• the Company's ability to integrate Erdman;

• the Company's ability to obtain future financing arrangements;

• estimates relating to the Company's future distributions;

• the Company's understanding of the Company's competition;

• the Company's ability to renew the Company's ground leases;

• changes in the reimbursement available to the Company's tenants by government or private payors;

• the Company's tenants' ability to make rent payments;

• defaults by tenants;

• market trends; and

• projected capital expenditures.

Forward-looking statements are based on estimates as of the date of this report. The Company disclaims any obligation to publicly release the results of any revisions to these forward-looking statements reflecting new estimates, events or circumstances after the date of this report. Overview
The Company 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. The Company focuses on the ownership, development, redevelopment, 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 specialized real estate needs of the healthcare industry.
On March 10, 2008, the Company merged with MEA, which wholly owns Erdman. Erdman is a market-leading provider of design-build healthcare facilities throughout the United States of America. Erdman's service offerings include advance planning, architecture, engineering, and construction. Combined, the Company is a fully integrated healthcare facilities solutions company providing services from conceptual planning to long-term property management.

      Core Capabilities   [[Image Removed: (PIE CHART)]]   Core Capabilities
      Erdman                                               Cogdell Spencer

      Advance Planning                                     Ownership

      Design                                               Development

      Construction                                         Acquisitions

                                                           Property Management

The Company is building a national portfolio of healthcare properties located on hospital campuses. Since the Company's initial public offering in 2005, the Company has acquired properties in five new states and multiple new markets. During the nine months ended September 30, 2008, the Company acquired two off-market acquisitions that were a result of strong relationships with existing clients. Client relationships and advance planning services provided by Erdman also give the Company the ability to be included in the initial project discussions that can lead to ownership and investment in healthcare properties.
The Company's development team has completed four projects since the Company's initial public offering in 2005. In the fourth quarter of 2007, the Company broke ground on the St. Luke's Riverside Outpatient Campus project, which is a $100 million, 400,000 square foot, four building project including two medical office buildings. The Company will retain ownership in the two medical office buildings, which are valued between $35 and $40 million.
During the third quarter of 2008, the Company formed a joint venture with Northwestern Mutual. The joint venture, named Cogdell Spencer Medical Partners LLC, expects to acquire up to approximately $350.0 million of medical office buildings and other healthcare facilities nationwide, predominantly associated with not-for-profit healthcare systems and large physician-owned clinics. The Company will contribute 20% of the equity capital to fund future acquisitions in this joint venture. The joint venture will be the Company's exclusive vehicle for cash acquisitions.
On September 2, 2008, the Company announced the first synergy project since the closing of the Merger with Erdman. 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.
Since its founding in 1951, Erdman has designed, engineered, or built over 5,000 healthcare facilities, which support more than 50,000 physicians. In 2007, Erdman achieved $324 million in revenue and increased its backlog. Erdman was ranked as the number one healthcare design-build firm for 2007 by Modern Healthcare's 2008 Construction and Design Survey.

The Company's property management team has a proactive, customer-focused service approach that leads to faster response times and greater resources to serve tenants. The Company's management believes that a strong internal property management capability is a vital component of the Company's business, both for the properties that the Company owns and for those that the Company manages. In 2008, the Company will continue the "Celebrating 25 Years" Campaign, which recognizes the long-term relationships between the Company and its healthcare system clients and partners.
As of September 30, 2008, the Company owned and/or managed 116 medical office buildings ("MOBs") and healthcare related facilities, serving 27 hospital systems in 13 states. The Company's portfolio consists of:
• 62 properties, comprised of 3.3 million net rentable square feet, each of which the Company wholly-owns or is a consolidated real estate partnership;

• Three properties, comprised of 0.2 million net rentable square feet, in which the Company owns a minority interest; and

• 51 properties, comprised of 2.2 million net rentable square feet, that the Company manages for third parties.

As of September 30, 2008, of the Company's wholly-owned properties, 81% were located on hospital campuses and an additional 7% were located off-campus, but were hospital anchored. The Company believes that its on-campus and hospital anchored assets occupy a premier franchise location in relation to local hospitals, providing the Company's properties with a distinct competitive advantage over alternative medical office space in an area. As of September 30, 2008, the Company's in-service, consolidated wholly-owned and joint venture properties were approximately 91.9% occupied, with a weighted average remaining lease term of approximately 4.8 years.
Factors Which May Influence Future Results of Operations The Company derives a significant portion of its revenues from two sources:
1) rents received from tenants under existing leases in medical office buildings and other healthcare related facilities, and 2) design-build services for healthcare customers. The Company derives a lesser portion of its revenues from fees that are paid for managing and developing medical office buildings and other healthcare related facilities for third parties. Generally, the Company's revenues and expenses have remained consistent except for growth due to property and business acquisitions and timing of development fee earnings. Erdman's financial results can be affected by weather at the construction sites, amount and timing of capital spending by healthcare systems and providers, and the demand for Erdman's services in the healthcare facilities market. Fluctuations in the commercial property credit markets and changes in variable interest rates could influence the Company's borrowing costs.
Critical Accounting Policies
The Company's discussion and analysis of financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared on the accrual basis of accounting in conformity with GAAP. All significant intercompany balances and transactions have been eliminated in consolidation and combination.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses in the reporting period. The Company's actual results may differ from these estimates. Management has provided a summary of the Company's significant accounting policies in Note 2 to the Company's consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2007. Critical accounting policies are those judged to involve accounting estimates or assumptions that may be material due to the levels of subjectivity and judgment necessary to account for uncertain matters or susceptibility of such matters to change. Other companies in similar businesses may utilize different estimation policies and methodologies, which may impact the comparability of the Company's results of operations and financial condition to those companies.

Acquisition of Real Estate
The price that the Company pays to acquire a property is impacted by many factors, including the condition of the buildings and improvements, the occupancy of the building, the existence of above and below market tenant leases, the creditworthiness of the tenants, favorable or unfavorable financing, above or below market ground leases and numerous other factors. Accordingly, the Company is required to make subjective assessments to allocate the purchase price paid to acquire investments in real estate among the assets acquired and liabilities assumed based on the Company's estimate of the fair values of such assets and liabilities. This includes determining the value of the buildings and improvements, land, any ground leases, tenant improvements, in-place tenant leases, tenant relationships, the value (or negative value) of above (or below) market leases and any debt assumed from the seller or loans made by the seller to the Company. Each of these estimates requires significant judgment and some of the estimates involve complex calculations. The Company's calculation methodology is summarized in Note 2 to the Company's audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2007. These allocation assessments have a direct impact on the Company's results of operations because if the Company were to allocate more value to land there would be no depreciation with respect to such amount or if the Company were to allocate more value to the buildings as opposed to allocating to the value of tenant leases, this amount would be recognized as an expense over a much longer period of time, since the amounts allocated to buildings are depreciated over the estimated lives of the buildings whereas amounts allocated to tenant leases are amortized over the terms of the leases. Additionally, the amortization of value (or negative value) assigned to above (or below) market rate leases is recorded as an adjustment to rental revenue as compared to amortization of the value of in-place leases and tenant relationships, which is included in depreciation and amortization in the Company's consolidated and combined statements of operations. Useful Lives of Assets
The Company is required to make subjective assessments as to the useful lives of the Company's properties and intangible assets for purposes of determining the amount of depreciation and amortization to record on an annual basis with respect to the Company's assets. These assessments have a direct impact on the Company's net income (loss) because if the Company were to shorten the expected useful lives, then the Company would depreciate or amortize such assets over fewer years, resulting in more depreciation or amortization expense on an annual basis.
Asset Impairment Valuation
The Company reviews the carrying value of its properties, goodwill, and intangible assets when circumstances, such as adverse market conditions, indicate a potential impairment may exist. The Company bases its review on an estimate of the future cash flows (excluding interest charges) expected to result from the real estate or business investment's use and eventual disposition. The Company considers factors such as future operating income, trends and prospects, as well as the effects of leasing demand, competition and other factors. If the Company's evaluation indicates that it may be unable to recover the carrying value of an investment, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the asset. These losses have a direct impact on the Company's net income because recording an impairment loss results in an immediate negative adjustment to operating results. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future sales, backlog, occupancy, rental rates and capital requirements that could differ materially from actual results in future periods. Since cash flows on properties considered to be long-lived assets to be held and used are considered on an undiscounted basis to determine whether an asset has been impaired, the Company's strategy of holding properties over the long-term directly decreases the likelihood of recording an impairment loss for properties. If the Company's strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized and such loss could be material. If the Company determines that impairment has occurred, the affected assets must be reduced to their fair value. No such impairment losses have been recognized to date. The Company estimates the fair value of rental properties utilizing a discounted cash flow analysis that includes projections of future revenues, expenses and capital improvement costs, similar to the income approach that is commonly utilized by appraisers. The Company reviews the value of Goodwill using an income approach on an annual basis and when circumstances indicate a potential impairment may exist.

Revenue Recognition
Rental income related to non-cancelable operating leases is recognized using the straight line method over the terms of the tenant leases. Deferred rents included in the Company's consolidated balance sheets represent the aggregate excess of rental revenue recognized on a straight line basis over the rental revenue that would be recognized under the cash flow received, based on the terms of the leases. The Company's leases generally contain provisions under which the tenants reimburse the Company for all property operating expenses and real estate taxes incurred by the Company. Such reimbursements are recognized in the period that the expenses are incurred. Lease termination fees are recognized when the related leases are canceled and the Company has no continuing obligation to provide services to such former tenants. As discussed above, the Company recognizes amortization of the value of acquired above or below market tenant leases as a reduction of rental income in the case of above market leases or an increase to rental revenue in the case of below market leases.
For design-build contracts, the Company recognizes revenue under the percentage of completion method. Due to the volume, varying complexity, and other factors related to the Company's design-build contracts, the estimates required to determine percentage of completion are complex and use subjective judgments. Changes in labor costs and material inputs can have a significant impact on the percentage of completion calculations. The Company and Erdman have a long history of developing reasonable and dependable estimates related to design-build contracts with clear requirements and rights of the parties to the contracts. As long-term design-build projects extend over one or more years, revisions in cost and estimate earnings during the course of the work are reflected in the accounting period in which the facts which require the revision become known. At the time a loss on a design-build project becomes known, the entire amount of the estimated ultimate loss is recognized in the consolidated financial statements.
The Company receives fees for property management and development and consulting services from time to time from third parties which are reflected as fee revenue. Management fees are generally based on a percentage of revenues for the month as defined in the related property management agreements. Revenue from development and consulting agreements is recognized as earned per the agreements. Due to the amount of control retained by the Company, most joint venture developments will be consolidated; therefore, those development fees will be eliminated in consolidation. However, the Cogdell Spencer Medical Partners, LLC partnership is an unconsolidated entity.
Other income shown in the statement of operations, generally includes interest income, primarily from the amortization of unearned income on a sales-type capital lease recognized in accordance with Statement of Financial Accounting Standards No. 13 ("SFAS 13"), and other income incidental to the Company's operations and is recognized when earned.
The Company must make subjective estimates as to when the Company's revenue is earned and the collectibility of the Company's accounts receivable related to design-build contracts and other sales, minimum rent, deferred rent, expense reimbursements, lease termination fees and other income. The Company specifically analyzes accounts receivable and historical bad debts, tenant and customer concentrations, tenant and customer creditworthiness, and current economic trends when evaluating the adequacy of the allowance for bad debts. These estimates have a direct impact on the Company's net income because a higher bad debt allowance would result in lower net income, and recognizing rental revenue as earned in one period versus another would result in higher or lower net income for a particular period. REIT Qualification Requirements
The Company is subject to a number of operational and organizational requirements to qualify and then maintain qualification as a REIT. If the Company does not qualify as a REIT, its income would become subject to U.S. federal, state and local income taxes at regular corporate rates that would be substantial and the Company cannot re-elect to qualify as a REIT for five years. The resulting adverse effects on the Company's results of operations, liquidity and amounts distributable to stockholders would be material.

Changes in Financial Condition
On January 23, 2008, the Company issued 3,448,278 shares of common stock to certain institutional investors at a price of $15.95 per share resulting in net proceeds to the Company of approximately $53.8 million. On September 10, 2008, the Company issued 2,160,000 shares of common stock in a public offering at a price of $18.50 per share resulting in net proceeds to the Company of approximately $37.6 million. The net proceeds of both offerings were used to reduce outstanding principal on the Company's Credit Facility and for working capital purposes. For more information on the Credit Facility, see "Liquidity and Capital Resources."
As discussed in Note 3 and Note 8 in the accompanying consolidated financial statements, the Company completed the Merger with Erdman, amended the Credit Facility, and obtained $100.0 million in term debt. Results of Operations
The Company's loss from operations is generated primarily from operations of its properties and design-build services. The changes in operating results from period to period reflect changes in existing property performance, changes in the number of properties due to development, acquisition, or disposition of properties, and the operating results of the design-build segment.
For the three and nine months ended September 30, 2008, there are three months and seven months, respectively, of operating activity related to the Erdman subsidiary.
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. See Note 5 of the accompanying consolidated financial statements.
Property Summary
The following is an activity summary of the Company's portfolio of wholly-owned and consolidated partnership properties for the three and nine months ended September 30, 2008 and 2007 and the year ended December 31, 2007:

                                                                     Three Months Ended                                    Nine Months Ended
                                                       September 30, 2008         September 30, 2007         September 30, 2008         September 30, 2007
Properties at beginning of the period                              62                         53                         59                            50
Acquisitions                                                        -                          2                          2                             3
In-service completed developments                                   -                          -                          1                             1
Lease-up completed development                                      -                          1                          -                             2

Properties at end of the period                                    62                         56                         62                            56




                                                       Year Ended
                                                   December 31, 2007
              Properties at January 1                         51
              Acquisitions                                     5
              In-service completed developments                2
              Lease-up completed development                   1

              Properties at December 31                       59

The above tables include East Jefferson Medical Specialty Building, which is accounted for as a sales-type capital lease. A property is considered "in-service" upon the earlier of (1) lease-up and substantial completion of tenant improvements, or (2) one year after cessation of major construction. For portfolio and operational data, a single in-service date is used. For GAAP reporting, a property is placed into service in stages as construction is completed and the property and tenant space is available for its intended use.

Comparison of the three months ended September 30, 2008 and 2007
FFOM
FFOM increased $3.2 million, or 63.5%, from $5.0 million in the three months ended September 30, 2007 to $8.2 million for the three months ended September 30, 2008. The increase in FFOM is due to: (1) $8.9 million increase in FFOM for the design-build and development segment, of which the majority of the segment's increase is due to the inclusion of Erdman's operating activity for the three months ended September 30, 2008; and (2) $1.2 million increase in FFOM from property acquisitions and completed developments. These increases in FFOM were offset by a $2.6 million increase in interest expense due to increased outstanding debt balances, $2.4 million income tax expense primarily related to taxable income at the Erdman subsidiary, a $0.9 million minority interest charge, and a $1.3 million increase in corporate general and administrative expenses primarily due to increased incentive compensation expense and professional fees. The $0.9 minority interest charge is due to a consolidated real estate partnership's negative partner's equity that resulted from a debt refinance proceeds cash distribution to the 65.5% owner and subsequent cash distributions to the 65.5% owner and GAAP net losses. In accordance with GAAP, the consolidating partner is required to record a charge to minority interest for distributions and net losses when the partnership's partners' equity is negative.
See Note 5 to the accompanying consolidated financial statements for business segment information and management's use of FFO and FFOM to evaluate operating performance. The following table presents the reconciliation of FFO and FFOM to net loss, which is the most directly comparable GAAP measure to FFO and FFOM, for the three months ended September 30, 2008 and 2007 (in thousands, except per share and OP unit amounts):

                                                                       For the Three Months Ended
                                                                  September 30,          September 30,
                                                                       2008                   2007
Net loss                                                          $       (1,086 )       $       (1,602 )
Plus minority interests in operating partnership                            (639 )                 (615 )
Plus real estate related depreciation and amortization                     7,494                  7,180

Funds from Operations (FFO)                                                5,769                  4,963
Plus amortization of intangibles related to purchase
accounting, net of income tax benefit                                      2,390                     26

Funds from Operations Modified (FFOM)                             $        8,159         $        4,989

Revenue
Rental revenue increased $3.2 million, or 19.7%, from $16.4 million in the three months ended September 30, 2007 to $19.6 million for the three months ended September 30, 2008. Rental revenue from acquisition properties and completed developments increased $3.0 million. Same-property revenue increased . . .