Cogdell Spencer Announces Third Quarter 2011 Results

For the Three Months Ended

For the Nine Months Ended

September 30,
2011

September 30,
2010

September 30,
2011

September 30,
2010

FFOM

$                       5,858

$                       5,322

$                     11,603

$                       9,623

Impact of:

Litigation loss (gain) provision

(339)

-

1,461

-

Litigation gain settlement

(500)

-

(500)

-

Impairment charges

-

-

-

10,848

CEO retirement expense

-

-

-

2,545

FFOM, excluding impact of items listed above

$                       5,019

$                       5,322

$                     12,564

$                     23,016

Per share and operating partnership unit data:

FFOM

$                         0.10

$                         0.09

$                         0.20

$                         0.18

FFOM, excluding impact of items listed above

0.09

0.09

0.21

0.43

For the Three Months Ended

For the Nine Months Ended

September 30,
2011

September 30,
2010

September 30,
2011

September 30,
2010

FFO

$                       5,627

$                       4,948

$                     10,909

$                       8,502

Impact of:

Litigation loss (gain) provision

(339)

-

1,461

-

Litigation gain settlement

(500)

-

(500)

-

Impairment charges

-

-

-

10,848

CEO retirement expense

-

-

-

2,545

FFO, excluding impact of items listed above

$                       4,788

$                       4,948

$                     11,870

$                     21,895

Per share and operating partnership unit data:

FFO

$                         0.10

$                         0.09

$                         0.19

$                         0.16

FFO, excluding impact of items listed above

0.09

0.09

0.20

0.41

For the Three Months Ended

For the Nine Months Ended

September 30,
2011

September 30,
2010

September 30,
2011

September 30,
2010

Net loss attributable to Cogdell Spencer Inc. common shareholders

$                      (1,834)

$                      (1,838)

$                      (9,950)

$                    (10,574)

Impact attributable to Cogdell Spencer Inc. common shareholders of:

Litigation loss (gain) provision

(296)

-

1,275

-

Litigation gain settlement

(437)

-

(437)

-

Impairment charges

-

-

-

9,280

CEO retirement expense

-

-

-

2,171

Net income (loss) attributable to Cogdell Spencer Inc. common shareholders, excluding impact of items above

$                      (2,566)

$                      (1,838)

$                      (9,111)

$                          877

Per share data:

Net loss attributable to Cogdell Spencer Inc. common shareholders

$                        (0.04)

$                        (0.04)

$                        (0.19)

$                        (0.24)

Net income (loss) attributable to Cogdell Spencer Inc. common shareholders, excluding impact of items listed above

(0.05)

(0.04)

(0.18)

0.01

Net Rentable

Number of

Square Feet

Percentage

Properties

(in millions)

Leased

Stabilized properties:

Wholly-owned

61

3.33

Consolidated joint ventures

7

0.51

Total stabilized properties

68

3.84

92.3%

Fill-up properties(1):

2

0.11

66.5%

Total consolidated properties

70

3.95

Unconsolidated joint venture properties

3

0.21

Properties managed for third parties

44

1.99

Total portfolio

117

6.15

(1) Fill-up properties are newly available properties that have not achieved underwritten stabilized occupancy.

For the Three Months Ended

For the Nine Months Ended

September 30,
2011

September 30,
2010

September 30,
2011

September 30,
2010

Litigation gain (loss) provision

$                          339

$                             -

$                      (1,461)

$                             -

Litigation gain settlement

500

-

500

-

Goodwill and intangible asset impairment charges, net of income tax benefit

-

-

-

(10,848)

CEO retirement compensation expense, net of income tax expense

-

-

-

(2,545)

Guidance Range for the

Year Ending December 31, 2011

Low

High

(In thousands, except per share and unit data)

Net income (loss)

$ (3,500)

- -

$ (3,200)

Plus real estate related depreciation and amortization

28,500

- -

30,000

Less noncontrolling interests in real estate partnerships, before real estate

  related depreciation and amortization

(2,500)

- -

(2,500)

Less dividends on preferred stock

(6,300)

- -

(6,300)

     Funds from Operations (FFO)

16,200

- -

18,000

Plus amortization of intangibles related to purchase accounting, net of income tax benefit

500

- -

500

     Funds from Operations Modified (FFOM)

16,700

- -

18,500

Litigation gains and losses, net

1,000

- -

1,000

     FFOM, excluding litigation gains and losses

$ 17,700

- -

$ 19,500

FFO per share and unit - diluted

$     0.28

- -

$     0.31

FFOM per share and unit - diluted

$     0.29

- -

$     0.32

FFO per share and unit - diluted, excluding litigation gains and losses

$     0.29

- -

$     0.32

FFOM per share and unit - diluted, excluding litigation gains and losses

$     0.30

- -

$     0.33

Weighted average shares and units outstanding - basic and diluted

58,500

- -

58,500

Cogdell Spencer Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(unaudited)

September 30, 2011

December 31, 2010

Assets

Real estate properties:

  Operating real estate properties

$                   709,091

$                  634,291

  Less: Accumulated depreciation

(139,212)

(119,141)

     Total operating real estate properties, net

569,879

515,150

  Construction in progress

31,546

22,243

        Total real estate properties, net

601,425

537,393

Cash and cash equivalents

16,033

12,203

Restricted cash

2,952

6,794

Tenant and accounts receivable, net

14,831

11,383

Goodwill

22,882

22,882

Intangible assets, net

20,943

18,601

Other assets

30,718

23,684

  Total assets

$                   709,784

$                  632,940

Liabilities and Equity

Mortgage notes payable

$                   271,454

$                  317,303

Term loan

80,800

-

Revolving credit facility

82,000

45,000

Accounts payable

15,782

11,368

Billings in excess of costs and estimated earnings on uncompleted contracts

1,284

1,930

Other liabilities

60,886

39,819

  Total liabilities

512,206

415,420

Commitments and contingencies

Equity:

  Cogdell Spencer Inc. stockholders' equity:

     Preferred stock, $0.01 par value; 50,000 shares authorized:

        8.5000% Series A Cumulative Redeemable Perpetual Preferred Shares (liquidation

           preference $25.00 per share), 2,940 and 2,600 shares issued and outstanding in

           2011 and 2010, respectively

73,500

65,000

     Common stock, $0.01 par value, 200,000 shares authorized, 51,080 and 50,870 shares

        issued and outstanding in 2011 and 2010, respectively

511

509

     Additional paid-in capital

419,564

417,960

     Accumulated other comprehensive loss

(5,852)

(3,339)

     Accumulated deficit

(312,939)

(287,798)

        Total Cogdell Spencer Inc. stockholders' equity

174,784

192,332

  Noncontrolling interests:

     Real estate partnerships

8,057

6,452

     Operating partnership

14,737

18,736

        Total noncontrolling interests

22,794

25,188

Total equity

197,578

217,520

  Total liabilities and equity

$                   709,784

$                  632,940

Cogdell Spencer Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30,
2011

September 30,
2010

September 30,
2011

September 30,
2010

Revenues:

Rental revenue

$                     24,762

$                     22,765

$                     70,952

$                     65,004

Design-Build contract revenue and other sales

21,619

15,734

54,500

66,406

Property management and other fees

789

809

2,325

2,388

Development management and other income

7

1

122

122

Total revenues

47,177

39,309

127,899

133,920

Expenses:

Property operating and management

10,069

9,067

29,180

25,652

Design-Build contracts and development management

18,567

13,806

47,557

49,832

Selling, general, and administrative

5,198

6,684

18,227

21,850

Depreciation and amortization

8,623

8,293

24,439

24,558

Impairment charges

-

-

-

13,635

Total expenses

42,457

37,850

119,403

135,527

Income (loss) from continuing operations before other income (expense) and income tax benefit (expense)

4,720

1,459

8,496

(1,607)

Other income (expense):

Interest and other income

641

151

978

446

Interest expense

(5,564)

(5,851)

(15,441)

(16,332)

Interest rate derivative expense

-

(7)

-

(32)

Equity in earnings (loss) of unconsolidated real estate partnerships

(1)

3

11

5

Total other income (expense)

(4,924)

(5,704)

(14,452)

(15,913)

Loss from continuing operations before income tax benefit (expense)

(204)

(4,245)

(5,956)

(17,520)

Income tax benefit (expense)

(32)

2,294

(69)

5,741

Net loss from continuing operations

(236)

(1,951)

(6,025)

(11,779)

Discontinued operations:

Income from discontinued operations

-

-

-

6

Gain on sale of discontinued operations

-

-

-

264

Net loss  

(236)

(1,951)

(6,025)

(11,509)

Net income attributable to the noncontrolling interests in real estate partnerships

(290)

(172)

(725)

(660)

Net loss attributable to the noncontrolling interests in operating partnership

254

285

1,486

1,595

Dividends on preferred stock

(1,562)

-

(4,686)

-

Net loss attributable to Cogdell Spencer Inc. common stockholders

$                      (1,834)

$                      (1,838)

$                      (9,950)

$                    (10,574)

Per share data - basic and diluted

Loss from continuing operations attributable to Cogdell Spencer Inc. common stockholders

$                        (0.04)

$                        (0.04)

$                        (0.19)

$                        (0.24)

Income from discontinued operations attributable to Cogdell Spencer Inc. common stockholders

-

-

-

0.01

Net loss per share attributable to Cogdell Spencer Inc. common stockholders

$                        (0.04)

$                        (0.04)

$                        (0.19)

$                        (0.23)

Weighted average common shares - basic and diluted

51,080

50,083

51,049

46,348

Net loss attributable to Cogdell Spencer Inc. common stockholders:

Continuing operations, net of tax

$                      (1,834)

$                      (1,838)

$                      (9,950)

$                    (10,805)

Discontinued operations

-

-

-

231

Net loss attributable to Cogdell Spencer Inc. common stockholders

$                      (1,834)

$                      (1,838)

$                      (9,950)

$                    (10,574)

Cogdell Spencer Inc.

Business Segment Reporting

(In thousands)

(unaudited)

Three months ended September 30, 2011:

Property
Operations

Design-Build
and
Development

Intersegment Eliminations

Unallocated
and Other

Total

Revenues:

  Rental revenue

$      24,762

$                 -

$                   -

$               -

$ 24,762

  Design-Build contract revenue and other sales

-

34,072

(12,453)

-

21,619

  Property management and other fees

789

-

-

-

789

  Development management and other income

-

288

(281)

-

7

     Total revenues

25,551

34,360

(12,734)

-

47,177

Certain operating expenses:

  Property operating and management

10,046

-

-

-

10,046

  Design-Build contracts and development management

-

31,135

(12,568)

-

18,567

  Selling, general, and administrative

-

3,110

-

-

3,110

     Total certain operating expenses

10,046

34,245

(12,568)

-

31,723

15,505

115

(166)

-

15,454

Interest and other income

136

500

-

5

641

Corporate general and administrative expenses

-

-

-

(2,088)

(2,088)

Interest expense

-

-

-

(5,564)

(5,564)

Income tax expense applicable to funds from operations modified

-

-

-

(32)

(32)

Non-real estate related depreciation and amortization

-

(270)

-

(45)

(315)

Earnings from unconsolidated real estate partnerships, before real estate related depreciation and amortization

1

-

-

-

1

Noncontrolling interests in real estate partnerships, before real estate related depreciation and amortization

(677)

-

-

-

(677)

Dividends on preferred stock

-

-

-

(1,562)

(1,562)

     Funds from operations modified (FFOM)

14,965

345

(166)

(9,286)

5,858

Amortization of intangibles related to purchase accounting

(42)

(189)

-

-

(231)

     Funds from operations (FFO)

14,923

156

(166)

(9,286)

5,627

Real estate related depreciation and amortization

(8,079)

-

-

-

(8,079)

Noncontrolling interests in real estate partnerships, before real estate related depreciation and amortization

677

-

-

-

677

Acquisition-related expenses

(23)

(23)

Dividends on preferred stock

-

-

-

1,562

1,562

     Net income (loss)

$        7,498

$               156

$               (166)

$        (7,724)

$    (236)

Cogdell Spencer Inc.

Business Segment Reporting

(In thousands)

(unaudited)

Nine months ended September 30, 2011:

Property
Operations

Design-Build
and
Development

Intersegment Eliminations

Unallocated
and Other

Total

Revenues:

  Rental revenue

$      70,952

$                 -

$                   -

$               -

$ 70,952

  Design-Build contract revenue and other sales

-

89,598

(35,098)

-

54,500

  Property management and other fees

2,325

-

-

-

2,325

  Development management and other income

-

1,738

(1,616)

-

122

     Total revenues

73,277

91,336

(36,714)

-

127,899

Certain operating expenses:

  Property operating and management

28,675

-

-

-

28,675

  Design-Build contracts and development management

-

82,631

(35,074)

-

47,557

  Selling, general, and administrative

-

11,772

-

-

11,772

     Total certain operating expenses

28,675

94,403

(35,074)

-

88,004

44,602

(3,067)

(1,640)

-

39,895

Interest and other income

444

516

-

18

978

Corporate general and administrative expenses

-

-

-

(6,455)

(6,455)

Interest expense

-

-

-

(15,441)

(15,441)

Income tax expense applicable to funds from operations modified

-

-

-

(69)

(69)

Non-real estate related depreciation and amortization

-

(825)

-

(132)

(957)

Earnings from unconsolidated real estate partnerships, before real estate related depreciation and amortization

19

-

-

-

19

Noncontrolling interests in real estate partnerships, before real estate related depreciation and amortization

(1,681)

-

-

-

(1,681)

Dividends on preferred stock

-

-

-

(4,686)

(4,686)

     Funds from operations modified (FFOM)

43,384

(3,376)

(1,640)

(26,765)

11,603

Amortization of intangibles related to purchase accounting

(127)

(567)

-

-

(694)

     Funds from operations (FFO)

43,257

(3,943)

(1,640)

(26,765)

10,909

Real estate related depreciation and amortization

(22,796)

-

-

-

(22,796)

Noncontrolling interests in real estate partnerships, before real estate related depreciation and amortization

1,681

-

-

-

1,681

Acquisition-related expenses

(505)

-

-

-

(505)

Dividends on preferred stock

-

-

-

4,686

4,686

     Net income (loss)

$      21,637

$          (3,943)

$            (1,640)

$      (22,079)

$ (6,025)

Cogdell Spencer Inc.

Reconciliation of Net Loss to Funds from Operations Modified (FFOM) (1)

(In thousands, except per share and unit amounts)

(unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30,
2011

September 30,
2010

September 30,
2011

September 30,
2010

Net loss

$                         (236)

$                      (1,951)

$                      (6,025)

$                    (11,509)

Add:

  Real estate related
   depreciation and amortization:

Wholly-owned and consolidated properties

8,077

7,372

22,788

21,837

Unconsolidated real estate partnerships

2

3

8

9

Acquisition-related expenses

23

-

505

-

Less:

  Noncontrolling interests in real
   estate partnerships,  Before
   real estate related
   depreciation and amortization

(677)

(476)

(1,681)

(1,571)

  Dividends on preferred stock

(1,562)

-

(4,686)

-

  Gain on sale of real estate
   property

-

-

-

(264)

Funds from Operations (FFO) (1)

5,627

4,948

10,909

8,502

  Amortization of intangibles
   related to purchase
   accounting, net of income
   tax benefit

231

374

694

1,121

Funds from Operations Modified (FFOM) (1)

$                       5,858

$                       5,322

$                     11,603

$                       9,623

FFO per share and unit - basic and diluted

$                         0.10

$                         0.09

$                         0.19

$                         0.16

FFOM per share and unit - basic and diluted

$                         0.10

$                         0.09

$                         0.20

$                         0.18

Weighted average shares and units outstanding - basic and diluted

58,503

57,849

58,469

54,134

(1) FFO is a supplemental non-GAAP financial measure used by the real estate industry to measure the operating performance of real estate companies.  FFOM adds back to traditionally defined FFO non-cash amortization of non-real estate related intangible assets associated with purchase accounting.  We present FFO and FFOM because we consider them important supplemental measures of operational performance.  We believe 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.  We believe that FFOM allows securities analysts, investors and other interested parties to evaluate current period results to results prior to the acquisition of MEA Holdings, Inc.  FFO and FFOM are 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 and FFOM excludes depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, they provide performance measures that, when compared year over year, reflect the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing a perspective not immediately apparent from net income.  We compute FFO in accordance with standards established by the Board of Governors of NAREIT in its March 1995 White Paper (as amended in November 1999 and April 2002), which may differ from the methodology for calculating FFO and FFOM utilized by other equity REITs and, accordingly, may not be comparable to such other REITs.  We adjust the NAREIT definition to add back noncontrolling interests in consolidated real estate partnerships before real estate related depreciation and amortization, acquisition-related expenses, and deduct dividends on preferred stock.  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.  FFO and FFOM should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as an indicator of our performance, nor are they indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions.