Cogdell Spencer Inc. Reports First Quarter 2009 Financial Results

CHARLOTTE, N.C., May 11 /PRNewswire-FirstCall/ -- Cogdell Spencer Inc. (NYSE:
CSA), 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, 2009.

First Quarter 2009 Results
For the first quarter of 2009, Cogdell Spencer Inc. reports Funds from
Operations Modified (FFOM) of $8.0 million, or $0.30 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
$0.29 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 $0.24 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 ($0.4 million), or ($0.02) 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 ($0.13) per share.

As of March 31, 2009, 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, 2009,
was 91.5%. 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, 2009, 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 $0.71 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 2009, the Company began construction on a five-story, 107,000
square foot medical office building development project in Jackson, Tennessee.
The $21.1 million West Tennessee MOB project is 75% pre-leased and scheduled
for completion during first quarter 2010. The Company expects to own
approximately 50% 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%. 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.

Dividend
On March 18, 2009, 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, 2009 to holders of record on March 31,
2009. The dividend covered the Company's first quarter of 2009.

Outlook
The Company's management team expects that FFOM per share and operating
partnership unit, for the year ending December 31, 2009, will be between $0.90
and $0.98, excluding the impairment charge described above. A reconciliation
of the range of projected net income (loss) to projected FFOM for the year
ending December 31, 2009 is below:

Guidance Range for the
Year Ending December 31, 2009
Low High

(In thousands, except per share and
operating partnership unit data)
Net loss $(107,650) -- $(105,450)
Plus real estate related depreciation
and amortization 27,500 -- 27,500
Less noncontrolling interests in real
estate partnerships, before real estate
related depreciation and amortization (800) -- (800)
Funds from Operations (FFO) (80,950) -- (78,750)
Plus amortization of intangibles related
to purchase accounting, net of income
tax benefit 4,000 -- 4,000
Funds from Operations Modified (FFOM) (76,950) -- (74,750)
Impairment charges, net of income
tax benefit 101,700 -- 101,700
FFOM, excluding non-cash impairment
charge $24,750 $26,950

FFO per share and unit - diluted $(2.94) -- $(2.86)
FFOM per share and unit - diluted $(2.80) -- $(2.72)
FFOM per share and unit - diluted,
excluding non-cash impairment charge $0.90 $0.98

Weighted average shares and units
outstanding - diluted 27,500 -- 27,500

Supplemental operating and financial data are available in the Investor
Relations section of the Company's Web site at www.cogdellspencer.com.

The reported results are unaudited and there can be no assurance that the
results will not vary from the final information for the three months ended
March 31, 2009. In the opinion of management, all adjustments considered
necessary for a fair presentation of these reported results have been made.

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. The
Company presents FFO and FFOM because it considers them important supplemental
measures of 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 a perspective not immediately
apparent from net income. The Company computes 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 utilized by other equity REITs and,
accordingly, may not be comparable to such other REITs. The Company adjusts
the NAREIT definition to add back noncontrolling interests in consolidated
real estate partnerships before real estate related depreciation and
amortization. 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 the Company's
performance, nor are they indicative of funds available to fund its cash
needs, including its ability to pay dividends or make distributions. A
reconciliation from GAAP net loss to FFO and FFOM is included as an attachment
to this press release.

Conference Call
Cogdell Spencer Inc. invites you to attend the Company's First Quarter 2009
Conference Call on Tuesday, May 12, 2009 at 10:00 a.m. (EDT). The number to
call for this teleconference is (800) 860-2442 (domestic) or (412) 858-4600
(international), and no passcode is required. In addition, the conference
call can be accessed via the Internet at www.cogdellspencer.com through the
"Q1 2009 Earnings Conference Call" link on the Investor Relations page.

A playback will be available until May 20, 2009. To access the playback,
please dial (877) 344-7529 (domestic) or (412) 317-0088 (international) and
enter the passcode: 423956. The replay can also be accessed via the Internet
at www.cogdellspencer.com through the "Q1 2009 Earnings Conference Call" link
on the Investor Relations page.

About Cogdell Spencer Inc.
Charlotte-based Cogdell Spencer Inc. (NYSE: CSA) is a fully-integrated,
self-administered, and self-managed real estate investment trust 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. Learn more about Cogdell Spencer Inc. and its subsidiaries at
www.cogdellspencer.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. The forward-looking
statements reflect the Company's views about future events and are subject to
risks, uncertainties, assumptions and changes in circumstances that may cause
actual results to differ materially. Factors that may contribute to these
differences include, but are not limited to the following: our business
strategy; our ability to comply with financial covenants in our debt
instruments; our ability to obtain future financing arrangements; estimates
relating to our future distributions; our understanding of our competition;
our ability to renew our ground leases; changes in the reimbursement available
to our tenants by government or private payors; our tenants' ability to make
rent payments; defaults by tenants; Erdman's customers' access to financing;
delays in project starts and cancellations by Erdman customers; the timing of
capital expenditures by healthcare systems and providers; market trends; and
projected capital expenditures.

For a further list and description of such risks and uncertainties, see the
reports filed by the Company with the Securities and Exchange Commission,
including the Company's Form 10-K for the year ended December 31, 2008.
Although the Company believes the expectations reflected in such
forward-looking statements are based on reasonable assumptions, it can give no
assurance that its expectations will be realized. The Company disclaims any
intention or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.

Cogdell Spencer Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(unaudited)

March 31, 2009 December 31, 2008

Assets

Real estate properties:
Operating real estate properties $533,363 $531,932
Less: Accumulated depreciation (75,447) (69,285)
Total operating real estate
properties, net 457,916 462,647
Construction in progress 21,881 15,314
Total real estate properties, net 479,797 477,961
Cash and cash equivalents 12,400 34,668
Restricted cash 12,686 12,964
Tenant and accounts receivable, net 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

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 from operations before other
income (expense) (116,086) 1,914

Other income (expense):
Interest and other income, net 155 255
Interest expense (6,025) (5,096)
Equity in earnings of unconsolidated
partnerships 6 3
Total other income (expense) (5,864) (4,838)

Income (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 (1) 17,995 14,364

(1) 5 and 11 shares of unvested restricted common stock are
anti-dilutive due to the net loss for the three months ended
March 31, 2009 and 2008, respectively.

Cogdell Spencer Inc.
Business Segment Reporting
(In thousands)
(unaudited)

Three months ended March 31, 2009:

Design-Build
Property and Unallocated
Operations Development 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)

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
March 31, 2009 March 31, 2008

Net loss $(102,324) $(2,566)
Add:
Real estate related depreciation
and amortization:
Wholly-owned and consolidated
properties 7,340 7,788
Unconsolidated real estate
partnerships 3 3
Less:
Noncontrolling interests in real estate
partnerships, before real estate related
depreciation and amortization (245) (78)
Funds from Operations (FFO) (1) (95,226) 5,147
Amortization of intangibles related to
purchase accounting, net of income
tax benefit 1,540 648
Funds from Operations Modified
(FFOM) (1) $(93,686) $5,795

FFO per share and unit -
basic and diluted $(3.54) $0.26
FFOM per share and unit -
basic and diluted $(3.49) $0.29

Weighted average shares and units
outstanding - basic 26,869 19,972
Weighted average shares and units
outstanding - diluted 26,869 19,985

(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. The Company presents FFO and
FFOM because it considers them important supplemental measures of
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 a perspective not immediately apparent from net
income. The Company computes 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 utilized by other
equity REITs and, accordingly, may not be comparable to such other
REITs. The Company adjusts the NAREIT definition to add back
noncontrolling interests in consolidated real estate partnerships
before real estate related depreciation and amortization. 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 the Company's performance, nor are they
indicative of funds available to fund its cash needs, including its
ability to pay dividends or make distributions.

SOURCE Cogdell Spencer Inc.

Media: Dana Crothers, Marketing Director, +1-704-940-2904,
dcrothers@cogdellspencer.com; General Inquiries: Frank C. Spencer, President
and Chief Executive Officer, +1-704-940-2926, fspencer@cogdellspencer.com;
Financial Inquiries: Charles M. Handy, Chief Financial Officer,
+1-704-940-2914, chandy@cogdellspencer.com