Cogdell Spencer Sees First Quarter Loss from One-Time Charge

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CHARLOTTE, N.C. — Cogdell Spencer Inc., a real estate investment trust (REIT) that invests in specialty office buildings, including medical offices, and ambulatory surgery and diagnostic centers, and provides strategic planning and design and construction services for the medical profession, announces financial results for the quarter ended March 31.

First Quarter 2009 Results
For the first quarter of 2009, Cogdell Spencer Inc. reports funds from operations modified (FFOM) of $8 million, or 30 cents per share and operating partnership unit, excluding an after-tax, non-cash impairment charge of $101.7 million, or $3.79 per share and operating partnership unit, related to the design-build and development business segment's goodwill and intangible assets. FFOM including the impairment charge described above was $93.7 million, or $3.49 per share and operating partnership unit, for the first quarter of 2009. During the same period in 2008, FFOM was $5.8 million, or 29 cents per share and operating partnership unit. FFOM adds back to traditionally defined funds from operations (FFO) non-cash amortization of non-real estate related intangible assets associated with purchase accounting.

FFO for the first quarter of 2009 was $6.5 million, or 24 cents per share and operating partnership unit, excluding the impairment charge described above. FFO including the impairment charge was $95.2 million, or $3.54 per share and operating partnership unit, for the first quarter of 2009. During the same period in 2008, FFO was $5.1 million, or $0.26 per share and operating partnership unit.

Net income (loss) attributable to Cogdell Spencer Inc. for the first quarter of 2009 was $400,000, or 2 cents per share, excluding the impairment charge described above. Net income (loss) attributable to Cogdell Spencer Inc. including the impairment charge was $70.2 million, or $3.90 per share, for the first quarter of 2009. During the same period in 2008, net income (loss) was $1.8 million, or 13 cents per share.

As of March 31, the company's portfolio consisted of 62 consolidated wholly-owned and joint venture properties, comprising a total of approximately 3.3 million net rentable square feet. The overall percentage of leased space at the company's 61 in-service, consolidated properties as of March 31 was 91.5 percent. In addition, the company has three unconsolidated joint venture properties and manages 51 properties for third party clients totaling approximately 2.5 million net rentable square feet.

Impairment charge
The company performed an interim impairment review of goodwill and intangible assets as of March 31, 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. Based on this review, during the first quarter of 2009, the company recorded a pre-tax, non-cash impairment charge of $120.9 million, or $4.50 per share and operating partnership unit, and the company recognized a non-cash income tax benefit of $19.2 million, or 71 cents per share and operating partnership unit, resulting in an after-tax impairment charge of $101.7 million, or $3.79 per share and operating partnership unit.

Development
In January, the company began construction on a five-story, 107,000 square foot medical office building development project in Jackson, Tenn. The $21.1 million West Tennessee MOB project is 75 percent pre-leased and scheduled for completion during first quarter 2010. The Company expects to own approximately 50 percent of the building through a joint venture with physician investors. 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 percent. 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 percent. The Company has entered into a forward starting interest rate swap agreement that effectively fixes the interest rate at 6.19 percent after the construction period through maturity. The loan matures September 2020.

Dividend
On March 18, the company announced that its board of directors had declared a quarterly dividend of $0.225 per share and operating partnership unit that was paid in cash on April 21 to holders of record on March 31. The dividend covered the company's first quarter of 2009.

Source: Cogdell Spencer Inc.

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