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Cogdell Spencer Inc. Reports Third Quarter 2008 Financial Results
Date:11/6/2008

CHARLOTTE, N.C., Nov. 6 /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 advanced planning and design-build services for the medical profession, today announced financial results for the quarter ended September 30, 2008.

Third Quarter 2008 Results

Cogdell Spencer Inc. reports Funds from Operations Modified (FFOM) of $8.2 million for the quarter ended September 30, 2008, compared to $5.0 million in the prior year third quarter, an increase of 64%. FFOM per share and operating partnership unit, basic and diluted, for the current quarter was $0.33, compared to $0.30 in the prior year third quarter, a 10% increase. FFOM adds back to traditionally defined FFO non-cash amortization of non-real estate related intangible assets associated with purchase accounting.

FFO for the three months ended September 30, 2008 was $5.8 million, or $0.23 per share and operating partnership unit, basic and diluted. The weighted average number of basic and diluted shares and operating partnership units outstanding totaled 24,861,076 and 24,993,478, respectively, for the three months ended September 30, 2008.

Net income (loss) was ($1.1 million) for the three months ended September 30, 2008, or ($0.07) per share basic and diluted. The weighted average number of basic and diluted shares outstanding totaled 15,746,627 for the three months ended September 30, 2008.

As of September 30, 2008, the Company's portfolio consisted of 62 consolidated wholly-owned and joint venture properties, comprising a total of approximately 3.3 million square feet. The overall percentage of leased space at the Company's in-service, consolidated properties as of September 30, 2008, was 91.9%. In addition, the Company has three unconsolidated joint venture properties and manages 51 properties for third party clients totaling approximately 2.4 million square feet.

Results for the Nine Months Ended September 30, 2008

FFOM for the nine months ended September 30, 2008 was $21.3 million, or $0.92 per share and operating partnership unit, basic and diluted. FFO for the nine months ended September 30, 2008 was $15.7 million, or $0.68 per share and operating partnership unit, basic and diluted. The weighted average number of basic and diluted shares and operating partnership units outstanding totaled 23,066,677 and 23,160,851, respectively, for the nine months ended September 30, 2008.

Net income (loss) was ($4.7 million) for the nine months ended September 30, 2008, or ($0.31) per share basic and diluted. The weighted average number of basic and diluted shares outstanding totaled 15,170,131 for the nine months ended September 30, 2008.

Joint Venture to Acquire Medical Office Buildings

During the third quarter of 2008, the Company formed Cogdell Spencer Medical Partners, LLC, a joint venture with Northwestern Mutual that, subject to certain limited exceptions, will be the Company's exclusive vehicle for cash acquisitions. The Company has agreed to contribute 20% of the equity capital to fund future acquisitions in this joint venture.

First Synergy Project Uses Integrated Services

On September 2, 2008, the Company announced the first synergy project since the closing of the merger with Marshall Erdman & Associates, Inc. (now Erdman, A Cogdell Spencer Company). The project will include design/build (architectural, engineering, and construction), development, and property management services. The $22.4 million project is a 75,985 square foot medical office building and outpatient treatment center located in Pensacola, Florida. The project is 100% pre-leased and scheduled for completion in December 2009. The Company expects to own approximately 40% of the building through a joint venture with the physician tenants of the building. In connection with this project, the Company obtained financing in an amount up to $16.8 million and for a total term of ten years, inclusive of an 18-month construction period. The loan provides for payments of interest-only during the construction period at a rate of one-month LIBOR plus 1.50%. After the construction period, the loan converts to an amortizing loan with monthly payments based on a 25-year amortization schedule. The Company has entered into a forward starting interest rate swap agreement that effectively fixes the interest rate at 6.21% after the construction period through maturity. The loan matures September 2018.

Common Stock Issuance

On September 10, 2008, the Company issued 2,160,000 common shares at a price of $18.50 per share resulting in net proceeds to the Company of $37.6 million. The net proceeds were used to reduce outstanding principal on the Company's secured revolving Credit Facility and for working capital purposes.

Dividend

On September 11, 2008, the Company announced that its Board of Directors had declared a quarterly dividend of $0.35 per share of common stock that was paid on October 20, 2008 to stockholders of record on September 26, 2008. The dividend covered the Company's third quarter of 2008.

Outlook

Cogdell Spencer Inc.'s management reiterates its expectations that FFOM per share and operating partnership unit for the year ending December 31, 2008 will be between $1.20 and $1.24 and expects that FFO per share and operating partnership unit will be between $0.86 and $0.90. A reconciliation of the range of projected net income (loss) to projected FFO and FFOM for the year ending December 31, 2008 is below:

Guidance Range for the

Year Ending December 31, 2008

Low High

(In thousands, except per share and

operating partnership unit data)

Net loss before minority interests

in Operating Partnership $(6,900) - - $(5,900)

Plus real estate related depreciation

and amortization 27,500 - - 27,500

Funds from Operations (FFO) 20,600 - - 21,600

Plus amortization of intangibles

related to purchase accounting,

net of income tax benefit 8,150 - - 8,150

Funds from Operations Modified (FFOM) $28,750 - - $29,750

FFO per share and unit - diluted $0.86 - - $0.90

FFOM per share and unit - diluted $1.20 - - $1.24

Weighted average shares and units

outstanding - diluted 24,000 - - 24,000

Supplemental operating and financial data are available in the Investor Relations section of the Company's Web site at http://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 and nine months ended September 30, 2008. 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. Further, FFO does 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 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 is it 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 Third Quarter 2008 Conference Call on Friday, November 7, 2008 at 10:00 a.m. (Eastern Standard Time). 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 http://www.cogdellspencer.com through the "Third Quarter 2008 Earnings Conference Call" link on the Investor Relations page.

A playback will be available until December 1, 2008. 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 http://www.cogdellspencer.com through the "Third Quarter 2008 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 REIT that invests in specialty office buildings for the medical profession, including medical offices and ambulatory surgery and diagnostic centers. On March 10, 2008, the Company merged with Marshall Erdman & Associates, Inc. (now Erdman, a Cogdell Spencer Company). Erdman is a market-leading provider of design-build healthcare facilities throughout the United States of America. Erdman's service offerings include advanced planning, architecture, engineering, and construction. Combined, the Company is a fully integrated healthcare facilities company providing services from conceptual planning to long-term property ownership and management.

At present, the Company's portfolio consists of 62 consolidated wholly-owned properties and joint venture properties, three unconsolidated joint venture properties, and 52 managed medical office buildings. For more information on Cogdell Spencer Inc., please visit the Company's Web site at http://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 integrate Erdman; 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; 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, 2007. 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)

September 30, December 31,

2008 2007

Assets

Real estate properties:

Operating real estate properties $529,495 $486,279

Less: Accumulated depreciation (63,154) (44,596)

Total operating real estate

properties, net 466,341 441,683

Construction in progress 10,672 13,380

Total real estate properties, net 477,013 455,063

Cash and cash equivalents 10,637 3,555

Restricted cash 18,388 1,803

Tenant and accounts receivable, net 42,924 2,249

Goodwill and intangible assets, net 308,423 31,589

Other assets 27,689 11,978

Total assets $885,074 $506,237

Liabilities and stockholders' equity

Mortgage notes payable $234,497 $237,504

Revolving credit facility 90,000 79,200

Term loan 100,000 -

Accounts payable 23,185 5,817

Billings in excess of costs and estimated

earnings on uncompleted contracts 27,616 -

Deferred income taxes 40,302 217

Payable to Erdman shareholders 24,003 -

Other liabilities 47,751 21,243

Total liabilities 587,354 343,981

Minority interests 96,090 47,221

Stockholders' equity 201,630 115,035

Total liabilities and stockholders'

equity $885,074 $506,237

Cogdell Spencer Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(unaudited)

For the Three For the Nine

Months Ended Months Ended

Sept. 30, Sept. 30, Sept. 30, Sept. 30,

2008 2007 2008 2007

Revenues:

Rental revenue $19,631 $16,399 $57,622 $45,344

Design-Build contract revenue

and other sales 72,914 - 174,870 -

Property management and other

fees 852 874 2,524 2,644

Development management and

other income 622 25 751 276

Total revenues 94,019 17,298 235,767 48,264

Expenses:

Property operating and

management 8,370 6,797 23,403 18,766

Costs related to design-build

revenue and other sales 59,578 - 146,907 -

Selling, general, and

administrative 7,599 1,532 20,396 5,296

Depreciation and amortization 11,871 7,273 33,275 20,664

Total expenses 87,418 15,602 223,981 44,726

Income from operations before

other income (expense) 6,601 1,696 11,786 3,538

Other income (expense):

Interest and other income, net 210 183 682 763

Interest expense (6,743) (4,101) (18,695) (11,324)

Equity in earnings (loss) of

unconsolidated partnerships 10 2 18 (2)

Total other income (expense) (6,523) (3,916) (17,995) (10,563)

Income (loss) from operations

before income tax (expense)

benefit 78 (2,220) (6,209) (7,025)

Income tax (expense) benefit (883) 19 (143) (151)

Loss from operations (805) (2,201) (6,352) (7,176)

Minority interests in real estate

partnerships (920) (16) (859) (55)

Minority interests in operating

partnership 639 615 2,480 2,226

Net loss $(1,086) $(1,602) $(4,731) $(5,005)

Net loss per share - basic and

diluted $(0.07) $(0.13) $(0.31) $(0.47)

Weighted average common shares -

basic and diluted (1) 15,747 11,934 15,170 10,755

(1) 8 and 15 shares of unvested restricted common stock are anti-dilutive

due to the net loss for the three months ended September 30, 2008 and

2007, respectively. 10 and 18 shares of unvested restricted common

stock are anti-dilutive due to the net loss for the nine months ended

September 30, 2008 and 2007, respectively.

Cogdell Spencer Inc.

Business Segment Reporting

(In thousands)

(unaudited)

Design-

Build

Property and Unallocated

Operations Development and Other Total

Three months ended

September 30, 2008:

Revenues:

Rental revenue $19,631 $- $- $19,631

Design-Build contract

revenue and other sales - 72,914 - 72,914

Property management and other

fees 852 - - 852

Development management and

other income - 622 - 622

Total revenues 20,483 73,536 - 94,019

Operating expenses:

Property operating and

management 8,370 - - 8,370

Costs related to design-build

revenue and other sales - 59,578 - 59,578

Selling, general, and

administrative - 4,865 - 4,865

Total operating expenses 8,370 64,443 - 72,813

12,113 9,093 - 21,206

Other income (expense) 143 52 15 210

Corporate general and

administrative expenses - - (2,734) (2,734)

Interest expense - - (6,743) (6,743)

Provision for income taxes

applicable to funds from

operations modified - - (2,411) (2,411)

Depreciation and amortization - (348) (57) (405)

Earnings from unconsolidated real

estate partnerships, before real

estate related depreciation and

amortization 13 - - 13

Minority interests in real estate

partnerships, before real estate

related depreciation and

amortization (977) - - (977)

Funds from operations

modified (FFOM) 11,292 8,797 (11,930) 8,159

Amortization of intangibles

related to purchase

accounting, net of income

tax benefit (42) (3,876) 1,528 (2,390)

Funds from operations (FFO) 11,250 4,921 (10,402) 5,769

Real estate related depreciation

and amortization (7,494) - - (7,494)

Minority interests in operating

partnership - - 639 639

Net income (loss) $3,756 $4,921 $(9,763) $(1,086)

Cogdell Spencer Inc.

Business Segment Reporting

(In thousands)

(unaudited)

Design-

Build

Property and Unallocated

Operations Development and Other Total

Nine months ended

September 30, 2008:

Revenues:

Rental revenue $57,622 $- $- $57,622

Design-Build contract revenue

and other sales - 174,870 - 174,870

Property management and other

fees 2,524 - - 2,524

Development management and

other income - 751 - 751

Total revenues 60,146 175,621 - 235,767

Operating expenses:

Property operating and

management 23,403 - - 23,403

Costs related to design-build

revenue and other sales - 146,907 - 146,907

Selling, general, and

administrative - 12,548 - 12,548

Total operating expenses 23,403 159,455 - 182,858

36,743 16,166 - 52,909

Other income (expense) 456 137 89 682

Corporate general and

administrative expenses - - (7,848) (7,848)

Interest expense - - (18,695) (18,695)

Provision for income taxes

applicable to funds from

operations modified - - (3,719) (3,719)

Depreciation and amortization - (772) (176) (948)

Earnings from unconsolidated real

estate partnerships, before real

estate related depreciation and

amortization 26 - - 26

Minority interests in real estate

partnerships, before real estate

related depreciation and

amortization (1,128) - - (1,128)

Funds from operations

modified (FFOM) 36,097 15,531 (30,349) 21,279

Amortization of intangibles

related to purchase

accounting, net of

income tax benefit (127) (9,043) 3,576 (5,594)

Funds from operations (FFO) 35,970 6,488 (26,773) 15,685

Real estate related depreciation

and amortization (22,896) - - (22,896)

Minority interests in operating

partnership - - 2,480 2,480

Net income (loss) $13,074 $6,488 $(24,293) $(4,731)

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 For the Nine

Months Ended Months Ended

Sept. 30, Sept. 30, Sept. 30, Sept. 30,

2008 2007 2008 2007

Net loss $(1,086) $(1,602) $(4,731) $(5,005)

Plus minority interests in

operating partnership (639) (615) (2,480) (2,226)

Plus real estate related

depreciation and

amortization (2) 7,494 7,180 22,896 20,395

Funds from Operations (FFO) (1) 5,769 4,963 15,685 13,164

Plus amortization of intangibles

related to purchase accounting,

net of income tax benefit 2,390 26 5,594 77

Funds from Operations Modified

(FFOM) (1) $8,159 $4,989 $21,279 $13,241

FFO per share and unit - basic

and diluted $0.23 $0.30 $0.68 $0.86

FFOM per share and unit - basic

and diluted $0.33 $0.30 $0.92 $0.86

Weighted average shares and units

outstanding - basic 24,861 16,530 23,067 15,317

Weighted average shares and units

outstanding - diluted 24,993 16,545 23,161 15,335

(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. Further, FFO does 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 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 is it indicative of funds available to

fund its cash needs, including its ability to pay dividends or make

distributions.

(2) Real estate depreciation and amortization consists of depreciation and

amortization from wholly-owned real estate properties of $7,119 and

$7,160 and the Company's share of joint venture real estate

depreciation and amortization of $375 and $20 for the three months

ended September 30, 2008 and 2007, respectively. Real estate

depreciation and amortization consists of depreciation and

amortization from wholly-owned real estate properties of $21,947 and

$20,334 and the Company's share of joint venture real estate

depreciation and amortization of $949 and $61 for the nine months

ended September 30, 2008 and 2007, respectively.


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SOURCE Cogdell Spencer Inc.
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