Dispositions
Disposition activity allows the Company to, among other things, (1) reduce its holdings in certain markets and product types within

a market consistent with the Company's strategy; (2) lower the average age of the portfolio; (3) optimize the cash proceeds from the sale of certain assets; and (4) obtain funds for investment activities. During the three months ended June 30, 2012, the Company realized proceeds of $208.6 million from the sale of 54 operating properties representing 2.7 million square feet and 58 acres of land. During the six months ended June 30, 2012, the Company realized proceeds of $215.1 million from the sale of 56 operating properties representing 2.8 million square feet and 58 acres of land. For 2012, the Company anticipates that wholly owned property dispositions will range from $250 million to $350 million. Development
During the three and six months ended June 30, 2012, the Company brought into service one Wholly Owned Property under Development representing 128,000 square feet and a Total Investment of $6.6 million. During the three months ended June 30, 2012, the Company initiated three Wholly Owned Properties under Development with a projected Total Investment of $23.5 million. During the six months ended June 30, 2012, the Company initiated four Wholly Owned Properties under Development with a projected Total Investment of $31.2 million. As of June 30, 2012, the Company had 13 Wholly Owned Properties under Development with a projected Total Investment of $310.1 million. For 2012, the Company anticipates that wholly owned development deliveries will total between $30 million and $70 million and that during 2012 it will commence development on properties with an expected aggregate Total Investment in a range from $200 million to $300 million.
"Total Investment" for a property is defined as the property's purchase price plus closing costs (in the case of acquisitions if vacant) and management's estimate, as determined at the time of acquisition, of the cost of necessary building improvements in the case of acquisitions, or land costs and land and building improvement costs in the case of development projects, and, where appropriate, other development costs and carrying costs.
UNCONSOLIDATED JOINT VENTURE CAPITAL ACTIVITY The Company periodically enters into unconsolidated joint venture relationships in connection with the execution of its real estate operating strategy. Acquisitions
During the three and six months June 30, 2012, none of the unconsolidated joint ventures in which the Company held an interest acquired any properties. The Company does not anticipate that any unconsolidated joint ventures in which the Company holds an interest will acquire any properties in 2012. Dispositions
During the three and six months ended June 30, 2012, none of the unconsolidated joint ventures in which the Company held an interest sold any properties. The Company does not anticipate that any unconsolidated joint ventures in which the Company holds an interest will dispose of any properties in 2012. Development
During the three and six months ended June 30, 2012, none of the unconsolidated joint ventures in which the Company held an interest brought any properties into service or began any development activities. As of June 30, 2012, the Company has no unconsolidated joint venture properties under development. The Company does not anticipate that any unconsolidated joint ventures in which the Company holds an interest will bring any development properties into service or begin any development activities in 2012.

PROPERTIES IN OPERATION
The composition of the Company's Properties in Operation as of June 30, 2012 and
2011 was as follows (square feet in thousands):

                                                            Straight Line Rent and
                                                              Operating Expense
                                     Net Rent              Reimbursement Per Square
                                Per Square Foot(1)                 Foot(2)                Total Square Feet         Percent Occupied
                                     June 30,                      June 30,                    June 30,                 June 30,
                                 2012           2011           2012          2011          2012          2011       2012         2011
Wholly Owned Properties in
Operation:
Industrial-Distribution    $     4.44         $  4.54     $       5.83     $  5.84       35,434        32,440       93.8 %       90.8 %
Industrial-Flex            $     9.09         $  9.13     $      13.23     $ 13.07        9,072        10,053       88.9 %       88.5 %
Office                     $    14.71         $ 14.24     $      22.65     $ 22.03       18,649        20,378       88.7 %       91.3 %
                           $     8.03         $  8.43     $      11.67     $ 12.26       63,155        62,871       91.6 %       90.6 %
JV Properties in
Operation:
Industrial-Distribution    $     3.97         $  3.91     $       5.53     $  5.61        9,269         9,269       85.3 %       82.5 %
Industrial-Flex            $    24.56         $ 27.81     $      27.59     $ 26.30          171           171       91.2 %       81.9 %
Office                     $    24.39         $ 23.85     $      34.94     $ 34.60        4,724         4,724       89.4 %       89.4 %
                           $    11.25         $ 11.20     $      15.92     $ 16.05       14,164        14,164       86.7 %       84.8 %
Properties in Operation:
Industrial-Distribution    $     4.35         $  4.41     $       5.77     $  5.79       44,703        41,709       92.0 %       89.0 %
Industrial-Flex            $     9.39         $  9.42     $      13.50     $ 13.27        9,243        10,224       88.9 %       88.4 %
Office                     $    16.68         $ 16.02     $      25.15     $ 24.36       23,373        25,102       88.8 %       91.0 %
                           $     8.59         $  8.91     $      12.41     $ 12.92       77,319        77,035       90.7 %       89.5 %

(1) Net rent represents the contractual rent per square foot at June 30, 2012 or 2011 for tenants in occupancy. Net rent does not include the tenant's obligation to pay property operating expenses and real estate taxes. If a tenant at June 30, 2012 or 2011 was within a free rent period its rent would equal zero for the purposes of this metric.
(2) Straight line rent and operating expense reimbursement represents the straight line rent including operating expense recoveries per square foot at June 30, 2012 or 2011 for tenants in occupancy.

Geographic segment data for the three and six months ended June 30, 2012 and 2011 are included in Note 6 to the Company's financial statements. Forward-Looking Statements
When used throughout this report, the words "believes," "anticipates," "estimates" and "expects" and similar expressions are intended to identify forward-looking statements. Such statements indicate that assumptions have been used that are subject to a number of risks and uncertainties that could cause actual financial results or management plans and objectives to differ materially from those projected or expressed herein, including: the effect of global, national and regional economic conditions; rental demand; the Company's ability to identify, and enter into agreements with suitable joint venture partners in situations where it believes such arrangements are advantageous; the Company's ability to identify and secure additional properties and sites, both for itself and the joint ventures to which it is a party, that meet its criteria for acquisition or development; the effect of prevailing market interest rates; risks related to the integration of the operations of entities that we have acquired or may acquire; risks related to litigation; and other risks described from time to time in the Company's filings with the SEC. Given these uncertainties, readers are cautioned not to place undue reliance on such statements.
Critical Accounting Policies and Estimates Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2011 for a discussion of critical accounting policies which include capitalized costs, revenue recognition, allowance for doubtful accounts, impairment of real estate, intangibles and investments in unconsolidated joint ventures. During the six months ended June 30, 2012, there were no material changes to these policies.

Results of Operations
The following discussion is based on the consolidated financial statements of the Company. It compares the results of operations of the Company for the three and six months ended June 30, 2012 with the results of operations of the Company for the three and six months ended June 30, 2011. As a result of the varying levels of development, acquisition and disposition activities by the Company in 2012 and 2011, the overall operating results of the Company during such periods are not directly comparable. However, certain data, including the Same Store comparison, do lend themselves to direct comparison.

This information should be read in conjunction with the accompanying consolidated financial statements and notes included elsewhere in this report. Comparison of Three and Six Months Ended June 30, 2012 to Three and Six Months Ended June 30, 2011
Overview
The Company's average gross investment in operating real estate owned for the three months ended June 30, 2012 increased to $4,985.8 million from $4,682.4 million for the three months ended June 30, 2011. This increase in operating real estate resulted in increases in rental revenue, operating expense reimbursement, rental property expenses, real estate taxes and depreciation and amortization expense. Rental property expense includes utilities, insurance, janitorial, landscaping, snow removal and other costs necessary to maintain a property. For the six months ended June 30, 2012, the Company's average gross investment in operating real estate owned increased to $4,975.4 million from $4,671.4 million for the six months ended June 30, 2011. This increase in operating real estate resulted in increases in rental revenue, operating expense reimbursement, rental property expenses, real estate taxes and depreciation and amortization expense.
Total operating revenue increased to $169.2 million for the three months ended June 30, 2012 from $164.4 million for the three months ended June 30, 2011. The $4.8 million increase was primarily due to an increase in rental income, which was primarily due to the increase in average gross investment in operating real estate. This increase was partially offset by a decrease in termination fees, which totaled $593,000 for the three months ended June 30, 2012 compared to $1.6 million for the same period in 2011. Total operating revenue increased to $338.9 million for the six months ended June 30, 2012 from $330.3 million for the six months ended June 30, 2011. The $8.6 million increase was primarily due to an increase in rental income, which was primarily due to the increase in average gross investment in operating real estate as well as an increase in termination fees, which totaled $2.2 million for the six months ended June 30, 2012 as compared to $1.9 million for the same period in 2011.
Termination fees are fees that the Company agrees to accept in consideration for permitting certain tenants to terminate their leases prior to the contractual expiration date. Termination fees are included in rental revenue and if a property is sold, related termination fees are included in discontinued operations. See "Other" below.
Segments
The Company evaluates the performance of the Wholly Owned Properties in Operation in terms of net operating income by reportable segment (see Note 6 to the Company's financial statements for a reconciliation of this measure to income from continuing operations). The following table identifies changes to net operating income in reportable segments (dollars in thousands):

                    THREE MONTHS ENDED        PERCENTAGE           SIX MONTHS ENDED         PERCENTAGE
                         June 30,              INCREASE                June 30,              INCREASE
                    2012          2011        (DECREASE)          2012          2011        (DECREASE)
Northeast
- Southeastern
PA               $  24,814     $  25,571          (3.0 %)      $  49,984     $  51,095         (2.2 %)
- Lehigh/Central
PA                  16,558        16,417           0.9 %          32,753        33,866         (3.3 %)
- Other              7,628         9,063         (15.8 %) (1 )    16,733        18,258         (8.4 %)
Central             15,544        17,390         (10.6 %) (1 )    33,291        34,863         (4.5 %)
South               31,316        34,090          (8.1 %)         63,971        68,092         (6.1 %)
Metro                5,986         5,044          18.7 %  (2 )    11,615        11,001          5.6 %
United Kingdom        (121 )        (234 )       (48.3 %)           (349 )        (284 )       22.9 %
Total net
operating income $ 101,725     $ 107,341          (5.2 %)      $ 207,998     $ 216,891         (4.1 %)

(1) The decrease is primarily due to the sale of a portfolio of properties during the three months ended June 30, 2012.
(2) The increase is primarily due to an increase in average gross investment in operating real estate.

Same Store
Property level operating income, exclusive of termination fees, for the Same Store properties decreased to $112.8 million for the three months ended June 30, 2012 compared to $113.9 million for the three months ended June 30, 2011 on a straight line basis (which recognizes rental revenue evenly over the life of the lease), and $111.6 million for the three months ended June 30, 2012 compared to $112.3 million for the three months ended June 30, 2011 on a cash basis. Property level operating income, exclusive of Termination Fees, for the Same Store properties decreased to $226.1 million for the six months ended June 30, 2012 from $227.8 million for the six months ended June 30, 2011, on a straight line basis, and decreased to $224.2 million for the six months ended June 30, 2012 from $224.5 million for the six months ended June 30, 2011 on a cash basis. The same store results were affected by one-time reductions in certain operating expense items during the three and six months ended June 30, 2011 that did not recur during the same period in 2012, decreases in cash and straight line rental rates and an increase in occupancy. The following details the Same Store occupancy and rental rates for the respective periods:

                                          Three Months Ended               Six Months Ended
                                               June 30,                        June 30,
                                          2012            2011           2012            2011
Average occupancy %                         92.6 %          91.3 %          92.7 %         91.1 %
Average rental rate - cash basis (1) $      8.27      $     8.39     $      8.32     $     8.40
Average rental rate - straight line
basis (2)                            $     12.01      $    12.07     $     12.01     $    12.06

(1) Represents the average contractual rent per square foot for the three or six months ended June 30, 2012 for tenants in occupancy in Same Store properties. Net rent does not include the tenant's obligation to pay property operating expenses and real estate taxes. If a tenant was within a free rent period its rent would equal zero for purposes of this metric.
(2) Straight line rent and operating expense reimbursement represents the average straight line rent including operating expense recoveries per square foot for the three or six months ended June 30, 2012 or 2011 for tenants in occupancy. Management generally considers the performance of the Same Store properties to be a useful financial performance measure because the results are directly comparable from period to period. Management further believes that the performance comparison should exclude termination fees since they are more event-specific and are not representative of ordinary performance results. In addition, Same Store property level operating income and Same Store cash basis property level operating income exclusive of termination fees is considered by management to be a more reliable indicator of the portfolio's baseline performance. The Same Store properties consist of the 528 properties totaling approximately 58.2 million square feet owned on January 1, 2011. Acquisitions and completed development during the year ended December 31, 2011 and the six months ended June 30, 2012 are excluded from the Same Store properties. Acquisitions and completed development are included in Same Store when they have been purchased in the case of acquisitions, and are stabilized in the case of completed development, prior to the beginning of the earliest period presented in the comparison. The 62 properties sold during 2011 and the 56 properties sold during the six months ended June 30, 2012 are also excluded.

Set forth below is a schedule comparing the property level operating income, on a straight line basis and on a cash basis, for the Same Store properties for the three and six months ended June 30, 2012 and 2011. Same Store property level operating income and cash basis property level operating income are non-GAAP measures and do not represent income before property dispositions, income taxes and equity in earnings of unconsolidated joint ventures because they do not reflect the consolidated operations of the Company. Investors should review Same Store results, along with Funds from operations (see "Liquidity and Capital Resources" below), GAAP net income and cash flow from operating activities, investing activities and financing activities when considering the Company's operating performance. Also set forth below is a reconciliation of Same Store property level operating income and cash basis property level operating income to net income (in thousands).

                                      Three Months Ended                     Six Months Ended
                               June 30, 2012      June 30, 2011      June 30, 2012      June 30, 2011
Same Store:
Rental revenue                $      114,036     $      114,297     $      227,568     $      228,401
Operating expenses:
Rental property expense               30,734             29,555             60,886             62,251
Real estate taxes                     18,852             19,127             37,934             38,103
Operating expense recovery           (48,356 )          (48,278 )          (97,315 )          (99,755 )
Unrecovered operating
expenses                               1,230                404              1,505                599
Property level operating
income                               112,806            113,893            226,063            227,802
Less straight line rent                1,160              1,609              1,834              3,265
Cash basis property level
operating income              $      111,646     $      112,284     $      224,229     $      224,537
Reconciliation of non-GAAP
financial measure - Same
Store:
Cash basis property level
operating income              $      111,646     $      112,284     $      224,229     $      224,537
Straight line rent                     1,160              1,609              1,834              3,265
Property level operating
income                               112,806            113,893            226,063            227,802
Property level operating
income - properties purchased
or developed subsequent to
January 1, 2011                        3,845                758              7,484              1,340
Termination fees                         593              1,641              2,239              1,878
General and administrative
expense                              (14,619 )          (13,255 )          (31,823 )          (29,203 )
Depreciation and amortization
expense                              (40,733 )          (38,554 )          (82,014 )          (77,546 )
Other income (expense)               (28,267 )          (27,018 )          (54,781 )          (57,272 )
Gain on property dispositions            335                302                858              1,463
Income taxes                            (146 )              (63 )             (324 )             (613 )
Equity in earnings of
unconsolidated joint ventures            769              1,109              1,685              1,643
Discontinued operations (1)            3,097             54,028              7,895             58,292
Net income                    $       37,680     $       92,841     $       77,282     $      127,784

(1) Includes Termination Fees of $110,000 and $644,000 for the three and six months ended June 30, 2012, respectively, and $4,000 and $29,000 for the three and six months ended June 30, 2011, respectively.

General and Administrative
General and administrative expenses increased to $14.6 million for the three months ended June 30, 2012 compared to $13.3 million for the three months ended June 30, 2011 and increased to $31.8 million for the six months ended June 30, 2012 compared to $29.2 million for the six months ended June 30, 2011. These increases were primarily due to increases in acquisition-related expenditures, cancelled project expense, incentive compensation and costs associated with operating initiatives. General and administrative expenses include salaries, wages and incentive compensation for general and administrative staff along with related costs, consulting, marketing, public company expenses, costs associated with the acquisition of properties and other general and administrative costs. Depreciation and Amortization
Depreciation and amortization increased to $40.7 million for the three months ended June 30, 2012 from $38.6 million for the three months ended June 30, 2011 and increased to $82.0 million for the six months ended June 30, 2012 from $77.5 million for the six months ended June 30, 2011. This increase was primarily due to the increased investment in operating real estate.

Interest Expense . . .