-cash expenses was primarily a result of an increase of $8.3 million in equity in net
loss of unconsolidated/uncombined real estate entities, an increase in minority interest of $5.8 million, and an increase in depreciation and amortization expense of $3.5 million resulting from the combination of One Commerce Square effective
June 1, 2004. The net increase in non-cash income was the result of a $25.8 million gain from the purchase of the Two Commerce Square Junior B mezzanine loan in 2005, offset by a $975,000 gain on sale of real estate in 2004.



Further, net cash provided by operations increased due to net changes in
assets and liabilities of $5.5 million. This increase was a result of a $7.8 million change in other assets, primarily as a result of costs incurred related to the Offering in 2004, a $2.2 million change in prepaid rent at Two Commerce Square, a
$2.1 million change in rents and other receivables, and a $2.8 million decrease in deferred tax asset. The increase was offset by a $5.6 million change in accounts payable and other liabilities, a $2.4 million change in deferred interest payable,
and a $1.9 million decrease in due to affiliate.



Investing
Activities - Net cash used in investing activities increased by $16.0 million to $17.0 million for the nine months ended September 30, 2005 compared to $949,000 for the nine months ended September 30, 2004. The increase was primarily the
result of the acquisition of the properties in suburban Philadelphia and Houston in 2005 for $8.8 million and $15.3 million, respectively, by our joint venture with CalSTRS, an increase in net contributions to unconsolidated/uncombined real estate
entities of $4.7 million, and an increase in real estate improvements of $869,000. In addition, during the nine months ended September 30, 2004, cash of $2.6 million resulted from the consolidation of One Commerce Square and proceeds of $3.3
million was received from the sale of development property to an unaffiliated third party, with no corresponding amounts during the nine months ended September 30, 2005. These increases were offset by a $14.0 million decrease in short-term
investments, a change in restricted cash of $406,000 and a deposit of $6.0 million in 2004 in connection with the acquisition of the 50% interest in One Commerce Square.



Financing Activities - Net cash used in financing activities increased by $20.9 million to $25.8 million for the nine months
ended September 30, 2005 compared to $4.9 million for the nine months ended September 30, 2004. The increase was primarily a result of the repayment of the One Commerce Square mezzanine loan of $9.3 million in 2005, the purchase of the Two
Commerce Square Junior B mezzanine loan for $2.5 million in 2005, the principal payments of mortgage and other secured loans of $3.3 million, the payment of dividends to common stockholders and distributions to limited partners in the operating
partnership of $3.8 million in 2005, and net contributions of $2.3 million in 2004 from TPGI Predecessor.



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 above. Our existing multi-family residential property and the planned multi-family
residential property we are considering are both located in the Philadelphia central business district. The existing residential property is subject to short-term leases. As a result, inflation can often be offset by increased rental rates. However,
a weak economic environment may restrict our ability to raise rental rates.



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##### Table of Contents

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



A primary market risk faced by our company is interest rate risk. We intend to mitigate this risk by seeking to maintain a target debt-to-gross assets
ratio of approximately 60%, while continuously evaluating all available debt and equity resources and following established risk management policies and procedures. 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 intend to 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, 2005, our company had an insignificant level of outstanding consolidated floating rate debt.



The unconsolidated real estate entities have total debt of $671.7 million, of which $370.0 million bears interest floating
rates. As of September 30, 2005, we have purchased interest rate caps for the floating rate loans.



Our fixed and variable rate long-term debt at September 30, 2005 consisted of the following (in thousands):



|                               |  |            |         |   |               |   |       |       |  |   |         |  
|------------------------------ |  | ---------- | ------- | - | ------------- | - | ----- | ----- |  | - | ------- | -
|Year of Maturity               |  | Fixed Rate |         |   | Variable Rate |   |       | Total | 
|2005                           |  | $          | 2,156   |   |               | $ |      |       |  | $ | 2,156   |  
|2006                           |  |            | 9,369   |   |               |   | 4,000 |       |  |   | 13,369  |  
|2007                           |  |            | 10,361  |   |               |   |      |       |  |   | 10,361  |  
|2008                           |  |            | 4,763   |   |               |   |      |       |  |   | 4,763   |  
|2009                           |  |            | 2,192   |   |               |   |      |       |  |   | 2,192   |  
|Thereafter                     |  |            | 213,402 |   |               |   |      |       |  |   | 213,402 |  
|                               |  |            |         |   |               |   |       |       |  |   |         |  
|Total                          |  | $          | 242,243 |   |               | $ | 4,000 |       |  | $ | 246,243 |  
|                               |  |            |         |   |               |   |       |       |  |   |         |  
|Weighted average interest rate |  |            | 8.7     | % |               |   | 6.8   | %     |  |   | 8.6     | %



We utilize sensitivity
analyses to assess the potential effect of our variable rate debt. At September 30, 2005, our variable rate long-term debt represents 1.6% of our total long-term debt. If interest rates were to increase by 70 basis points, or by approximately
10% of the weighted average variable rate at September 30, 2005, the net impact would be increased costs of $28,000 per year.



As of September 30, 2005, the fair value of our mortgage and other secured loans aggregates $248.7 million, compared to the aggregated carrying value
of $247.5 million, including loan premium of $1.2 million.



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##### Table of Contents

|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.



We have devoted and continue to devote significant time and resources to initiatives intended to improve our internal control over financial reporting. We
have undertaken these actions in response to (i) managements and the Audit Committees directives to strengthen internal controls as a result of our growth and increased complexity, and (ii) changes in laws and regulations
affecting public companies, including our obligation to comply with Section 404 of the Sarbanes Oxley Act of 2002 as of fiscal year end December 31, 2005. In connection with our Section 404 compliance effort, we have implemented and
continue to implement initiatives to improve our internal controls by, among other things, formalizing, documenting and communicating certain policies and procedures, strengthening information technology controls, and improving authorization and
monitoring controls. All of these initiatives are being conducted under the oversight of the Audit Committee and senior management.



There was no change in our internal control over financial reporting that occurred during the three months ended September 30, 2005 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.



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##### Table of Contents

|PART | II. OTHER INFORMATION
|---- | ---------------------



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------



Use of Proceeds



We completed our Offering on October 13, 2004. We sold 14,285,714 shares of common stock at a price to the public of $12.00 per share, resulting in
net proceeds of $151.9 million.



In August 2005, we used $15.3
million of the proceeds to fund our co-investment obligation to our joint venture with CalSTRS for the acquisition of four properties in Houston. In addition, in October 2005, we used $10.5 million of the proceeds to exercise our option to acquire
46.5 acres of land for our Campus El Segundo development in El Segundo, California.



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##### Table of Contents

|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.



In accordance with SEC Release
33-8212, the following exhibits are being furnished, and are not being filed as part of this report or as a separate disclosure document, and are not being incorporated by reference into any registration statement filed under the Securities Act of
1933.

|     |  |                                                                                                    
|---- |  | ---------------------------------------------------------------------------------------------------
|     | 
|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 11, 2005



THOMAS PROPERTIES GROUP, INC.By:

/s/ James A. ThomasJames A. ThomasChief Executive OfficerBy:

/s/ Diana M. LaingDiana M. LaingChief Financial Officer




32