Cautionary Notice Regarding Forward-Looking Statements

Certain statements contained in or incorporated by reference into this Report, including, without limitation, those related to our future operations, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "believe," "estimate," "expect," "anticipate," "intend," "plan," "seek," "may," and similar expressions or statements regarding future periods are intended to identify forward-looking statements.

These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any predictions of future results, performance or achievements that we express or imply in this Report. Some of the risks, uncertainties and other important factors that may affect future results include, among others:

• Changes in general economic and business conditions, including, without limitation, the impact of the current credit crisis and economic down-turn, which are having and may continue to have a negative effect on the fundamentals of our business, the financial condition of our tenants and our lenders, and the value of our real estate assets;

• Our continued qualification as a real estate investment trust, or "REIT", for U.S. federal income tax purposes;

• Heightened competition for tenants and potential decreases in property occupancy;

• Potential increases in real estate construction costs;

• Potential changes in the financial markets and interest rates;

• Volatility in our stock price and trading volume;

• Our continuing ability to raise funds on favorable terms, if at all, through the issuance of debt and equity in the capital markets, which may negatively affect both our ability to refinance our existing debt as well as our future interest expense;

• Our ability to successfully identify, acquire, develop and/or manage properties on terms that are favorable to us;

• Our ability to be flexible in the development and operations of joint venture properties;

• Our ability to successfully dispose of properties, if at all, on terms that are favorable to us;

• Inherent risks in the real estate business including, but not limited to, tenant defaults, potential liability relating to environmental matters and liquidity of real estate investments; and

• Other risks and uncertainties described herein, as well as those risks and uncertainties discussed from time to time in our other reports and other public filings with the Securities and Exchange Commission ("SEC").

Although we presently believe that the plans, expectations and results expressed in or suggested by the forward-looking statements are reasonable, all forward-looking statements are inherently subjective, uncertain and subject to change, as they involve substantial risks and uncertainties beyond our control. New factors emerge from time to time, and it is not possible for us to predict the nature, or assess the potential impact, of each new factor on our business. Given these uncertainties, we caution you not to place undue reliance on these forward-looking statements. We undertake no obligation to update or revise any of our forward-looking statements for events or circumstances that arise after the statement is made, except as otherwise may be required by law.

This list of risks and uncertainties, however, is only a summary of some of the most important factors and is not intended to be exhaustive. Additional information regarding risk factors that may affect us is included under the caption "Risk Factors" in Part II, Item 1A of this Report, and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, which we filed with the SEC on February 25, 2009. The risk factors contained in our Annual Report are updated by us from time to time in Quarterly Reports on Form 10-Q and other public filings.

Business Overview

We are a self-administered and self-managed REIT that began operations through a related entity in 1972. A more complete description of our business, and of management's philosophy and priorities, is included in our Annual Report on Form 10-K.

As of March 31, 2009 we:

• Owned or jointly controlled 764 industrial, office, healthcare and other properties (including 22 properties comprising approximately 4.0 million square feet under development), consisting of more than 134.8 million square feet; and

• Owned or jointly controlled more than 7,100 acres of land with an estimated future development potential of more than 107 million square feet of industrial, office, healthcare and other properties.

We provide the following services for our properties and for certain properties owned by third parties and joint ventures:

• Property leasing;

• Property management;

• Asset management;

• Construction;

• Development; and

• Other tenant-related services.

We have historically developed or acquired properties with the intent to sell (hereafter referred to as "Build-for-Sale" properties). Build-for-Sale properties were generally identified as such prior to construction commencement and were sold within a relatively short time after being placed in service. While we will still dispose of properties, we anticipate that development and sales of Build-for-Sale properties will represent a less significant component of our operations for the foreseeable future.

Key Performance Indicators

Our operating results depend primarily upon rental income from our industrial, office, healthcare and retail properties (collectively referred to as "Rental Operations"). The following discussion highlights the areas of Rental Operations that we consider critical for future revenues.

Occupancy Analysis: Our ability to maintain high occupancy rates is a principal driver of maintaining and increasing rental revenue from continuing operations. The following table sets forth occupancy information regarding our in-service portfolio of consolidated rental properties as of March 31, 2009 and 2008, respectively (in thousands, except percentage data):

                          Total             Percent of
                       Square Feet      Total Square Feet         Percent Occupied
        Type          2009     2008      2009         2008       2009          2008
        Industrial   56,529   52,333       62.9 %      61.6 %      87.6 %        87.6 %
        Office       31,673   31,046       35.3 %      36.6 %      86.3 %        87.7 %
        Other         1,629    1,529        1.8 %       1.8 %      89.0 %        88.5 %

        Total        89,831   84,908      100.0 %     100.0 %      87.2 %        87.6 %

Lease Expiration and Renewals: Our ability to maintain and improve occupancy rates primarily depends upon our continuing ability to re-lease expiring space. The following table reflects our consolidated in-service portfolio lease expiration schedule by property type as of March 31, 2009. The table indicates square footage and annualized net effective rents (based on March 2009 rental revenue) under expiring leases (in thousands, except percentage data):

                                             Total
                                           Portfolio                     Industrial            Suburban Office              Other
Year of                         Square     Ann. Rent     % of       Square     Ann. Rent    Square     Ann. Rent    Square      Ann. Rent
Expiration                       Feet       Revenue     Revenue      Feet       Revenue      Feet       Revenue      Feet        Revenue
Remainder of 2009                4,385     $   36,307         5 %    2,363     $   10,537    1,970     $   25,296       52     $       474
2010                             8,725         66,274        11 %    5,441         23,978    3,271         42,109       13             187
2011                            10,119         71,511        12 %    6,769         27,656    3,280         42,681       70           1,174
2012                             8,743         63,956        10 %    5,464         21,513    3,229         41,684       50             759
2013                            10,178         90,127        15 %    5,480         23,471    4,635         65,757       63             899
2014                             9,057         62,304        10 %    6,445         24,358    2,574         37,290       38             656
2015                             7,091         44,707         7 %    5,527         21,899    1,563         22,779        1              29
2016                             4,019         27,675         5 %    2,578          8,668    1,229         16,528      212           2,479
2017                             4,862         37,062         6 %    3,081         12,724    1,469         20,286      312           4,052
2018                             3,271         34,950         6 %    1,770          9,174    1,163         18,587      338           7,189
2019 and Thereafter              7,858         76,527        13 %    4,620         22,758    2,938         47,123      300           6,646

Total Leased                    78,308     $  611,400       100 %   49,538     $  206,736   27,321     $  380,120    1,449     $    24,544

Total Portfolio Square Feet     89,831                              56,529                  31,673                   1,629

Percent Occupied                  87.2 %                              87.6 %                  86.3 %                  89.0 %

Within our consolidated properties we renewed 78.6% and 69.7% of our leases up for renewal in the three months ended March 31, 2009 and 2008, totaling approximately 1.7 million and 1.3 million square feet, respectively. We attained 4% and 9% growth in average contractual rents on these renewals in the three months ended March 31, 2009 and 2008, respectively.

The average term of renewals increased from 3.3 years in the three months ended March 31, 2008 to 5.7 years in the three months ended March 31, 2009.

Future Development: Another source of our earnings growth is our wholly owned and joint venture development activities. We expect to generate future earnings through income upon sale of these development properties or from Rental Operations income as the development properties are placed in service and leased. Considering the continued downturn in the economy, we have substantially reduced our level of development activities and are focused on the lease-up of recent projects.

We had 4.0 million square feet of property under development with total estimated costs upon completion of $744.0 million at March 31, 2009 compared to 13.6 million square feet with total costs of $1.1 billion at March 31, 2008. The square footage and estimated costs include both wholly owned and joint venture development activity at 100%.

The following table summarizes our properties under development as of March 31, 2009 (in thousands, except percentage data):

                                                    Total
                                                  Estimated      Total        Amount
                             Square   Percent      Project     Incurred      Remaining
  Ownership Type              Feet    Leased        Costs       to Date     to be Spent
  Wholly owned properties     1,863        83 %   $  370,924   $ 174,557   $     196,367
  Joint venture properties    2,153        12 %      373,028     214,602        158,426  (1)

  Total                       4,016        45 %   $  743,952   $ 389,159   $     354,793

(1) These costs will be primarily financed by remaining availability under in-place construction loan facilities.

Acquisition and Disposition Activity: Gross sales proceeds related to the dispositions of wholly owned held-for-rental properties were $55.1 million and $18.6 million for the three months ended March 31, 2009 and 2008, respectively.

We had no dispositions of wholly-owned Build-for-Sale properties in the three months ended March 31, 2009 and 2008.

Our share of proceeds from sales of properties within unconsolidated joint ventures, in which we have less than a 100% interest, totaled $25.5 million for the three months ended March 31, 2008. We had no such dispositions in the same period in 2009.

For the three months ended March 31, 2008, we acquired $27.3 million of income producing properties comprised of two industrial real estate properties in Savannah, Georgia. We had no acquisitions of income producing properties in the same period in 2009, but we acquired $6.2 million of undeveloped land in the three months ended March 31, 2009, compared to $15.4 million in the same period in 2008.

Funds From Operations

Funds From Operations ("FFO") is used by industry analysts and investors as a supplemental operating performance measure of a REIT. FFO is calculated in accordance with the definition that was adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). NAREIT created FFO as a supplemental measure of REIT operating performance that excludes historical cost depreciation, among other items, from net income determined in accordance with accounting principles generally accepted in the United States of America ("GAAP"). FFO is a non-GAAP financial measure. The most comparable GAAP measure is net income (loss). FFO should not be considered as a substitute for net income or any other measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other companies.

Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry analysts and investors have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. FFO, as defined by NAREIT, represents GAAP net income (loss), excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated real estate assets, plus certain non-cash items such as real estate depreciation and amortization, and after similar adjustments for unconsolidated partnerships and joint ventures.

Management believes that the use of FFO, combined with net income (which remains the primary measure of performance), improves the understanding of operating results of REITs among the investing public and makes comparisons of REIT operating results more meaningful. Management believes that, by excluding gains or losses related to sales of previously depreciated real estate assets and excluding real estate asset depreciation and amortization, investors and analysts are able to readily identify the operating results of the long-term assets that form the core of a REIT's activity and assist in comparing these operating results between periods or as compared to different companies.

The following table shows a reconciliation of net income attributable to common shareholders to the calculation of FFO for the three months ended March 31, 2009 and 2008, respectively (in thousands):

                                                             Three Months Ended March 31,
                                                               2009                 2008
Net income attributable to common shareholders            $        23,247       $       2,533
Adjustments:
Depreciation and amortization                                      80,208              79,121
Company share of joint venture depreciation and
amortization                                                       11,218               6,928
Earnings from depreciable property sales - wholly owned            (5,119 )            (1,110 )
Earnings from depreciable property sales - share of
joint venture                                                          -                  (19 )
Noncontrolling interest share of adjustments                       (3,761 )            (4,326 )

Funds From Operations attributable to common
shareholders                                              $       105,793       $      83,127

Results of Operations

A summary of our operating results and property statistics for the three months
ended March 31, 2009 and 2008, respectively, is as follows (in thousands, except
number of properties and per share data):



                                                             Three Months Ended March 31,
                                                               2009               2008
Rental and Related Revenue                                $       220,951    $       211,988
Service Operations Revenue                                         16,946             14,551
Earnings from Rental Operations                                    60,016             70,530
Earnings from Service Operations                                    8,348              4,413
Operating income                                                   56,138             60,452
Net income attributable to common shareholders                     23,247              2,533
Weighted average common shares outstanding                        148,488            146,331
Weighted average common shares and potential dilutive
securities                                                        155,747            154,596
Basic income (loss) per common share:
Continuing operations                                     $           .12    $          (.01 )
Discontinued operations                                   $           .03    $           .03
Diluted income (loss) per common share:
Continuing operations                                     $           .12    $          (.01 )
Discontinued operations                                   $           .03    $           .03
Number of in-service consolidated properties at end of
period                                                                538                521
In-service consolidated square footage at end of period            89,831             84,908
Number of in-service joint venture properties at end of
period                                                                204                198
In-service joint venture square footage at end of
period                                                             40,943             35,439

Comparison of Three Months Ended March 31, 2009 to Three Months Ended March 31, 2008

Rental and Related Revenue

Overall, rental revenue from continuing operations increased from $212.0 million for the quarter ended March 31, 2008 to $221.0 million for the same period in 2009. The following table sets forth rental revenue from continuing operations by reportable segment to our total reported rental revenue from continuing operations for the three months ended March 31, 2009 and 2008, respectively (in thousands):

                                               2009        2008
                   Rental Revenue:
                   Office                    $ 143,326   $ 140,014
                   Industrial                   65,178      61,052
                   Non-reportable segments      12,447      10,922

                   Total                     $ 220,951   $ 211,988

The following factors contributed to these results:

• We acquired five properties and placed 38 developments in service from January 1, 2008 to March 31, 2009 that provided incremental revenues of $11.8 million in the first quarter of 2009, as compared to the same period in 2008.

• Lease termination fees, to the extent they are included in rental revenue from continuing operations, decreased from $2.6 million in the first quarter of 2008 to approximately $275,000 in the first quarter of 2009.

Rental Expenses and Real Estate Taxes

The following table sets forth rental expenses and real estate taxes by
reportable segment to our total reported amounts in the statements of operations
for the three months ended March 31, 2009 and 2008, respectively (in thousands):



                                                2009       2008
                    Rental Expenses:
                    Office                    $ 42,828   $ 39,915
                    Industrial                   8,315      8,153
                    Non-reportable segments      3,127      2,298

                    Total                     $ 54,270   $ 50,366

                    Real Estate Taxes:
                    Office                    $ 19,252   $ 16,987
                    Industrial                   8,874      7,709
                    Non-reportable segments      1,050        788

                    Total                     $ 29,176   $ 25,484

Overall, rental expenses increased by $3.9 million in the first quarter of 2009, compared to the same period in 2008. The increase was primarily driven by $2.0 million of incremental costs associated with properties acquired and developments placed in service from January 1, 2008 to March 31, 2009.

Of the overall $3.7 million increase in real estate taxes in the first quarter of 2009, compared to the same period in 2008, $1.3 million was attributable to properties acquired and developments placed in service from January 1, 2008 to March 31, 2009. The remaining increase was driven by increases in taxes on our existing properties.

Equity in Earnings of Unconsolidated Companies

Equity in earnings represents our ownership share of net income from investments in unconsolidated companies that generally own and operate rental properties and develop properties for sale. These earnings decreased from $10.1 million in the three months ended March 31, 2008 to $2.5 million for the same period in 2009. In the first quarter of 2008, our share of the gain on sale of a property from an unconsolidated subsidiary totaled $3.0 million, compared to no such sales in the three months ended March 31, 2009. In addition, two properties owned by unconsolidated companies were removed from held-for-sale classification in the third quarter of 2008, resulting in a reduction in equity in earnings of $2.9 million for our share of depreciation expense in the first quarter of 2009.

Depreciation and Amortization

Depreciation and amortization expense increased from $75.7 million during the first quarter of 2008 to $80.0 million for the same period in 2009 due to increases in our held-for-rental asset base from acquisitions and developments during 2008.

Service Operations

Service Operations primarily consist of sales of Build-for-Sale properties and the leasing, management, construction and development services for joint venture properties and properties owned by third parties. These operations are heavily influenced by the current state of the economy, as leasing and management fees are dependent upon occupancy while construction and development services rely on the expansion of business operations of third-party property owners. Earnings from Service Operations increased from $4.4 million for the three months ended March 31, 2008 to $8.3 million for the three months ended March 31, 2009. The increase was primarily due to net general contractor revenue being lower than usual in the first quarter of 2008 as a result of increases in our total cost estimates for two third-party fixed price construction contracts, which reduced the margins on the contracts.

General and Administrative Expense

General and administrative expenses decreased from $12.2 million for the three months ended March 31, 2008 to $9.9 million for the same period in 2009. General and administrative expenses consist of two components. The first component is direct expenses that are not attributable to specific assets such as legal fees, audit fees, marketing costs, investor relations expenses and other corporate overhead. The second component is the unallocated indirect costs determined to be unrelated to the operation of our owned properties and Service Operations. Those indirect costs not allocated to these operations are charged to general and administrative expenses. The decrease in general and administrative expenses was due to a $9.2 million decrease in total indirect costs in the first quarter of 2009, as we continued our focus on overhead reduction initiatives. This decrease was partially offset by an approximate $7.1 million decrease in overhead costs allocated to leasing and construction activity based on decreased volume in these areas.

Interest Expense

Interest expense increased from $48.1 million in the first quarter of 2008 to $52.1 million in the first quarter of 2009. This increase is primarily the result of decreased capitalization of interest costs related to development projects that were completed and placed in service in 2008. In addition, we carried an overall mix of higher interest rate unsecured notes through the first quarter of 2009. Partially offsetting these increases, we recognized interest savings on the LIBOR-based DRLP unsecured line of credit, as LIBOR rates were lower in the three months ended March 31, 2009 than in the same period in 2008.

Gain on Extinguishment of Debt

During the first quarter of 2009, we repurchased certain of our outstanding series of unsecured notes scheduled to mature in 2009 through 2011. The majority of our debt repurchases during the quarter consisted of our 3.75% Senior Exchangeable Unsecured Notes due November 2011 (the "Exchangeable Notes"). In total, we repurchased unsecured notes that had a face value of $169.5 million for $130.5 million, recognizing a net gain on extinguishment of approximately $33.1 million after considering the write-off of unamortized deferred financing costs and discounts.

Discontinued Operations

The results of operations for properties sold during the year to unrelated parties or classified as held-for-sale at the end of the period are required to be classified as discontinued operations. The property specific components of earnings that are classified as discontinued operations include rental revenues, rental expenses, real estate taxes, allocated interest expense and depreciation expense, as well as the net gain or loss on the disposition of properties.