Edgar Filing: Cogdell Spencer Inc.

t65475_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 March 31, 2009

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file number 001-32649

COGDELL SPENCER INC.

(Exact name of registrant as specified in its charter)


	Maryland		20-3126457
	(State or other jurisdiction of		(I.R.S. Employer
	incorporation or organization)		Identification No.)

	4401 Barclay Downs Drive, Suite 300
	Charlotte, North Carolina		28209
	(Address of principal executive offices)		(Zip code)

(704) 940-2900

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filed, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer o	Accelerated filer x	Non-accelerated filer o	Smaller reporting company o.
	(Do not check if a smaller reporting company)

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: 19,488,061 shares of common stock, par value $.01 per share, outstanding as of May 5, 2009.

TABLE OF CONTENTS


		Page

PART I	FINANCIAL INFORMATION

Item 1	Financial Statements	1

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3	Quantitative and Qualitative Disclosures about Market Risk	32

Item 4	Controls and Procedures	32

PART II	Other Information

Item 1	Legal Proceedings	33

Item 1A	Risk Factors	33

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3	Defaults Upon Senior Securities	33

Item 4	Submission of Matters to a Vote of Security Holders	33

Item 5	Other Information	33

Item 6	Exhibits	33

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

COGDELL SPENCER INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(unaudited)


	March 31, 2009			December 31, 2008
Assets
Real estate properties:
Land	$	30,673		$	30,673
Buildings and improvements		502,690			501,259
Less: Accumulated depreciation		(75,447	)		(69,285	)
Net operating real estate properties		457,916			462,647
Construction in progress		21,881			15,314
Net real estate properties		479,797			477,961
Cash and cash equivalents		12,400			34,668
Restricted cash		12,686			12,964
Tenant and accounts receivable, net of allowance of $204 in 2009 and $194 in 2008		34,701			43,523
Goodwill		108,683			180,435
Trade names and trademarks		41,240			75,969
Intangible assets, net of accumulated amortization of $41,837 in 2009 and $38,054 in 2008		27,144			45,363
Other assets		31,484			29,207
Total assets	$	748,135		$	900,090

Liabilities and equity
Mortgage notes payable	$	243,030		$	240,736
Revolving credit facility		112,000			124,500
Term loan		100,000			100,000
Accounts payable		17,978			22,090
Billings in excess of costs and estimated earnings on uncompleted contracts		19,123			17,025
Deferred income taxes		14,510			34,176
Payable to prior Erdman shareholders		18,002			18,002
Other liabilities		48,481			60,567
Total liabilities		573,124			617,096
Commitments and contingencies
Equity:
Cogdell Spencer Inc. stockholders’ equity:
Preferred stock, $0.01 par value; 50,000 shares authorized, none issued or outstanding		—			—
Common stock; $0.01 par value; 200,000 shares authorized, 19,488 and 17,699 shares issued and outstanding in 2009 and 2008, respectively		195			177
Additional paid-in capital		292,971			275,380
Accumulated other comprehensive loss		(5,806	)		(5,106	)
Accumulated deficit		(152,042	)		(77,438	)
Total Cogdell Spencer Inc. stockholders’ equity		135,318			193,013
Noncontrolling interests:
Real estate partnerships		4,658			4,657
Operating partnership		35,035			85,324
Total noncontrolling interests		39,693			89,981
Total equity		175,011			282,994
Total liabilities and equity	$	748,135		$	900,090

See notes to consolidated financial statements.

COGDELL SPENCER INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(unaudited)


	For the Three Months Ended
	March 31, 2009			March 31, 2008
Revenues:
Rental revenue	$	19,665		$	18,691
Design-Build contract revenue and other sales		46,390			23,936
Property management and other fees		850			841
Development management and other income		2,799			19
Total revenues		69,704			43,487
Expenses:
Property operating and management		7,927			7,199
Design-Build contracts and development management		40,165			21,043
Selling, general, and administrative		6,667			4,306
Depreciation and amortization		10,111			9,025
Impairment charges		120,920			—
Total expenses		185,790			41,573
Income (loss) from operations before other income (expense) and income tax benefit		(116,086	)		1,914
Other income (expense):
Interest and other income		155			255
Interest expense		(6,025	)		(5,096	)
Equity in earnings of unconsolidated real estate partnerships		6			3
Total other income (expense)		(5,864	)		(4,838	)
Loss from operations before income tax benefit		(121,950	)		(2,924	)
Income tax benefit		19,626			358
Net loss		(102,324	)		(2,566	)
Net loss (income) attributable to the noncontrolling interest in:
Real estate partnerships		(92	)		13
Operating partnership		32,198			752
Net loss attributable to Cogdell Spencer Inc.	$	(70,218	)	$	(1,801	)

Net loss per share attributable to Cogdell Spencer Inc. - basic and diluted	$	(3.90	)	$	(0.13	)

Weighted average common shares - basic and diluted		17,995			14,364

See notes to consolidated financial statements.

COGDELL SPENCER INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands)

(unaudited)


							Cogdell Spencer Inc. Stockholders
	Total Equity			Comprehensive Loss			Accumulated Deficit			Accumulated Other Comprehensive Loss			Common Stock		Additional Paid-in Capital		Noncontrolling Interests in Operating Partnership			Noncontrolling Interests in Real Estate Partnerships

Balance at December 31, 2008	$	282,994		$	—		$	(77,438	)	$	(5,106	)	$	177	$	275,380	$	85,324		$	4,657
Comprehensive loss:
Net income (loss)		(102,324	)		(102,324	)		(70,218	)		—			—		—		(32,198	)		92
Unrealized gain (loss) on interest rate swaps, net of tax		(164	)		(164	)		—			(236	)		—		—		(108	)		180
Comprehensive loss		(102,488	)	$	(102,488	)
Conversion of operating partnership units to common stock		—						—			464			18		17,496		(17,050	)		—
Restricted stock and LTIP unit grants		817						—			—			—		79		738			—
Amortization of restricted stock grants		25						—			—			—		16		9			—
Dividends and distributions		(6,337	)					(4,386	)		—			—		—		(1,680	)		(271	)
Balance at March 31, 2009	$	175,011					$	(152,042	)	$	(5,806	)	$	195	$	292,971	$	35,035		$	4,658

See notes to consolidated financial statements.

COGDELL SPENCER INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands)

(unaudited)


							Cogdell Spencer Inc. Stockholders
	Total Equity			Comprehensive Loss			Accumulated Deficit			Accumulated Other Comprehensive Loss			Common Stock		Additional Paid-in Capital		Noncontrolling Interests in Operating Partnership			Noncontrolling Interests in Real Estate Partnerships
Balance at December 31, 2007	$	162,256		$	—		$	(50,751	)	$	(884	)	$	119	$	166,901	$	44,437		$	2,434
Comprehensive loss:
Net loss		(2,566	)		(2,566	)		(1,801	)		—			—		—		(752	)		(13	)
Unrealized loss on interest rate swaps, net of tax		(1,772	)		(1,772	)		—			(1,145	)		—		—		(568	)		(59	)
Comprehensive loss		(4,338	)	$	(4,338	)
Issuance of common stock and operating partnership units, net of costs		107,839						—			—			35		53,698		54,106			—
Investment in real estate costs contributed by partner in a consolidated real estate partnership		135						—			—			—		—		—			135
Redemptions of operating partnership units		(120	)											—				(120	)		—
Restricted stock and LTIP unit grants		728						—			—			—		94		634			—
Amortization of restricted stock grants		25						—			—			—		16		9			—
Dividends and distributions		(8,584	)					(5,397	)		—			—		—		(3,133	)		(54	)
Adjustment to record change of interest in the operating partnership due to the issuance of operating partnership units in excess of book value		14,502						—			—			—		14,502		—			—
Balance at March 31, 2008	$	272,443					$	(57,949	)	$	(2,029	)	$	154	$	235,211	$	94,613		$	2,443

COGDELL SPENCER INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)


	For the Three Months Ended
	March 31, 2009			March 31, 2008
Operating activities:
Net loss	$	(102,324	)	$	(2,566	)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization		10,111			9,060
Amortization of acquired above market leases and acquired below market leases, net		(131	)		(188	)
Straight line rental revenue		(118	)		(113	)
Amortization of deferred finance costs and debt premium		423			135
Deferred income taxes		(19,666	)		(562	)
Equity-based compensation		842			754
Equity in earnings of unconsolidated real estate partnerships		(6	)		(3	)
Impairment of intangible assets		120,920			—
Changes in operating assets and liabilities:
Tenant and accounts receivable and other assets		7,119			1,185
Accounts payable and other liabilities		(17,123	)		(12,159	)
Billings in excess of costs and estimated earnings on uncompleted contracts		2,098			1,741
Net cash provided by (used in) operating activities		2,145			(2,716	)
Investing activities:
Business acquisitions, net of cash acquired		—			(124,086	)
Investment in real estate properties		(7,048	)		(23,255	)
Purchase of noncontrolling interests in operating partnership		—			(174	)
Proceeds from sales-type capital lease		76			77
Purchase of corporate property, plant and equipment		(1,020	)		(47	)
Distributions received from unconsolidated real estate partnerships		5			5
Decrease (increase) in restricted cash		278			(21,071	)
Net cash used in investing activities		(7,709	)		(168,551	)
Financing activities:
Proceeds from mortgage notes payable		3,309			—
Repayments of mortgage notes payable		(997	)		(717	)
Proceeds from revolving credit facility		—			90,500
Repayments to revolving credit facility		(12,500	)		(53,700	)
Proceeds from term loan		—			100,000
Net proceeds from sale of common stock		—			53,733
Dividends and distributions		(6,022	)		(5,737	)
Equity contribution from noncontrolling interest in real estate partnerships		—			135
Distributions to noncontrolling interests in real estate partnerships		(271	)		(54	)
Payment of deferred financing costs		(223	)		(2,867	)
Net cash provided by (used in) financing activities		(16,704	)		181,293
Increase (decrease) in cash and cash equivalents		(22,268	)		10,026
Balance at beginning of period		34,668			3,555
Balance at end of period	$	12,400		$	13,581
Supplemental disclosure of cash flow information:
Cash paid for interest, net of capitalized interest	$	5,503		$	4,874
Cash paid for income taxes	$	1		$	—
Supplemental cash flow information - noncash investing and financing activities:
Operating Partnership Units converted into common stock	$	17,514		$	—
Investment in real estate properties included in accounts payable and other liabilities		898			714
Accrued dividends and distributions		6,088			8,551
Operating Partnership Units issued or to be issued in connection with the acquisition of a business or real estate property		—			81,347

See notes to consolidated financial statements.

COGDELL SPENCER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


1.	Business Description

Cogdell Spencer Inc., incorporated in Maryland in 2005, together with its subsidiaries (the “Company”) is a fully-integrated, self-administered, and self-managed real estate investment trust (“REIT”) that invests in specialty office buildings for the medical profession, including medical offices and ambulatory surgery and diagnostic centers. The Company focuses on the ownership, delivery, acquisition, and management of strategically located medical office buildings and other healthcare related facilities in the United States of America. The Company has been built around understanding and addressing the full range of specialized real estate needs of the healthcare industry. The Company operates its business through Cogdell Spencer LP, its operating partnership subsidiary (the “Operating Partnership”), and its subsidiaries. The Company has two segments: (1) Property Operations and (2) Design-Build and Development. Property Operations owns and manages properties and manages properties for third parties. Design-Build and Development provides strategic planning, design, construction, development, and project management services for properties owned by the Company and for third parties.


2.	Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and represent the assets and liabilities and operating results of the Company. The consolidated financial statements include the Company’s accounts, its wholly-owned subsidiaries, as well as the Operating Partnership and its subsidiaries. The consolidated financial statements also include any partnerships for which the Company or its subsidiaries is the general partner or the managing member and the rights of the limited partners do not overcome the presumption of control by the general partner or managing member. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company reviews its interests in entities to determine if the entity’s assets, liabilities, noncontrolling interests and results of activities should be included in the consolidated financial statements in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 46R, “Consolidation of Variable Interest Entities,” Emerging Issues Task Force (“EITF”) 04-5 “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” and Accounting Research Bulletin No. 51, “Consolidated Financial Statements.”

Liquidity

The current economic environment and the volatility in the credit markets have affected and, most likely, will continue to affect the Company’s results of operations and financial position and in particular, the results of operations and financial position of MEA Holdings, Inc., the parent company of Erdman Company, (together, “Erdman”), a subsidiary of the Company. In the first quarter of 2009, Erdman experienced delays in client project starts and some contract cancellations, and Erdman could face additional delays and cancellations over the next several quarters. Should Erdman’s clients continue to delay their project starts into the third quarter of 2009, it is probable that the Company would not be able to meet one or more of the financial covenants applicable to Erdman under the $100.0 million senior secured term facility (the “Term Loan”). Due to the uncertainty of Erdman’s future operating results, the Company proposed to the Term Loan lenders, and the Term Loan lenders have now executed a term sheet, which expires June 26, 2009, that allows the Company to repay $50.0 million of the outstanding Term Loan principal balance and upon such repayment to amend the Term Loan, as follows:

the minimum adjusted consolidated EBITDA covenant will be eliminated,

the maximum adjusted consolidated senior indebtedness to adjusted consolidated EBITDA will be modified to 3.50 to 1.00 through March 2011 and 3.00 to 1.00 from April 2011 to final maturity,

the interest rate will increase from LIBOR plus 3.50% to LIBOR plus 4.50%, and

a payment of a market based modification fee.

Should the Company decide to move forward with the $50.0 million Term Loan repayment, it will seek to fund such repayment through available cash and cash equivalents, sale of assets, future public and/or private offerings of common or preferred equity or debt, reducing costs and expenditures, joint venture financing, or a combination of these sources. There can be no assurances that the Company will be successful in raising any required funding. If the Company is unsuccessful in amending the terms of the Term Loan and violates its financial covenants, this could result in a default under the Term Loan and a default under the secured revolving credit facility (“Credit Facility”). This could cause the Company’s lenders to accelerate payment of the loans and may have a material adverse effect on the Company’s business, financial condition, and results of operations.

Interim Financial Information

The financial information for the three months ended March 31, 2009 and 2008 is unaudited, but includes all adjustments, consisting of normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows for such periods. Operating results for the three months ended March 31, 2009 and 2008 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal years of 2009 or 2008 or any other future period. These condensed consolidated financial statements do not include all disclosures required by GAAP for annual consolidated financial statements. The Company’s audited consolidated financial statements are contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

Use of Estimates in Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Significant estimates and assumptions are used by management in determining the percentage of completion revenue, useful lives of real estate properties and improvements, the initial valuations and underlying allocations of purchase price in connection with business and real estate property acquisitions, and projected cash flow and fair value estimates used for impairment testing. Actual results may differ from those estimates.

Fair Value Measurements

SFAS No. 157, “Fair Value Measurements” (“SFAS 157”) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company implemented the requirement of SFAS 157 for its financial assets and liabilities on January 1, 2008. In accordance with FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No 157,” the Company implemented SFAS 157 for all nonfinancial assets and nonfinancial liabilities on January 1, 2009. The adoption of SFAS No. 157 for non-financial assets and liabilities on January 1, 2009 did not have a material impact on the Company’s consolidated financial position or results of operations.

SFAS 157 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Fair values determined by Level 1 inputs utilize observable inputs such as quoted prices in active markets for identical assets or liabilities we have the ability to access. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In instances in which the inputs used to measure fair value may fall into different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety has been determined is based on the lowest level input significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

To obtain fair values, observable market prices are used if available. In some instances, observable market prices are not readily available for certain financial instruments and fair value is determined using present value or other techniques appropriate for a particular financial instrument. These techniques involve some degree of judgment and as a result are not necessarily indicative of the amounts the Company would realize in a current market exchange. The use of different assumptions or estimation techniques may have a material effect on the estimated fair value amounts.

See Note 6 regarding the write-down of the Company’s goodwill and certain intangible assets to implied fair market value. See Note 8 regarding the fair value of the Company’s interest rate swap agreements.

Per Share Data

Basic and diluted earnings per share are computed based upon the weighted average number of shares outstanding during the respective period. There were 4,050 and 10,324 shares of unvested restricted stock outstanding at March 31, 2009 and 2008, respectively, which were not included in the computation of diluted earnings per share because the effects of their inclusion would be anti-dilutive.

Concentrations and Credit Risk

The Company maintains its cash in commercial banks. Balances on deposit are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to specific limits. Balances on deposit in excess of FDIC limits are uninsured. At March 31, 2009, the Company had bank cash balances of $15.9 million in excess of FDIC insured limits.

One customer accounted for more than 10% of tenant and accounts receivable at March 31, 2009 and 2008. One customer or tenant accounted for more than 10% of revenue for the three months ended March 31, 2009, and no customers or tenants accounted for more than 10% of revenue for the three months ended March 31, 2008.

Recent Accounting Pronouncements

In December 2007, the FASB issued Statement of Financial Accounting Standard (“SFAS”) No. 141 (Revised), “Business Combinations — a replacement of FASB Statement No. 141” (“SFAS 141R), which significantly changes the principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement is effective prospectively, except for certain retrospective adjustments to deferred tax balances, for fiscal years beginning after December 15, 2008. The Company implemented SFAS 141R effective January 1, 2009. The adoption of SFAS 141R had no impact on the Company’s balance sheet, statement of operations, or changes in equity on January 1, 2009.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51” (“SFAS 160”). SFAS 160 changes the accounting and reporting for minority interests. Minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, except for the presentation and disclosure requirements, which will apply retrospectively. The Company implemented SFAS 160 effective January 1, 2009 and has applied the presentation and disclosure requirements retrospectively. The adoption of SFAS 160 has resulted in an increase to equity as of December 31, 2008 of $94.0 million for the reclassification of minority interest to equity for noncontrolling interests in consolidated entities. The adoption of SFAS 160 has resulted in a $4.1 million reclassification of Accumulated Other Comprehensive Loss from Cogdell Spencer Inc. stockholder equity to noncontrolling interests as of December 31, 2008. Also, net loss for the three months ended March 31, 2008 has increased by $0.8 million for the reclassification of loss allocated to noncontrolling interests; however, net loss attributable to Cogdell Spencer Inc., loss per common share – basic and diluted were not affected by this reclassification.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 is intended to provide users of financial statements with an enhanced understanding of derivative instruments and hedging activities by having the Company disclose: (1) how and why the Company uses derivative instruments; (2) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations; and (3) how derivative instruments and related hedged items affect the Company’s financial position, financial performance and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. SFAS 161 encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The adoption of SFAS 161 had no impact on the Company’s balance sheet, statement of operations, or changes in equity on January 1, 2009.


3.	Investments in Real Estate Partnerships

As of March 31, 2009, the Company had an ownership interest in eight limited liability companies or limited partnerships.

The following is a description of the unconsolidated entities:


	●	Cogdell Spencer Medical Partners LLC, a Delaware limited liability company, founded in 2008, has no assets as of March 31, 2009, and 20.0% owned by the Company;

	●	BSB Health/MOB Limited Partnership No. 2, a Delaware limited partnership, founded in 2002, owns nine medical office buildings, and 2.0% owned by the Company;

	●	Shannon Health/MOB Limited Partnership No. 1, a Delaware limited partnership, founded in 2001, owns ten medical office buildings, and 2.0% owned by the Company; and

	●	McLeod Medical Partners, LLC, a South Carolina limited liability company, founded in 1982, owns three medical office buildings, and 1.1% owned by the Company.

The following is a description of the consolidated entities:


	●	Genesis Property Holdings, LLC, a Florida limited liability company, founded in 2007, has one medical office building under construction, and 40.0% owned by the Company;

	●	Cogdell General Health Campus MOB, LP, a Pennsylvania limited partnership, founded in 2006, owns one medical office building, and 80.9% owned by the Company;

	●	Mebane Medical Investors, LLC, a North Carolina limited liability company, founded in 2006, owns one medical office building, and 35.1% owned by the Company; and

	●	Rocky Mount MOB, LLC, a North Carolina limited liability company, founded in 2002, owns one medical office building, and 34.5% owned by the Company.

The Company is the general partner or managing member of these real estate partnerships and manages the properties owned by these entities. The Company may receive design/build revenue, development fees, property management fees, leasing fees, and expense reimbursements from these real estate partnerships. For consolidated entities, these revenues and fees are eliminated in consolidation.

The consolidated entities are included in the Company’s consolidated financial statements because the limited partners or non-managing members do not have sufficient participation rights in the partnerships to overcome the presumption of control by the Company as the managing member or general partner. The limited partners or non-managing members have certain protective rights such as the ability to prevent the sale of building, the dissolution of the partnership or limited liability company, or the incurrence of additional indebtedness, in each case subject to certain exceptions.

The Company’s unconsolidated entities are accounted for under the equity method of accounting based on the Company’s ability to exercise significant influence as the entity’s managing member or general partner. The following is a summary of financial information for the limited liability companies and limited partnerships for the periods indicated. The summary of financial information set forth below reflects the financial position and operations of the unconsolidated real estate partnerships in their entirety, not just the Company’s interest in the entities (in thousands):


	March 31, 2009		December 31, 2008
Financial position:
Total assets	$	56,110	$	56,262
Total liabilities		49,631		49,831
Members’ equity		6,479		6,431

	For the Three Months Ended
	March 31, 2009		March 31, 2008
Results of operations:
Total revenues	$	3,068	$	3,068
Operating and general and administrative expenses		1,376		1,417
Net income		235		225

4.	Business Segments

The Company has two identified reportable segments: (1) Property Operations and (2) Design-Build and Development. The Company defines business segments by their distinct customer base and service provided. Each segment operates under a separate management group and produces discrete financial information, which is reviewed by the chief operating decision maker to make resource allocation decisions and assess performance.

The Company’s management evaluates the operating performance of its operating segments based on funds from operations (“FFO”) and funds from operations modified (“FFOM”). FFO, as defined by the National Association of Real Estate Investment Trusts, or NAREIT, represents net income (computed in accordance with GAAP), excluding gains from sales of property, plus real estate depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. The Company adjusts the NAREIT definition to add back noncontrolling interests in real estate partnerships before real estate related depreciation and amortization. FFOM adds back to FFO non-cash amortization of non-real estate related intangible assets associated with purchase accounting. The Company considers FFO and FFOM important supplemental measures of the Company’s operational performance. The Company believes FFO is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. The Company’s methodology may differ from the methodology for calculating FFO utilized by other equity REITs and, accordingly, may not be comparable to such other REITs. Further, FFO and FFOM do not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations, or other commitments and uncertainties.

The following tables represent the segment information for the three months ended March 31, 2009 and 2008 (in thousands):


Three months ended March 31, 2009:	Property Operations			Design-Build and Development			Unallocated and Other			Total
Revenues:
Rental revenue	$	19,665		$	—		$	—		$	19,665
Design-Build contract revenue and other sales		—			46,390			—			46,390
Property management and other fees		850			—			—			850
Development management and other income		—			2,799			—			2,799
Total revenues		20,515			49,189			—			69,704

Certain operating expenses:
Property operating and management		7,927			—			—			7,927
Design-Build contracts and development management		—			40,165			—			40,165
Selling, general, and administrative		—			4,514			—			4,514
Impairment charges		—			120,920			—			120,920
Total certain operating expenses		7,927			165,599			—			173,526
		12,588			(116,410	)		—			(103,822	)

Interest and other income		141			1			13			155
Corporate general and administrative expenses		—			—			(2,153	)		(2,153	)
Interest expense		—			—			(6,025	)		(6,025	)
Benefit from income taxes applicable to funds from operations modified		—			—			18,642			18,642
Non-real estate related depreciation and amortization		—			(193	)		(54	)		(247	)
Earnings from unconsolidated real estate partnerships, before real estate related depreciation and amortization		9			—			—			9
Noncontrolling interests in real estate partnerships, before real estate related depreciation and amortization		(245	)		—			—			(245	)
Funds from operations modified (FFOM)		12,493			(116,602	)		10,423			(93,686	)

Amortization of intangibles related to purchase accounting, net of income tax benefit		(42	)		(2,482	)		984			(1,540	)
Funds from operations (FFO)		12,451			(119,084	)		11,407			(95,226	)

Real estate related depreciation and amortization		(7,343	)		—			—			(7,343	)
Noncontrolling interests in real estate partnerships, before real estate related depreciation and amortization		245			—			—			245
Net income (loss)		5,353			(119,084	)		11,407			(102,324	)
Net loss (income) attributable to the noncontrolling interest in:
Real estate partnerships		(92	)		—			—			(92	)
Operating partnership		—			—			32,198			32,198
Net income (loss) attributable to Cogdell Spencer Inc.	$	5,261		$	(119,084	)	$	43,605		$	(70,218	)

Total assets	$	653,839		$	93,351		$	945		$	748,135

Three months ended March 31, 2008:	Property Operations			Design-Build and Development			Unallocated and Other			Total

Revenues:
Rental revenue	$	18,691		$	—		$	—		$	18,691
Design-Build contract revenue and other sales		—			23,936			—			23,936
Property management and other fees		841			—			—			841
Development management and other income		—			19			—			19
Total revenues		19,532			23,955			—			43,487

Certain operating expenses:
Property operating and management		7,199			—			—			7,199
Desin-Build conracts and development management		—			21,043			—			21,043
Selling, general, and administrative		—			1,881			—			1,881
Total certain operating expenses		7,199			22,924			—			30,123
		12,333			1,031			—			13,364

Interest and other income		161			40			54			255
Corporate general and administrative expenses		—			—			(2,425	)		(2,425	)
Interest expense		—			—			(5,096	)		(5,096	)
Provision for income taxes applicable to funds from operations modified		—			—			(64	)		(64	)
Non-real estate related depreciation and amortization		—			(115	)		(52	)		(167	)
Earnings from unconsolidated real estate partnerships, before real estate related depreciation and amortization		6			—			—			6
Noncontrolling interests in real estate partnerships, before real estate related depreciation and amortization		(78	)		—			—			(78	)
Funds from operations modified (FFOM)		12,422			956			(7,583	)		5,795

Amortization of intangibles related to purchase accounting, net of income tax benefit		(42	)		(1,028	)		422			(648	)
Funds from operations (FFO)		12,380			(72	)		(7,161	)		5,147

Real estate related depreciation and amortization		(7,791	)		—			—			(7,791	)
Noncontrolling interests in real estate partnerships, before real estate related depreciation and amortization		78			—			—			78
Net income (loss)		4,667			(72	)		(7,161	)		(2,566	)
Net loss (income) attributable to the noncontrolling interest in:
Real estate partnerships		13			—			—			13
Operating partnership		—			—			752			752
Net income (loss) attributable to Cogdell Spencer Inc.	$	4,680		$	(72	)	$	(6,409	)	$	(1,801	)

Total assets	$	561,503		$	350,926		$	799		$	913,228

Contracts

Revenue and billings to date on uncompleted contracts, from their inception, as of March 31, 2009 and December 31, 2008, are as follows (in thousands):


	March 31, 2009			December 31, 2008

Costs and estimated earnings on uncompleted contracts	$	151,752		$	165,891
Billings to date		(163,614	)		(176,210	)
Net billings in excess of costs and estimated earnings	$	(11,862	)	$	(10,319	)

These amounts are included in the consolidated balance sheet at March 31, 2009 and December 31, 2008 as shown below (in thousands). At March 31, 2009 and December 31, 2008, the Company had retainage receivables of $8.7 million and $8.8 million, respectively, which are included in “Tenant and accounts receivable” in the consolidated balance sheets. The Company estimates that $1.3 million of the March 31, 2009 retainages receivable balance will be collected after one year.


	March 31, 2009			December 31, 2008

Costs and estimated earnings in excess of billings (1)	$	7,261		$	6,706
Billings in excess of costs and estimated earnings		(19,123	)		(17,025	)
Net billings in excess of costs and estimated earnings	$	(11,862	)	$	(10,319	)

(1) Included in “Other assets” in the consolidated balance sheets

6.	Goodwill and Intangible Assets

As of March 31, 2009, the Company performed an interim impairment review of goodwill and intangible assets related to the Design-Build and Development business segment. The interim review was performed due to a decline in the Company’s stock price, a decline in the cash flow multiples for comparable public engineering and construction companies, and changes in the cash flow projections for the Design-Build and Development business segment resulting from a decline in backlog and delays and cancellations of client building projects. The following table presents information about the Company’s goodwill and certain intangible assets measured at fair value as of March 31, 2009 (in thousands):


	Recorded Value as of March 31, 2009		Fair Value Measurement as of March 31, 2009
Description	Recorded Value as of March 31, 2009		Level 1		Level 2		Level 3		Total Losses
Goodwill	$	108,683	$	—	$	—	$	108,683	$	(71,755	)
Trade names and trademarks		41,240		—		—		41,240		(34,728	)
Acquired signed contracts		1,398		—		—		5,281		—
Acquired proposals		2,129		—		—		2,129		(1,833	)
Acquired customer relationships		1,789		—		—		1,789		(12,604	)
	$	155,239	$	—	$	—	$	159,122	$	(120,920	)

See Note 2 for a discussion of the Company’s accounting policy regarding the fair value of financial and non-financial assets.

Based on this review, during the first quarter of 2009, the Company recorded a pre-tax, non-cash impairment charge of ($120.9 million) and the Company recognized a non-cash income tax benefit of $19.2 million, resulting in an after-tax impairment charge of ($101.7 million). The Company’s goodwill, amortizing and non-amortizing intangible assets, and deferred tax liabilities associated with the Design-Build and Development business segment have been reduced from the December 31, 2008 carrying amounts as a result of the impairment charge.

The goodwill impairment review involved a two-step process. The first step is a comparison of the reporting unit’s fair value to its carrying value. Fair value was estimated by using two approaches, an income approach and a market approach. Each approach was weighted 50% in the Company’s analysis. The income approach uses the reporting unit’s projected operating results and discounted cash flows using a weighted-average cost of capital that reflects current market conditions, which was 14.5% for the March 31, 2009, review. The cash flow projections use estimates of economic and market information over the projection period, including growth rates in revenues and costs and estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures, and changes in future working capital requirements. The market approach estimates fair value by applying cash flow multiples to the reporting unit’s operating performance. The multiples are derived from comparable publicly traded companies with similar operating and profitability characteristics. Additionally, the Company reconciled the total of the estimated fair values of all its reporting units to its market capitalization to determine if the sum of the individual fair values is reasonable compared to the external market indicators.

If the carrying value of the reporting unit is higher than its fair value, as it was for March 31, 2009, then an indication of impairment may exist and a second step must be performed to measure the amount of impairment. The amount of impairment is determined by comparing the implied fair value of the reporting unit’s goodwill to the carrying value of the goodwill calculated in the same manner as if the reporting unit was being acquired in a business combination. If the implied fair value of goodwill is less than the recorded goodwill, then an impairment charge for the difference would be recorded.

For non-amortizing intangible assets, the Company estimates fair value by applying an estimated market royalty rate, 2.0% for the March 31, 2009 review, to projected revenues and discounted using a weighted-average cost of capital that reflects current market conditions, which was 14.5% for the March 31, 2009 review.

The Company had goodwill of $108.7 million and $180.4 million at March 31, 2009 and December 31, 2008, respectively, and non-amortizing trade names and trademarks intangible assets of $41.2 million and $76.0 million at March 31, 2009 and December 31, 2008, respectively. Amortizing intangible assets consisted of the following for the periods shown (in thousands):


	March 31, 2009		December 31, 2008

Acquired signed contracts, net of accumulated amortization of $11,855 and $11,389 in 2009 and 2008, respectively.	$	1,398	$	1,864
Acquired proposals, net of accumulated amortization of $2,206 and $886 in 2009 and 2008, respectively.		2,129		5,282
Acquired customer relationships, net of accumulated amortization of $1,339 and $644 in 2009 and 2008, respectively.		1,789		15,088
Acquired above market leases, net of accumulated amortization of $799 and $748 in 2009 and 2008, respectively.		760		811
Acquired in place lease value and deferred leasing costs, net of accumulated amortization of $24,749 and $23,573 in 2009 and 2008, respectively.		16,296		17,472
Acquired ground leases, net of accumulated amortization of $420 and $389 in 2009 and 2008, respectively.		3,142		3,173
Acquired property management contracts, net of accumulated amortization of $467 and $425 in 2009 and 2008, respectively.		1,630		1,673
Total amortizing intangible assets, net	$	27,144	$	45,363

Amortization expense related to intangibles for the three months ended March 31, 2009 and 2008 was $3.7 million and $2.7 million, respectively. The Company expects to recognize amortization expense from the acquired intangible assets of $6.6 million, $3.3 million, $2.6 million, $1.4 million, and $1.1 million for the years ended December 31, 2009, 2010, 2011, 2012, and 2013 respectively, and $4.7 million thereafter. Goodwill and trade names and trademarks are not amortized and are associated with the Design-Build and Development business segment.


7.	Mortgage Notes Payable and Borrowing Agreements

Construction Financing

The Company obtained financing in an amount of $14.8 million from a construction loan on the West Tennessee MOB facility. The loan provides for interest-only payments during the construction period at a rate of one-month LIBOR plus 2.50%. In September 2010, the loan converts to an amortizing loan with monthly payments based on a 25-year amortization schedule at an interest rate of one-month LIBOR plus 2.50%. The Company has entered into a forward starting interest rate swap agreement that effectively fixes the interest rate at 6.19% after the construction period through maturity. The loan matures September 2020.

Mortgage Notes Payable

In May 2009, the Company refinanced the mortgage note payable for the Medical Arts Center of Orangeburg. There was no change in the principal balance. The interest rate is LIBOR plus 3.25% (3.75% as of March 31, 2009) with a 6.0% minimum interest rate and the maturity date is May 2014.

Scheduled Maturities

The Company’s mortgages are collateralized by property and principal and interest payments are generally made monthly. Scheduled maturities of mortgages, notes payable under the Credit Facility, and the Term Loan as of March 31, 2009 are as follows (in thousands):


For the period ending:
2009	$	49,854
2010		31,781
2011		238,067
2012		23,131
2013		13,855
Thereafter		98,148
		454,836
Unamortized premium		194
	$	455,030

As of March 31, 2009, the Company had approximately $49.9 million of principal and maturity payments remaining due in 2009 related to mortgage note payables. Of this $49.9 million, $30.0 million can be extended for one two-year period at the Company’s conditional option. The Company believes it will be able to refinance the 2009 balloon maturities as a result of the current loan to value ratios at individual properties and preliminary discussions with lenders. Based on those preliminary discussions, the stated interest rates (LIBOR plus spread or fixed) are comparable to the Company’s weighted average fixed rate at March 31, 2009. In addition, the Company has $42.4 million combined cash and cash equivalents and Credit Facility availability as of March 31, 2009, which exceeds the 2009 principal and maturity payments due in 2009, excluding the $30.0 million referred to above with the conditional extension option.

At March 31, 2009, the Company believes it was in compliance with all its loan covenants. See “Liquidity and Capital Resources.”

8.	Derivative Financial Instruments

Interest rate swap agreements are utilized to reduce exposure to variable interest rates associated with certain mortgage notes payable and credit facilities. These agreements involve an exchange of fixed and floating interest payments without the exchange of the underlying principal amount (the “notional amount”). The interest rate swap agreements are reported at fair value in the consolidated balance sheet within “Other assets” or “Other liabilities” and changes in the fair value, net of tax where applicable, are reported in accumulated other comprehensive income (loss) exclusive of ineffectiveness amounts. No interest rate swap agreements were believed to be ineffective as of March 31, 2009. The following table summarizes the terms of the agreements and their fair values at March 31, 2009 and December 31, 2008 (dollars in thousands):


	Notional Amount as of March 31, 2009
						Effective Date	Expiration Date	March 31, 2009				December 31, 2008
Entity			Receive Rate	Pay Rate		Effective Date	Expiration Date	Asset		Liability		Asset		Liability
West Tennessee Investors, LLC	$	14,770	1 Month LIBOR	3.69	%	9/1/2010	3/1/2019	$	—	$	609	$	—	$	—
Genesis Property Holdings, LLC		16,797	1 Month LIBOR	4.71	%	4/1/2010	10/1/2018		—		2,069		—		2,365
Cogdell Health Campus MOB, LP		10,729	1 Month LIBOR	4.03	%	3/14/2008	3/2/2015		—		1,049		—		1,064
River Hills Medical Associates, LLC		3,912	1 Month LIBOR	1.78	%	1/15/2009	1/31/2012		—		45		—		25
East Jefferson Medical Plaza		11,600	1 Month LIBOR	1.80	%	1/15/2009	12/23/2011		—		149		—		81
Beaufort Medical Plaza, LLC		4,858	1 Month LIBOR	3.80	%	8/18/2008	8/18/2011		—		293		—		296
St. Francis Community MOB, LLC		7,007	1 Month LIBOR	3.32	%	10/15/2008	6/15/2011		—		335		—		331
St. Francis Medical Plaza, LLC		7,526	1 Month LIBOR	3.32	%	10/15/2008	6/15/2011		—		360		—		356
Cogdell Spencer LP		30,000	1 Month LIBOR	3.11	%	10/15/2008	3/10/2011		—		1,229		—		1,218
MEA Holdings, LLC		100,000	1 Month LIBOR	2.82	%	4/1/2008	3/1/2011		—		3,609		—		3,458
Indianapolis MOB LLC		30,000	1 Month LIBOR	4.95	%	11/2/2006	10/31/2009		—		862		—		1,106
Roper MOB, LLC		9,095	1 Month LIBOR	4.95	%	11/2/2006	7/10/2009		—		135		—		221
								$	—	$	10,744	$	—	$	10,521

The following table presents information about the Company’s liabilities measured at fair value on a recurring basis as of March 31, 2009, and indicates the fair value hierarchy, as defined under SFAS 157 referenced in Note 2, of the valuation techniques utilized by the Company to determine such fair value (in thousands):


	Fair Value Measurements as of March 31, 2009
	Total		Level 1		Level 2		Level 3
Liabilities -
Derivative financial instruments	$	10,744	$	—	$	10,744	$	—

The valuation of derivative financial instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. The fair values of variable to fixed interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of future interest rates forward curves derived from observable market interest rate curves. To comply with the provisions of SFAS 157, the Company incorporates credit valuation adjustments to appropriately reflect both its nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.


9.	Equity

Cogdell Spencer Inc. Stockholders’ Equity

The following is a summary of changes of Cogdell Spencer Inc. common stock for the three months ended March 31, 2009 and 2008 (in thousands):

	For the Three Months Ended

	March 31, 2009		March 31, 2008
Common stock balance at beginning of period		17,699		11,948
Issuance of common stock		-		3,449
Conversion of OP units to common stock		1,776		-
Restricted stock grants		13		6
Common stock balance at end of period		19,488		15,403

The following is net loss attributable to Cogdell Spencer Inc. and transfer from noncontrolling interests for the three months ended March 31, 2009 and 2008 (in thousands):


	2009			2008
Net loss attributable to Cogdell Spencer Inc.	$	(70,218	)	$	(1,801	)
Increase in Cogdell Spencer Inc. additional paid-in capital for the conversion of OP units into common stock		17,496			-
Change from net loss attributable to Cogdell Spencer Inc. and transfers from noncontrolling interests	$	(52,722	)	$	(1,801	)

Noncontrolling Interests in Operating Partnership

As of March 31, 2009, there were 27.0 million OP Units outstanding, of which 19.5 million, or 72.2%, were owned by the Company and 7.5 million, or 27.8%, were owned by other partners, including certain directors, officers and other members of senior management. As of March 31, 2009, the fair market value of the OP Units not owned by the Company was $38.7 million, based on a market value of $5.10 per unit, which was the closing stock price of the Company’s shares on March 31, 2009. Cash distributions paid during the three months ended March 31, 2009 were $2.1 million.

Dividends and Distributions

On March 18, 2009, the Company announced that the Board of Directors had declared a quarterly distribution of $0.225 per share or OP Unit that was paid on April 21, 2009 to stockholders and holders of OP Units of record on March 31, 2009. The distribution covered the first quarter of 2009 and $6.1 million is included in “Other liabilities” in the March 31, 2009 condensed consolidated balance sheet.


10.	Incentive and Share-Based Compensation

The Company’s 2005 Long-Term Stock Incentive Plan (“2005 Incentive Plan”) provides for the grant of incentive awards to employees, directors and consultants to attract and retain qualified individuals and reward them for superior performance in achieving the Company’s business goals and enhancing stockholder value. Awards issuable under the incentive award plan include stock options, restricted stock, dividend equivalents, stock appreciation rights, long-term incentive plan units (“LTIP”), cash performance bonuses and other incentive awards. Only employees are eligible to receive incentive stock options under the incentive award plan. The Company has reserved a total of 1,000,000 shares of common stock for issuance pursuant to the incentive award plan, subject to certain adjustments set forth in the plan. Each LTIP issued under the incentive award plan will count as one share of stock for purposes of calculating the limit on shares that may be issued under the plan and the individual award limit discussed below.

In January 2009, the Company issued 500 LTIP units that vested upon issuance. The LTIP units were valued at $9.31 per unit, which was the Company’s closing stock price on the grant date. The Company recorded compensation expense of less than $0.1 million for the three months ended March 31, 2009.

In February 2009, each non-employee member of the Company’s Board of Directors was granted shares of restricted stock or LTIP units in the Operating Partnership that all vested upon issuance. Messrs. Georgius, Lee, Lubar, and Neugent were each granted 6,569 LTIP units and Mr. Jennings and Dr. Smoak were each granted 6,569 shares of restricted stock. The restricted stock and LTIP units were valued at $6.09 per share, which was the Company’s closing stock price on the grant date. The Company has recorded compensation expense of $0.2 million in connection with these issuances.

In February 2009, 3,334 LTIP units of previously issued, but unvested, LTIP units became vested based on 2008 Company performance. Compensation expense of $0.1 million was recorded for the year ended December 31, 2008. As of March 31, 2009, there were 114,535 unvested LTIP units that will vest if, and when, the Company achieves certain performance standards as provided in the awards. Any portions of the unvested LTIP units that are not vested as of December 2015 are forfeited. As of March 31, 2009, the Company assessed the probability of the performance conditions being achieved and has recorded no compensation expenses associated with 2009 Company performance.

In February 2009, the Company issued an aggregate of 80,586 LTIP units, all of which vested upon issuance, to certain employees based on 2008 performance goals. The LTIP units were valued at $6.09 per unit, which was the Company’s closing stock price on the grant date. The Company accrued compensation expense in 2008 related to this issuance.

In February 2009, the Company issued 4,926 LTIP units that will vest in February 2010 if employment is maintained through February 2010. The LTIP units were valued at $6.09 per unit, which was the Company’s closing stock price on the grant date. The Company will record compensation expense for the year ended December 31, 2009 of less than $0.1 million.

The following is a summary of restricted stock and LTIP unit activity for the three months ended March 31, 2009 (in thousands, except weighte