Operating Highlights

 --  Funds from operations per diluted share ("FFO") was $0.29 for the     quarter, which includes the effects of $18.7 million of impairment and     other non-cash charges and $1.5 million of gains on repurchases of     unsecured bonds. Without the effects of these non-cash items, FFO for     the quarter was $0.37, in line with expectations. --  Liquidity position further enhanced during the quarter:       --  $575.0 million raised in sale of 75.2 million shares of common           stock in follow-on public offering closed April 21, 2009;       --  $114.0 million in secured financing closed on July 16, 2009;       --  $73.3 million in cash generated from property and land sales;       --  $21.5 million par value of unsecured debt obligations repurchased           at a discount. --  Capital raised through July 2009 exceeded $970.0 million; anticipate     capital raised in 2009 in excess of $1.2 billion upon closing of $280.0     million of secured debt financing in third quarter. --  2009 FFO guidance reaffirmed:  $1.42 - $1.64 per share as adjusted for     the additional shares issued in the April 2009 common stock offering     ($1.85 - $2.15 per share pre-offering). 

"We are pleased that we have been able to raise nearly $1 billion of capital to date in 2009," said Dennis D. Oklak, chairman and chief executive officer. "We are focused on using funds to reduce leverage. We are on track with our capital plan and, as of mid-July, have a zero balance outstanding on our credit facility."

Financial Performance

 --  FFO for the second quarter of 2009 was $0.29 (including $0.13 per     share dilution resulting from the company's common offering in April),     compared to $0.59 for the second quarter of 2008. Second quarter 2009 FFO     includes impairments and other non-cash charges of $18.7 million ($0.09 per     share), partially offset by $1.5 million ($0.01per share) of gains on the     repurchase of unsecured debt obligations.  Excluding the impact of these     non-cash items, FFO would have been $0.37 for the second quarter of 2009.      --  Net income per diluted share (EPS) for the second quarter 2009 was a     loss of $0.16, as compared to earnings of $0.11 for the same quarter in     2008. The loss was primarily attributable to impairment charges incurred     and higher depreciation expense recognized in the second quarter of 2009.      

Financing Update

The company announced the following transactions which, in the aggregate, have or will add additional liquidity and strengthen the company's balance sheet:

 --  Completion on April 21, 2009, of an underwritten public offering of     75,210,000 shares of the company's common stock at a price per share of     $7.65.  The offering raised $575.0 million ($551.9 million of net     proceeds), which the company used to repay outstanding borrowings under its     unsecured line of credit and for general corporate purposes.      --  Completion of a $114.0 million, 10-year secured debt financing on July     16, 2009. The loan is secured by a portfolio of suburban office and     industrial assets.      --  Execution of a commitment letter in July for a $280.0 million 7-year     secured loan.  The loan, subject to closing, will be secured by suburban     office and industrial assets. The company anticipates the closing of this     loan in the third quarter of 2009. The company is also actively discussing     additional secured debt financing, which the company believes may generate     proceeds in the range of $75 million to $100 million in 2009.  To the     extent that such financing is finalized, it also would be secured by a     geographically diverse portfolio of suburban office and industrial assets.     As of June 30, 2009, the company had $5.9 billion of in-service,     unencumbered assets in its portfolio.      --  Repurchase of $21.5 million in outstanding unsecured debt that was     scheduled to mature in 2010 and 2011. Year to date, the company has     repurchased $191.0 million par value of unsecured debt maturing at various     dates from 2009 through 2011 for $150.0 million at an average discount of     21.5 percent.      

Portfolio Performance

 --  Overall portfolio occupancy, including projects under development, was     87.4 percent as of June 30, 2009, compared to 87.3 percent at March 31,     2009.      --  Stabilized, in-service properties (128 million square feet) were 88.5     percent leased at June 30, 2009, compared with 89.7 percent at March 31,     2009.  This decrease is attributable to the addition of 11 recently     developed properties aggregating 3.3 million square feet which were 42     percent leased at June 30, 2009. The company classifies a property as     stabilized upon the earlier of its reaching 90% occupancy or one year after     its in-service date. The decrease in stabilized occupancy as a result of     these newly developed assets was anticipated by the company.      --  Tenant retention for the second quarter of 2009 was 81.9 percent, with     growth in net effective rents on renewals of 3.1 percent.      --  Same store net operating income decreased by 1.6 percent for the     second quarter of 2009, compared with the three-month period ended June 30,     2008. Same store net operating income increased by approximately 1.6     percent for the 12-month period ended June 30, 2009, compared with the 12-     month period ended June 30, 2008.      

Real Estate Investment Activity

Development

Wholly Owned Properties

 --  The company's wholly owned development pipeline at June 30, 2009,     consists mostly of projects that are in the final stages of completion. The     total estimated costs of these projects upon stabilization are $297.1     million, with $130.0 million in remaining costs to be funded.  The pipeline     is comprised of 13 properties (1.7 million square feet), which are 89     percent pre-leased.      --  The company began only one project during the quarter: an expansion of     a bulk distribution facility in Phoenix which is 100% leased and scheduled     for contribution to a joint venture upon completion in the second half of     2009.      --  The company placed into service three healthcare properties (242,000     square feet), of which two were 100% leased and one was 10% leased upon     completion.      

Joint Venture Properties

 --  The company's joint venture development pipeline at June 30, 2009,     consists mostly of projects that are in the final stages of completion. The     total estimated costs of these projects upon stabilization are $339.5     million, with $118.0 million in remaining costs to be funded.  The pipeline     is comprised of 3 properties (1.1 million square feet), which are 26     percent pre-leased. Each joint venture has obtained third-party debt to     finance construction of these properties. (All joint venture costs and     square footage are reported at 100 percent ownership.)      --  Two speculative industrial assets were placed in service during the     quarter:  a 503,000 square foot bulk industrial property in the Dugan     Realty joint venture and a 533,000 square foot bulk industrial building in     the AllPoints Midwest joint venture.  Neither property is leased.      

Acquisitions

The company acquired two industrial properties aggregating 450,000 square feet near the Port of Savannah, Georgia. These properties are 100% leased.

Dispositions

 --  During the quarter, the company completed the disposition of five     assets, including three properties contributed to the company's joint     venture with CB Richard Ellis Realty Trust. The company realized gross     proceeds of $65.8 million at an aggregate capitalization rate of 9.0%.      --  The company sold approximately 30 acres of undeveloped land that no     longer met its growth objectives. These sales generated gross proceeds of     $7.5 million.      

Real Estate Valuation - Impairment and Other Charges

During the second quarter of 2009, the company recorded impairment and other charges for the quarter of $18.7 million, pertaining to certain land parcels sold or held for sale ($4.6 million), properties sold or held for sale ($7.4 million), and investments in joint ventures ($6.7 million). These charges were the result of increases in estimated capitalization rates and changes in market conditions that negatively affected values. These non-cash charges have no effect on liquidity, and have no impact on compliance with the company's credit facility or unsecured bond covenants.

General and Administrative Expenses

General and administrative expenses for the second quarter aggregated $13.6 million, compared with $6.9 million for the same period in 2008. The second quarter 2009 expenses include approximately $3.5 million of severance payments resulting from a reduction in workforce during the quarter. Year to date non-recurring severance costs included in general and administrative expenses totaled $6.1 million.

As a result of current economic conditions, the company's workforce has been reduced approximately 26 percent since the beginning of 2008 and most development activities have been curtailed.

Dividends Declared

The company's board of directors has declared a quarterly cash dividend on the company's common stock of $0.17 per share, or $0.68 per share on an annualized basis. The second quarter dividend will be payable August 31, 2009, to shareholders of record as of August 14, 2009. The company's policy is to pay aggregate annual dividends in 2009 in an amount generally equal to and not to exceed its annual taxable income.