Supplemental Operating and Financial Data

EX-99.2 3 dex992.htm SUPPLEMENTAL OPERATING AND FINANCIAL DATA Supplemental Operating and Financial Data

Exhibit 99.2

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		PAGE
Corporate Data

Corporate Information		3

Ownership Structure		4

Consolidated Financial Information

Key Financial Data		5

Consolidated Balance Sheets		6

Consolidated Quarterly Statements of Operations		7

Funds From Operations and Adjusted Funds From Operations		8

Reconciliation of Earnings Before Interest, Taxes and Depreciation and Amortization and Financial Ratios		9

Net Operating Income (NOI) and Run-rate NOI for the three months ended September 30, 2006		10

Same Store and New Properties Consolidated Quarterly Statements of Operations		11

Same Store Operating Trend summary		12

Debt Summary		13

Debt Maturities		14

Portfolio Data

Portfolio Summary		15

Properties Acquired		16

Occupancy Analysis		17

Major Tenants		18

Lease Expirations & Lease Distribution		19

Leasing Activity		20

Tenant Improvements and Leasing Commissions		21

Historical Capital Expenditures		22

Redevelopment		23

Definitions

Management Statements on Non-GAAP Supplemental Measures		24

This supplemental package contains forward-looking statements within the meaning of the federal securities laws, including information related to run rate net operating income. Such statements are based on management’s beliefs and assumptions made based on information currently available to management. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

•

adverse economic or real estate developments in our markets or technology related real estate;

•

general and local economic conditions;

•

defaults on or non-renewal of leases by tenants;

•

increased interest rates and operating costs;

•

our inability to manage growth effectively;

•

our failure to obtain necessary outside financing;

•

decreased rental rates or increased vacancy rates;

•

difficulties in identifying properties to acquire and completing acquisitions;

•

our failure to successfully operate acquired properties and operations;

•

our failure to successfully redevelop properties acquired for that purpose;

•

our failure to maintain our status as a REIT;

•

possible adverse changes to tax laws; environmental uncertainties and risks related to natural disasters;

•

financial market fluctuations;

•

changes in foreign currency exchange rates;

•

and changes in real estate and zoning laws and increases in real property tax rates.

The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance. We discussed a number of additional material risks in our annual report on Form 10-K for the year ended December 31, 2005 and other filings with the Securities and Exchange Commission. Those risks continue to be relevant to our performance and financial condition. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise.

Corporate Information

Corporate Profile

Digital Realty Trust, Inc. owns, acquires, repositions and manages technology-related real estate. The company’s properties contain applications and operations critical to the day-to-day operations of technology industry tenants and corporate enterprise data center tenants. As of September 30, 2006 the Company owned 53 properties containing approximately 10.4 million rentable square feet, including 1.2 million square feet held for redevelopment. Digital Realty Trust’s property portfolio is located throughout North America and in Europe. For additional information, please visit the company’s website at www.digitalrealtytrust.com.

Corporate Headquarters

560 Mission Street, Suite 2900

San Francisco, California 94105

Telephone: (415) 738-6500

Facsimile: (415) 738-6501

Web site: www.digitalrealtytrust.com

Senior Management

Richard A. Magnuson: Executive Chairman

Michael F. Foust: Chief Executive Officer

A. William Stein: Chief Financial Officer and Chief Investment Officer

Scott E. Peterson: Senior Vice President, Acquisitions

Christopher J. Crosby: Senior Vice President, Sales and Technical Services

James R. Trout: Senior Vice President of Portfolio and Technical Operations

Investor Relations

To request an Investor Relations package or be added to our e-mail distribution list, please visit our website:


www.digitalrealtytrust.com	(Proceed to Information Request in the Investor Relations section)

Analyst Coverage

Credit Suisse	Merrill Lynch	KeyBanc Capital Markets
John Stewart	Steve Sakwa	Jordan Sadler
(212) 538-3183	(212) 449-0335	(917) 368-2280

JMP Securities	RBC Capital Markets	Citigroup
William Marks	Srikanth Nagarajan	Jonathan Litt
(415) 835-8944	(212) 428-2360	(212) 816-0231

Stock Listing Information

The stock of Digital Realty Trust, Inc. is traded primarily on the New York Stock Exchange under the following symbols:

Common Stock:	DLR
Series A Preferred Stock:	DLRPA
Series B Preferred Stock:	DLRPB

Note	that symbols may vary by stock quote provider.

Common Stock Price Performance

The following summarizes recent activity of Digital Realty’s common stock (DLR):


	3rd Quarter 2006			2nd Quarter 2006			1st Quarter 2006			4th Quarter 2005			3rd Quarter 2005			2nd Quarter 2005			1st Quarter 2005
High Price *	$	31.88		$	29.54		$	28.59		$	24.70		$	19.97		$	17.49		$	14.81
Low Price *	$	24.58		$	22.66		$	22.29		$	17.73		$	16.80		$	13.67		$	12.50
Closing Price, end of quarter *	$	31.32		$	24.69		$	28.17		$	22.63		$	18.00		$	17.38		$	14.37
Average daily trading volume *		365,056			224,662			194,179			134,046			260,942			94,248			94,884
Indicated dividend per common share **	$	1.06		$	1.06		$	1.06		$	1.06		$	0.98		$	0.98		$	0.98
Closing dividend yield, end of quarter		3.4	%		4.3	%		3.8	%		4.7	%		5.4	%		5.6	%		6.8	%
Closing shares and units outstanding end of quarter		63,110,530			63,052,653			59,052,653			59,016,949			58,826,122			52,942,731			52,942,731
Closing market value of shares and units outstanding (thousands), end of quarter		1,976,622			1,556,770			1,663,513			1,335,554			1,058,870			920,145			760,787

*	New York Stock Exchange trades only

**	On an annual basis

This Supplemental Operating and Financial Data package supplements the information provided in our quarterly and annual reports filed with the Securities and Exchange Commission. Additional information about us and our properties is also available at our website www.digitalrealtytrust.com.

Ownership Structure

As of September 30, 2006

LOGO


Partner	# of Units (3)	% Ownership (1)
Digital Realty Trust, Inc.	36,155,367	57.3	%
GI Partners, LLC	19,669,175	31.2	%
Cambay Tele.com, LLC (4)	5,623,124	8.9	%
Wave Exchange, LLC (4)	32,722	0.0	%
Directors, Executive Officers and Others	1,630,142	2.6	%

Total	63,110,530	100.0	%

(1)

Excludes shares issuable with respect to stock options that have been granted but have not yet been exercised, and also excludes shares issuable upon the redemption of Class C units which have not yet vested. This ownership table also excludes 9,200,000 common shares which were issued on October 4, 2006 and 4,600,000 operating partnership units which GI Partners redeemed on October 4, 2006. After these transactions, Digital Realty Trust, Inc. owns 67.0% of the Operating Partnership.

(2)	Reflects limited partnership interests held by our officers and directors in the form of vested long-term incentive units and excludes shares issuable upon the redemption of Class C units which have not yet vested and all unexercised common stock options.

(3)	The total number of units includes 45,355,367 shares of common stock and 22,355,163 common units and excludes shares issuable upon the redemption of Class C units which have not yet vested and all unexercised common stock options.

(4)	These third-party contributors received the units (along with cash and the operating partnership assuming debt) in exchange for their interests in 200 Paul Avenue 1-4, 1100 Space Park Drive, the eXchange colocation business and other specified assets and liabilities.

Key Financial Data

(Dollars in thousands, except per share data)


	For the three months ended or as of
	30-Sep-06			30-Jun-06			31-Mar-06			31-Dec-05			30-Sep-05			30-Jun-05			31-Mar-05
Shares and units at end of quarter
Common shares outstanding		36,155,367			36,104,961			31,429,296			27,363,408			27,304,691			21,421,300			21,421,300
Common units outstanding		26,955,163			26,947,692			27,623,357			31,653,541			31,521,431			31,521,431			31,521,431

Total shares and Operating Partnership units		63,110,530			63,052,653			59,052,653			59,016,949			58,826,122			52,942,731			52,942,731

Market Capitalization
Market value of common equity (1)	$	1,976,622		$	1,556,770		$	1,663,513		$	1,335,554		$	1,058,870		$	920,145		$	760,787
Stated value of preferred equity		166,750			166,750			166,750			166,750			166,750			103,500			103,500
Total debt at balance sheet carrying value (2)		1,074,757			820,501			813,655			749,067			686,909			765,687			515,701

Total market capitalization including debt (2)	$	3,218,129		$	2,544,021		$	2,643,918		$	2,251,371		$	1,912,529		$	1,789,332		$	1,379,988

Total debt/Total market capitalization including debt		33.4	%		32.3	%		30.8	%		33.3	%		35.9	%		42.8	%		37.4	%

Selected Balance Sheet Data
Investments in real estate (before depreciation) (3)		1,626,979			1,399,752			1,289,226			1,258,510			1,173,332			1,099,699			889,803
Total assets		1,971,762			1,713,857			1,574,041			1,529,170			1,454,222			1,368,256			1,099,727
Total liabilities		1,247,351			990,422			935,039			880,228			792,538			856,617			579,393

Selected Operating Data
Total operating revenues from continuing operations (4)		73,189			64,708			59,492			60,583			54,822			48,059			37,967
Total operating expenses from continuing operations (4)		53,997			46,117			41,379			43,501			38,396			31,540			25,179
Interest expense from continuing operations (4)		14,486			11,830			11,039			10,643			10,373			8,938			7,770
Net income		14,787			5,095			5,087			4,602			4,425			4,335			2,739
Net income available to common stockholders		11,342			1,650			1,642			1,157			1,326			2,136			1,468

Financial Ratios
EBITDA (5)		50,614			34,106			31,286			30,949			29,007			25,753			21,732
Adjusted EBITDA (6)		62,523			38,891			36,562			35,731			33,730			31,091			25,159
Cash paid for interest (7)		12,860			13,296			10,244			9,607			9,947			8,086			7,416
Fixed charges (8)		17,820			17,863			15,113			14,521			15,019			12,266			10,525
Debt service coverage ratio (9)		4.9			2.9			3.6			3.7			3.4			3.8			3.4
Fixed charge coverage ratio (10)		3.5			2.2			2.4			2.5			2.2			2.5			2.4

Profitability measures
Net income per common share - basic	$	0.31		$	0.05		$	0.06		$	0.04		$	0.05		$	0.10		$	0.07
Net income per common share - diluted	$	0.30		$	0.05		$	0.06		$	0.04		$	0.05		$	0.10		$	0.07
Diluted Funds From Operations (FFO) per share (11)	$	0.41		$	0.38		$	0.36		$	0.36		$	0.35		$	0.37		$	0.30
Diluted Adjusted Funds From Operations (AFFO) per share (12)	$	0.30		$	0.27		$	0.28		$	0.26		$	0.26		$	0.31		$	0.24
Dividends per share and common unit	$	0.27		$	0.27		$	0.27		$	0.27		$	0.24		$	0.24		$	0.24
Diluted FFO payout ratio (13)		65.9	%		71.1	%		75.0	%		73.8	%		70.1	%		65.8	%		82.0	%
Diluted AFFO payout ratio (14)		90.0	%		100.0	%		96.4	%		101.5	%		93.6	%		79.9	%		100.0	%

Portfolio Statistics (15)
Buildings		71			66			55			53			47			42			35
Properties		53			49			45			43			37			32			25
Net rentable square feet, excluding redevelopment space		9,111,904			8,766,173			7,769,773			7,685,028			7,498,576			7,424,926			5,937,042
Square feet held for redevelopment (16)		1,248,326			1,156,437			1,196,538			1,146,538			731,663			707,920			107,563
Occupancy at end of quarter (17)		94.7	%		94.6	%		93.1	%		94.2	%		93.3	%		92.7	%		88.2	%
Weighted average remaining lease term (years) (18)		7.2			7.0			7.4			7.5			7.7			8.2			7.3
Same store occupancy at end of quarter (19)		96.3	%		96.4	%		96.3	%		94.9	%		93.7	%		93.8	%		N/A

(1)

The market value of common equity is based on the closing stock price at the end of the quarter and assumes 100% redemption of the limited partnership units in the operating partnership for shares of our common stock. Excludes shares issuable with respect to stock options that have been granted but have not yet been exercised, and also excludes shares issuable upon the redemption of profits interests units and Class C units which have not yet vested.

(2)	This amount excludes the outstanding principal for a loan related to 7979 East Tufts Avenue of $26.0 million. We classified this property as held for sale at June 30, 2006. We completed its sale on July 12, 2006 and the eliminated our liability for the $26.0 million loan.

(3)	The June 30, 2006 amount excludes assets held for sale at East Tufts Avenue of $37.9 million.

(4)	Excludes operations at 7979 East Tufts Avenue, a property classified as held for sale at June 30, 2006 and sold on July 12, 2006 for all periods presented.

(5)	EBITDA is calculated as earnings before interest, taxes, depreciation and amortization. For a discussion of EBITDA, see page 21. For a reconciliation of net income available to common stockholders to EBITDA, see page 9.

(6)	Adjusted EBITDA is EBITDA adjusted for preferred dividends and minority interests. For a discussion of Adjusted EBITDA, see page 24. For a reconciliation of net income available to common stockholders to Adjusted EBITDA, see page 9.

(7)	Cash paid for interest is interest expense per our statement of operations (including interest expense on discontinued operations) adjusted for noncash interest expense and includes capitalized interest. For a reconciliation of GAAP interest expense to cash paid for interest see page 9.

(8)	Fixed charges consist of cash paid for interest, scheduled debt principal payments and preferred dividends.

(9)	Debt service coverage ratio is Adjusted EBITDA divided by cash paid for interest. Ignoring the effect of the gain on sale of 7979 East Tufts Avenue, debt service coverage ratio was 3.5 for the three months ended September 30, 2006.

(10)	Fixed charge coverage ratio is Adjusted EBITDA divided by fixed charges. Ignoring the effect of the gain on sale of 7979 East Tufts Avenue, fixed charge coverage ratio was 2.5 for the three months ended September 30, 2006.

(11)	For a definition and discussion of FFO see page 24. For a reconciliation of net income available to common stockholders to FFO, see page 8.

(12)	For a definition and discussion of AFFO, see page 24. For a reconciliation of FFO to AFFO, see page 8.

(13)	Diluted FFO payout ratio is dividend declared per common share and unit divided by diluted FFO per share and unit.

(14)	Diluted AFFO payout ratio is dividend declared per common share and unit divided by diluted AFFO per share and unit.

(15)	Portfolio statistics exclude operations at 7979 East Tufts Avenue, a property classified as held for sale at June 30, 2006 and sold on July 12, 2006 for all periods presented.

(16)

Redevelopment space requires significant capital investment in order to develop data center facilities that are ready for use. Most often this is shell space. However, in certain circumstances this may include partially built datacenter space that was not completed by previous ownership and requires a large capital investment in order to build out the space.

(17)

Occupancy at end of quarter excludes space held for redevelopment. We completed a review of space held for development in the quarter ended September 30, 2005 and have not restated any occupancy statistics for March 31, 2005 and earlier periods. This will cause occupancy statistics for March 31, 2005 to not be comparable to occupancy statistics for later periods.

(18)	Average remaining lease term excludes renewal options, weighted by net rentable square feet.

(19)	Same store properties were acquired before December 31, 2004. We have not presented March 31, 2005 same store occupancy as it is not comparable to later periods due to a review of space held for redevelopment review in the second quarter of 2005.

Consolidated Balance Sheets

(Dollars in thousands, except share data)


	September 30, 2006			December 31, 2005
	(unaudited)
ASSETS
Investments in real estate
Land	$	210,897		$	191,961
Acquired ground leases		2,969			1,477
Buildings and improvements		1,259,769			941,115
Tenant improvements		153,344			123,957

Investments in real estate		1,626,979			1,258,510
Accumulated depreciation and amortization		(94,412	)		(64,404	)

Net investments in real estate		1,532,567			1,194,106
Cash and cash equivalents		27,650			10,930
Accounts and other receivables, net		17,586			7,587
Deferred rent		34,385			25,094
Acquired above market leases, net		43,052			48,237
Acquired in place lease value and deferred leasing costs, net		219,675			201,141
Deferred financing costs, net		15,276			7,659
Restricted cash		24,477			22,123
Other assets		57,094			12,293

Total Assets	$	1,971,762		$	1,529,170

LIABILITIES AND STOCKHOLDERS’ EQUITY
Notes payable under line of credit	$	233,767		$	181,000
Mortgage loans		668,490			568,067
Exchangeable senior debentures		172,500			—
Accounts payable and other accrued liabilities		54,209			36,869
Accrued dividends and distributions		20,052			15,639
Acquired below market leases, net		83,633			67,177
Security deposits and prepaid rents		14,700			11,476

Total Liabilities		1,247,351			880,228

Commitments and contingencies		—			—

Minority interests in consolidated joint venture		—			206
Minority interests in operating partnership		241,152			262,239

Stockholders’ equity:
Preferred Stock: $0.01 par value, 20,000,000 authorized:

Series A Cumulative Redeemable Preferred Stock, 8.50%, $103,500,000 liquidation preference ($25.00 per share), 4,140,000 issued and outstanding		99,297			99,297

Series B Cumulative Redeemable Preferred Stock, 7.875%, $63,250,000 liquidation preference ($25.00 per share), 2,530,000 issued and outstanding		60,502			60,502
Common Stock; $0.01 par value: 100,000,000 authorized, 36,155,367 and 27,363,408 shares issued and outstanding as of September 30, 2006 and December 31, 2005		362			274
Additional paid-in capital		359,966			252,562
Dividends in excess of earnings		(39,540	)		(27,782	)
Accumulated other comprehensive income, net		2,672			1,644

Total Stockholders’ Equity		483,259			386,497

Total Liabilities and Stockholders’ Equity	$	1,971,762		$	1,529,170

Consolidated Quarterly Statements of Operations

(unaudited and in thousands, except share data)


	Three Months Ended
	30-Sep-06			30-Jun-06			31-Mar-06			31-Dec-05			30-Sep-05			30-Jun-05			31-Mar-05
Rental	$	59,552		$	52,033		$	47,824		$	47,504		$	43,587		$	36,148		$	31,189
Tenant reimbursements		13,637			12,675			11,500			11,647			10,970			8,079			6,478
Other		—			—			168			1,432			265			3,832			300

Total operating revenues		73,189			64,708			59,492			60,583			54,822			48,059			37,967

Rental property operating and maintenance		15,474			13,618			11,710			13,366			11,854			9,166			6,644
Property taxes		7,238			7,096			6,839			6,737			6,052			4,721			3,482
Insurance		953			1,068			890			886			751			511			580
Depreciation and amortization		24,739			19,511			17,513			18,040			16,309			13,728			11,539
General and administrative		4,986			4,674			4,246			4,425			3,324			2,453			2,413
Other		607			150			181			47			106			961			521

Total operating expenses		53,997			46,117			41,379			43,501			38,396			31,540			25,179

Operating income		19,192			18,591			18,113			17,082			16,426			16,519			12,788

Interest and other income		365			262			229			870			165			110			129
Interest expense		(14,486	)		(11,830	)		(11,039	)		(10,643	)		(10,373	)		(8,938	)		(7,770	)
Loss from early extinguishment of debt		(39	)		(425	)		(57	)		(896	)		—			—			(125	)

Income (loss) from discontinued operations before minority interests		5,032			6,598			7,246			6,413			6,218			7,691			5,022
Minority interests in continuing operations of operating partnership		(678	)		(1,413	)		(2,022	)		(1,592	)		(1,719	)		(3,272	)		(2,235	)

Income from continuing operations		4,354			5,185			5,224			4,821			4,499			4,419			2,787

Income (loss) from discontinued operations before gain on sale of assets and minority interests		203			(163	)		(328	)		(474	)		(169	)		(217	)		(127	)
Gain on sale of assets		18,016			—			—			—			—			—			—
Minority interests attributable to discontinued operations		(7,786	)		73			191			255			95			133			79

Income (loss) from discontinued operations (1)		10,433			(90	)		(137	)		(219	)		(74	)		(84	)		(48	)

Net income		14,787			5,095			5,087			4,602			4,425			4,335			2,739

Preferred stock dividends		(3,445	)		(3,445	)		(3,445	)		(3,445	)		(3,099	)		(2,199	)		(1,271	)

Net income available to common stockholders	$	11,342		$	1,650		$	1,642		$	1,157		$	1,326		$	2,136		$	1,468

Net income per share available to common stockholders - basic	$	0.31		$	0.05		$	0.06		$	0.04		$	0.05		$	0.10		$	0.07
Net income per share available to common stockholders - diluted	$	0.30		$	0.05		$	0.06		$	0.04		$	0.05		$	0.10		$	0.07
Weighted-average shares outstanding - basic		36,114,253			33,372,240			27,503,248			27,314,190			25,704,721			21,421,300			21,421,300
Weighted-average shares outstanding - diluted		37,446,894			33,872,344			28,354,597			27,656,496			26,004,324			21,584,913			21,535,485
Weighted-average fully diluted shares and units		64,397,265			60,959,350			59,873,798			59,248,243			57,525,755			53,106,344			53,056,916

(1)

During the quarter ended June 30, 2006 we classified our property located at 7979 East Tufts Avenue as available for sale and we completed this property sale in July 2006. We have presented all activity for this property in Income (loss) from discontinued operations for all periods presented above. This will cause individual line items above to differ from previous supplemental information but does not effect net income available to common stockholders.

Funds From Operations (FFO)

(unaudited and in thousands except per share data)


	Three Months Ended
	30-Sep-06			30-Jun-06			31-Mar-06			31-Dec-05			30-Sep-05			30-Jun-05			31-Mar-05
Reconciliation of net income available to common stockholders to FFO (Note):
Net income available to common stockholders	$	11,342		$	1,650		$	1,642		$	1,157		$	1,326		$	2,136		$	1,468
Adjustments:
Minority interests in operating partnership including discontinued operations		8,464			1,340			1,846			1,338			1,628			3,143			2,159
Real estate related depreciation and amortization (1)		24,454			20,238			18,185			18,781			16,929			14,318			12,143
Gain on sale of assets		(18,016	)		—			—			—			—			—			—

FFO available to common stockholders and unitholders	$	26,244		$	23,228		$	21,673		$	21,276		$	19,883		$	19,597		$	15,770

FFO per share:
Basic	$	0.42		$	0.38		$	0.37		$	0.36		$	0.35		$	0.37		$	0.30
Diluted	$	0.41		$	0.38		$	0.36		$	0.36		$	0.35		$	0.37		$	0.30

Weighted-average shares outstanding - basic		63,065			60,459			59,022			58,906			57,226			52,943			52,943
Weighted-average shares outstanding - diluted		64,397			60,959			59,874			59,248			57,526			53,106			53,057

(1) Real estate depreciation and amortization was computed as follows:
Depreciation and amortization per income statement	$	24,739		$	19,511		$	17,513		$	18,040		$	16,309		$	13,728		$	11,539
Depreciation and amortization of discontinued operations at 7979 East Tufts Avenue		—			764			743			764			648			600			604
Non real estate depreciation		(285	)		(37	)		(71	)		(23	)		(28	)		(10	)		—

	$	24,454		$	20,238		$	18,185		$	18,781		$	16,929		$	14,318		$	12,143

Note: For a definition and discussion of FFO, see page 24. FFO for all periods presented above includes the results of 7979 East Tufts Avenue, a property which we classify as held for sale and which we sold on July 12, 2006.

Adjusted Funds From Operations (AFFO)

(unaudited and in thousands)


	Three Months Ended
	30-Sep-06			30-Jun-06			31-Mar-06			31-Dec-05			30-Sep-05			30-Jun-05			31-Mar-05
Reconciliation of FFO to AFFO:
Funds from operations available to common stockholders and unitholders (FFO)	$	26,244		$	23,228		$	21,673		$	21,276		$	19,883		$	19,597		$	15,770

Adjustments:

Non real estate depreciation		285			37			71			23			28			10			—
Amortization of deferred financing costs		916			937			795			793			790			707			675
Non cash compensation		430			435			431			335			50			44			52
Loss from early extinguishment of debt		40			425			57			896			—			—			125
Straight line rents		(3,856	)		(4,233	)		(3,843	)		(4,172	)		(3,815	)		(2,483	)		(2,553	)
Above and below market rent amortization		(2,837	)		(1,504	)		(433	)		(632	)		(416	)		(230	)		(439	)
Capitalized leasing compensation		(185	)		(888	)		(764	)		(105	)		(549	)		(127	)		—
Recurring capital expenditures and tenant improvements		(344	)		(338	)		(904	)		(1,406	)		(240	)		(732	)		(519	)
Capitalized leasing commissions		(1,523	)		(1,682	)		(265	)		(1,535	)		(757	)		(579	)		(180	)

AFFO available to common stockholders and unitholders	$	19,170		$	16,417		$	16,818		$	15,473		$	14,974		$	16,207		$	12,931

Note: For a definition and discussion of AFFO, see page 24. For a reconciliation of net income available to common stockholders to FFO, see above table. AFFO for all periods presented above includes the results of 7979 East Tufts Avenue, a property which we classify as held for sale and which we sold on July 12, 2006.

Reconciliation of Earnings before interest, taxes, depreciation and amortization (EBITDA) (1)

(unaudited and in thousands)


	Three Months Ended
	30-Sep-06		30-Jun-06		31-Mar-06		31-Dec-05		30-Sep-05		30-Jun-05		31-Mar-05
Net income available to common stockholders	$	11,342	$	1,650	$	1,642	$	1,157	$	1,326	$	2,136	$	1,468
Interest		14,533		12,181		11,388		10,988		10,724		9,289		8,121
Depreciation and amortization		24,739		20,275		18,256		18,804		16,957		14,328		12,143

EBITDA		50,614		34,106		31,286		30,949		29,007		25,753		21,732
Minority interests		8,464		1,340		1,831		1,337		1,624		3,139		2,156
Preferred stock dividends		3,445		3,445		3,445		3,445		3,099		2,199		1,271

Adjusted EBITDA	$	62,523	$	38,891	$	36,562	$	35,731	$	33,730	$	31,091	$	25,159

(1)

For the definition and discussion of EBITDA and Adjusted EBITDA, see page 24. EBITDA and adjusted EBITDA for the three months ended September 30, 2006 include a gain on sale of 7979 East Tufts Avenue of $18.0 million. Excluding this gain EBITDA and Adjusted EBITDA would have been $40.3 million and $44.5 million, respectively for three months ended September 30, 2006. EBITDA and Adjusted EBITDA for all periods presented above includes the results of 7979 East Tufts Avenue, a property which we classify as held for sale and which we sold on July 12, 2006.

Financial Ratios

(unaudited and in thousands)


	30-Sep-06		30-Jun-06		31-Mar-06		31-Dec-05		30-Sep-05		30-Jun-05		31-Mar-05
Total GAAP interest expense (including discontinued operations)	14,533		12,181		11,388		10,988		10,724		9,289		8,121
Capitalized interest	917		1,058		762		279		—		—		—
Change in accrued interest and other noncash amounts	(2,590	)	57		(1,906	)	(1,660	)	(777	)	(1,203	)	(705	)

Cash paid for interest (a)	12,860		13,296		10,244		9,607		9,947		8,086		7,416
Scheduled debt principal payments and preferred dividends	4,960		4,567		4,869		4,914		5,072		4,180		3,109

Total fixed charges	17,820		17,863		15,113		14,521		15,019		12,266		10,525

Debt service coverage ratio based on GAAP interest expense (b)	4.3		3.2		3.2		3.3		3.1		3.3		3.1
Debt service coverage ratio based on cash interest expense (b)	4.9		2.9		3.6		3.7		3.4		3.8		3.4
Fixed charge coverage ratio based on GAAP interest expense (c)	3.2		2.3		2.2		2.2		2.1		2.3		2.2
Fixed charge coverage ratio based on cash interest expense (c)	3.5		2.2		2.4		2.5		2.2		2.5		2.4
Debt to total market capitalization including debt and preferred equity (d)	33.4	%	32.3	%	30.8	%	33.3	%	35.9	%	42.8	%	37.4	%
Debt plus preferred stock to total market capitalization including debt and preferred equity (e)	38.6	%	38.8	%	37.1	%	40.7	%	44.6	%	48.6	%	44.9	%
Pretax income to interest expense (f)	2.6		1.5		1.6		1.5		1.6		1.8		1.6

(a)

Cash paid for interest is interest expense less amortized deferred financing fees and includes interest that we capitalized. We consider cash interest expense to be a useful measure of interest as it excludes non-cash based interest expense.

(b)

Adjusted EBITDA divided by interest expense. Ignoring the effect of the gain on sale of 7979 East Tufts Avenue, debt service coverage ratio was 3.1 using GAAP interest expense and 3.5 using cash paid for interest for the three months ended September 30, 2006.

(c)

Adjusted EBITDA divided by fixed charges. Fixed charges include interest expense as per (a) above and scheduled debt principal payments and preferred dividends. Ignoring the effect of the gain on sale of 7979 East Tufts Avenue, fixed charges coverage ratio was 2.3 using GAAP interest expense and 2.5 using cash paid for interest for the three months ended September 30, 2006.

(d)

Mortgage debt and other loans divided by mortgage debt and other loans plus the liquidation value of preferred stock and the market value of outstanding common stock and operating partnership units, assuming the redemption of operating partnership units for shares of our common stock. Mortgage debt and other loans amount excludes the outstanding principal for a loan related to 7979 East Tufts Avenue of $26.0 million. We classified this property as held for sale at June 30, 2006. We completed its sale on July 12, 2006 and the eliminated our liability for the $26.0 million loan.

(e)

Same as (d), except numerator includes preferred stock.

(f)

Calculated as income Including gain on sale of assets before minority interest and interest divided by GAAP interest expense. Ignoring the effect of the gain on sale of 7979 East Tufts Avenue, pretax income to interest expense was 1.4 for the three months ended September 30, 2006.

Net Operating Income (NOI) and Run-rate NOI

For the three months ended September 30, 2006

(in thousands)


Rental revenues	$	59,552
Tenant reimbursements		13,637
Rental property operating and maintenance		(15,474	)
Property taxes		(7,238	)
Insurance		(953	)

NOI	$	49,524

Actual results of properties acquired during the quarter:
Rental revenues		(3,529	)
Tenant reimbursements		(66	)
Rental property operating and maintenance		826
Property taxes		59
Insurance		7

Prorated full quarter of actual results of properties acquired during the quarter:
Rental revenues		4,980
Tenant reimbursements		128
Rental property operating and maintenance		(1,172	)
Property taxes		(100	)
Insurance		(49	)

Run-rate NOI	$	50,608

Reconciliation of net income available to common stockholders to NOI
Net income available to common stockholders	$	11,342
Other revenues		—
Interest expense		14,486
Depreciation and amortization		24,739
General and administrative expenses		4,986
Loss from early extinguishment of debt		39
Other expenses		607
Interest and other income		(365	)
Minority interests in continuing operations of operating partnership		678
Loss from discontinued operations before minority interests		(203	)
Gain on sale of assets		(18,016	)
Minority interests attributable to discontinued operations		7,786
Preferred stock dividends		3,445

NOI	$	49,524

Note: NOI and run-rate NOI exclude the operations of 7979 East Tufts Avenue, a property which we classified as held for sale as at June 30, 2006 and sold on July 12, 2006. For a definition and discussion of NOI and Run-rate NOI, see page 24.

Same Store and New Properties Consolidated Quarterly Statements of Operations

(unaudited and in thousands, except share data)


	Three Months Ended
	30-Sep-06			30-Jun-06			31-Mar-06			31-Dec-05			30-Sep-05			30-Jun-05			31-Mar-05
Same store (1)
Operating Revenues:
Rental	$	34,417		$	33,324		$	31,546		$	31,558		$	30,841		$	31,246		$	30,215
Tenant reimbursements		8,863			8,593			7,336			8,153			7,106			6,565			6,157
Other		—			—			—			89			265			3,780			300

Total operating revenues		43,280			41,917			38,882			39,800			38,212			41,591			36,672

Operating Expenses:
Rental property operating and maintenance		10,058			9,318			8,597			9,160			7,718			7,350			6,147
Property taxes		3,445			3,379			3,335			3,524			3,157			3,370			3,429
Insurance		603			632			536			636			456			459			572
Depreciation and amortization		13,473			11,971			11,286			11,181			11,220			11,000			10,990
General and administrative (2)		4,986			4,674			4,246			4,425			3,324			2,453			2,413
Other		434			63			142			35			98			961			521

Total operating expenses		32,999			30,037			28,142			28,961			25,973			25,593			24,072

Operating income		10,281			11,880			10,740			10,839			12,239			15,998			12,600

Other Income (Expenses):
Interest and other income		167			149			123			133			100			80			33
Interest expense (3)		(7,173	)		(7,034	)		(6,494	)		(6,804	)		(7,187	)		(7,120	)		(7,095	)
Loss from early extinguishment of debt		(39	)		(425	)		(57	)		(896	)		—			—			(125	)

Income (loss) from discontinued operations before minority interests		3,236			4,570			4,312			3,272			5,152			8,958			5,413
Loss from discontinued operations before minority interests		203			(163	)		(328	)		(474	)		(169	)		(217	)		(127	)
Gain on sale of assets		18,016			—			—			—			—			—			—

Income before minority interests	$	21,455		$	4,407		$	3,984		$	2,798		$	4,983		$	8,741		$	5,286

New properties (1)
Operating Revenues:

Rental	$	25,135		$	18,709		$	16,278		$	15,946		$	12,746		$	4,902		$	974
Tenant reimbursements		4,774			4,082			4,164			3,494			3,864			1,514			321
Other		—			—			168			1,343			—			52			—

Total operating revenues		29,909			22,791			20,610			20,783			16,610			6,468			1,295

Operating Expenses:

Rental property operating and maintenance		5,416			4,300			3,113			4,206			4,136			1,816			497
Property taxes		3,793			3,717			3,504			3,213			2,895			1,351			53
Insurance		350			436			354			250			295			52			8
Depreciation and amortization		11,266			7,540			6,227			6,859			5,089			2,728			549
General and administrative (2)		—			—			—			—			—			—			—
Other		173			87			39			12			8			—			—

Total operating expenses		20,998			16,080			13,237			14,540			12,423			5,947			1,107

Operating income	$	8,911		$	6,711		$	7,373		$	6,243		$	4,187		$	521		$	188

Other Income (Expenses):
Interest and other income		198			113			106			737			65			30			96
Interest expense (3)		(7,313	)		(4,796	)		(4,545	)		(3,839	)		(3,186	)		(1,818	)		(675	)
Loss from early extinguishment of debt		—			—			—			—			—			—			—

Income (loss) from discontinued operations before minority interests		1,796			2,028			2,934			3,141			1,066			(1,267	)		(391	)
Income from discontinued operations before minority interests		—			—			—			—			—			—			—
Gain on sale of assets		—			—			—			—			—			—			—

Income before minority interests	$	1,796		$	2,028		$	2,934		$	3,141		$	1,066		$	(1,267	)	$	(391	)

(1)

Same store properties are properties that were acquired before December 31, 2004 and new properties are properties acquired after December 31, 2004. During the quarter ended June 30, 2006 we classified our property located at 7979 East Tufts Avenue as available for sale and we completed this property sale in July 2006. We have presented all activity for this property in Loss from discontinued operations for all periods presented above.

(2)	General and administrative expenses are included entirely in same store as they are not allocable to specific properties.

(3)	Interest expense on our line of credit is allocated entirely to new properties.

Same Store Operating Trend summary

(unaudited and in thousands, except share data)


	Three Months Ended
	30-Sep-06			30-Jun-06			Percentage Change		30-Sep-05			Percentage Change
Same store (1)
Rental	$	34,417		$	33,324		3.3	%	$	30,841		11.6	%
Tenant reimbursements		8,863			8,593		3.1	%		7,106		24.7	%

		43,280			41,917		3.3	%		37,947		14.1	%

Rental property operating and maintenance		10,058			9,318		7.9	%		7,718		30.3	%
Property taxes		3,445			3,379		2.0	%		3,157		9.1	%
Insurance		603			632		(4.6	)%		456		32.2	%

		14,106			13,329		5.8	%		11,331		24.5	%

Net Operating income	$	29,174		$	28,588		2.0	%	$	26,616		9.6	%

Same store occupancy at end of quarter		96.3	%		96.4	%				93.7	%

(1)	Same store properties were acquired before December 31, 2004.

Consolidated Debt Analysis

(in thousands)


	Maturity Date		Principal Balance as of September 30, 2006		% of Debt		Interest Rate as of September 30, 2006		Interest Rate as of September 30, 2006 including swaps
Unhedged Floating Rate Debt

Unsecured line of credit	October 31, 2008	(1)		233,767	21.7	%	6.82	%	—

			$	233,767	21.7	%
Fixed Rate Mortgage Debt and Hedged Floating Rate Debt

Secured Term Debt	November 11, 2014		$	151,412	14.1	%	5.65	%	—
350 East Cermak Road	June 9, 2008	(2)		99,686	9.3	%	7.52	%	6.23	%
6 Braham Street	April 10, 2011			24,708	2.3	%	5.65	%	5.54	%
200 Paul Avenue 1-4	October 8, 2015			81,000	7.5	%	5.74	%	—
600 West Seventh Street	March 15, 2016			59,458	5.5	%	5.80	%	—
2323 Bryan Street	November 6, 2009			56,761	5.3	%	6.04	%	—
34551 Ardenwood Boulevard 1-4	November 11, 2016			55,000	5.1	%	5.95	%	—
2334 Lundy Place	November 11, 2016			40,000	3.7	%	5.96	%	—
4055 Valley View Lane	January 1, 2009			20,745	1.9	%	6.57	%	4.95	%
100 Technology Center Drive	April 1, 2009			20,000	1.9	%	7.07	%	5.52	%
1125 Energy Park Drive	March 1, 2032			9,597	0.9	%	7.62	%	—
375 Riverside Parkway	November 25, 2006	(2)		8,775	0.8	%	7.22	%	5.18	%
Paul van Vlissingenstraat 16	July 18, 2013			14,155	1.3	%	4.92	%	5.58	%
Gyroscoopweg 2E-2F	October 18, 2013			9,007	0.8	%	4.92	%	5.49	%
Chemin de l’Epinglier 2	July 18, 2013			10,239	1.0	%	5.02	%	5.57	%
731 East Trade Street	July 1, 2020			5,924	0.6	%	8.22	%	—

			$	666,467	62.0	%

Exchangeable senior debentures			$	172,500	16.1	%	4.13	%	—

Total Fixed Rate Debt			$	838,967	78.1	%
Loan premium—1125 Energy Park Drive and 731 East Trade Street				2,023	0.2	%

Total Consolidated Debt			$	1,074,757	100.0	%

Weighted average cost of debt (including interest rate swaps)									5.78	%

(1)	A one-year extension option is available.

(2)	Two one-year extensions are available.

Credit Facility

(in thousands)


	Maximum Available		Available as of September 30, 2006		Drawn as of September 30, 2006
Unsecured Credit Facility	$	500,000	$	160,000	$	233,767

Debt Maturities

(in thousands)


Property		2006		2007		2008		2009		2010		Thereafter		Total
Unsecured line of credit	(1)	$	—	$	—	$	233,767	$	—	$	—	$	—	$	233,767
Secured Term Debt	(2)		524		2,150		2,276		2,410		2,552		141,500		151,412
350 East Cermak Road	(3)		330		1,366		97,990		—		—		—		99,686
200 Paul Avenue 1-4			—		231		1,433		1,533		1,624		76,179		81,000
600 West Seventh Street			277		1,149		1,218		1,290		1,367		54,157		59,458
2323 Bryan Street			182		747		784		55,048		—		—		56,761
34551 Ardenwood Boulevard 1-4			—		—		—		55		639		54,306		55,000
2334 Lundy Place			—		—		—		40		464		39,496		40,000
6 Braham Street			—		—		—		562		749		23,397		24,708
4055 Valley View Lane			135		540		540		19,530		—		—		20,745
100 Technology Center Drive			—		—		—		20,000		—		—		20,000
1125 Energy Park Drive			28		114		121		132		143		9,059		9,597
375 Riverside Parkway	(3)		8,775		—		—		—		—		—		8,775
Paul van Vlissingenstraat 16			53		213		213		213		213		13,250		14,155
Gyroscoopweg 2E-2F			—		132		135		135		135		8,470		9,007
Chemin de l’Epinglier 2			38		154		154		154		154		9,585		10,239
731 East Trade Street			41		174		189		205		235		5,080		5,924
Exchangeable senior debentures	(4)		—		—		—		—		—		172,500		172,500

Total		$	10,383	$	6,970	$	338,820	$	101,307	$	8,275	$	606,979	$	1,072,734

Weighted Average Term to Initial Maturity	(4)										5.6 Years
Weighted Average Term to Initial Maturity (assuming exercise of extension options)	(4)										6.0 Years

(1)	A one-year extension option is available.

(2)	This amount represents six mortgage loans secured by our interests in 36 NE 2nd Street, 3300 East Birch Street, 100 & 200 Quannapowitt Parkway, 300 Boulevard East, 4849 Alpha Road, and 11830 Webb Chapel Road. Each of these loans are cross-collateralized by the six properties.

(3)	Two one-year extensions are available.

(4)	Assumes maturity of Exchangeable senior debentures at first maturity date in August 2011.

Note: Above amounts assume no exercise of extensions and total excludes $2,023 of Loan Premiums.

Portfolio summary


	9/30/2006		6/30/2006
Number of Properties:
Domestic	48		45
International	5		4

	53		49

Number of Buildings:
Domestic	65		61
International	6		4

	71		65

Number of Markets:
Domestic	19		19
International	4		4

	23		23

Net Rentable Square Feet:
Domestic	8,836,424		8,546,278
International	275,480		219,895

	9,111,904		8,766,173

Redevelopment Square Feet:
Domestic	1,213,326		1,121,437
International	35,000		35,000

	1,248,326		1,156,437

Portfolio Occupancy (1)	94.7	%	94.6	%
Same Store Pool Occupancy	96.3	%	96.4	%
Average Original Lease Term (years)	12.3		11.9
Average Remaining Lease Term (years)	7.2		7.0
Lease Expirations (through 2008)	6.9	%	7.1	%

(1)	Occupancy excludes space held for redevelopment.

Properties acquired

For the three months ended September 30, 2006


Property	Metropolitan Area	Date Acquired	Purchase Price (in millions)		Net Rentable Square Footage of Property	Total Square Footage Held for Redevelopment	Percentage of Total Rentable Square Footage of Property Occupied (1)		Major Tenant(s)
120 E. Van Buren Street	Phoenix	July-06	$	175.0	206,359	81,155	94.7	%	Freescale Semiconductor; Toyota; Phase 2 Solutions
Gyroscoopweg 2E-2F	Amsterdam, Netherlands	July-06	$	12.4	55,585	—	100.0	%	Redbus Interhouse, BV
600 Winter Street	Boston	September-06	$	8.7	30,400	—	100.0	%	Savvis, Inc.
2300 NW 89th Place	Miami	September-06	$	5.6	64,174	—	100.0	%	Peer 1 Network

			$	201.7	356,518	81,155	96.9	%

(1)	Excludes space held for redevelopment.

Occupancy Analysis

As of September 30, 2006


Property	Acquisition date	Metropolitan Area	Net Rentable Square Feet	Redevelopment Space	Gross Annualized Rent ($000) (1)		Occupancy (2)										Net rentable Square Feet as a % of				Gross Annualized Rent as a % of
Property	Acquisition date	Metropolitan Area	Net Rentable Square Feet	Redevelopment Space	Gross Annualized Rent ($000) (1)		As of 9/30/06		As of 6/30/06		As of 3/31/06		As of 12/31/05		As of 9/30/05		Property Type		Total Portfolio		Property Type		Total Portfolio
Internet Gateways

350 East Cermak Road	May-05	Chicago	870,531	263,208		23,949	89.9	%	93.3	%	92.2	%	92.2	%	92.2	%	27.6	%	9.7		26.9	%	11.6	%
200 Paul Avenue 1-4	November-04	San Francisco	501,761	25,919		15,309	97.8		95.1		94.2		95.8		93.8		15.8		5.5		17.2		7.4
2323 Bryan Street	January-02	Dallas	457,217	19,890		11,673	83.0		85.2		82.4		82.0		80.9		14.4		5.0		13.1		5.7
600 West Seventh Street	May-04	Los Angeles	430,403	59,319		10,894	96.8		97.3		97.3		90.8		83.0		13.6		4.7		12.3		5.3
1100 Space Park Drive	November-04	Silicon Valley	165,297	—		6,590	100.0		100.0		97.4		94.9		94.9		5.2		1.8		7.4		3.2
6 Braham Street	July-02	London, England	63,233	—		6,434	100.0		100.0		100.0		100.0		100.0		2.0		0.7		7.2		3.1
600-780 S. Federal	September-05	Chicago	161,547	—		4,372	86.7		83.6		81.2		86.1		84.1		5.1		1.8		4.9		2.1
12001 North Freeway	April-06	Houston	281,426	19,279		4,207	98.8		98.8		N/A		N/A		N/A		8.9		3.1		4.7		2.0
36 NE 2nd Street	January-02	Miami	162,140	—		3,667	81.2		95.9		81.2		81.2		81.2		5.1		1.8		4.1		1.8
731 East Trade Street	August-05	Charlotte	40,879	—		1,098	100.0		100.0		100.0		100.0		100.0		1.3		0.4		1.2		0.5
113 North Myers	August-05	Charlotte	19,511	9,707		516	100.0		100.0		100.0		100.0		100.0		0.6		0.2		0.6		0.3
125 North Myers	August-05	Charlotte	12,160	13,242		309	100.0		100.0		85.8		85.8		85.8		0.4		0.1		0.4		0.2

			3,166,105	410,564		89,018	92.2		93.7		91.2		90.2		88.8		100.0		34.8		100.0		43.2

Data Centers

300 Boulevard East	November-02	New York	311,950	—		12,142	99.7		90.9		99.7		87.4		87.4		7.3		3.5		14.7		5.9
833 Chestnut Street	March-05	Philadelphia	535,098	119,660		8,571	75.5		75.5		75.5		91.5		91.3		12.4		5.9		10.3		4.2
2045 & 2055 LaFayette Street	May-04	Silicon Valley	300,000	—		5,940	100.0		100.0		100.0		100.0		100.0		7.0		3.3		7.2		2.9
11830 Webb Chapel Road	August-04	Dallas	365,647	—		5,716	95.0		95.0		93.3		93.3		90.5		8.5		4.0		6.9		2.8
150 South First Street	September-04	Silicon Valley	179,761	—		4,762	95.7		100.0		100.0		98.5		98.5		4.2		2.0		5.7		2.3
14901 FAA Boulevard	June-06	Dallas	263,700	—		4,364	100.0		100.0		N/A		N/A		N/A		6.1		2.9		5.3		2.1
120 E. Van Buren Street	July-06	Phoenix	206,359	81,155		4,295	94.7		N/A		N/A		N/A		N/A		4.8		2.3		5.2		2.1
2334 Lundy Place	December-02	Silicon Valley	130,752	—		4,090	100.0		100.0		100.0		100.0		100.0		3.0		1.4		4.9		2.0
2401 Walsh Street	June-05	Silicon Valley	167,932	—		3,118	100.0		100.0		100.0		100.0		100.0		3.9		1.8		3.8		1.5
200 North Nash Street	June-05	Los Angeles	113,606	—		2,110	100.0		100.0		100.0		100.0		100.0		2.6		1.2		2.6		1.0
Gyroscoopweg 2E-2F	July-06	Amsterdam, Netherlands	55,585	—		2,093	100.0		N/A		N/A		N/A		N/A		1.3		0.6		2.5		1.0
2403 Walsh Street	June-05	Silicon Valley	103,940	—		1,930	100.0		100.0		100.0		100.0		100.0		2.4		1.1		2.3		0.9
4025 Midway Road	January-06	Dallas	36,856	63,734		1,862	100.0		40.5		0.0		N/A		N/A		0.9		0.4		2.2		0.9
Paul van Vlissingenstraat 16	August-05	Amsterdam, Netherlands	77,472	35,000		1,810	58.8		58.8		62.0		62.0		62.0		1.8		0.9		2.2		0.9
4700 Old Ironsides Drive	June-05	Silicon Valley	90,139	—		1,674	100.0		100.0		100.0		100.0		100.0		2.1		1.0		2.0		0.8
8534 Concord Center Drive	June-05	Denver	82,229	—		1,567	100.0		100.0		100.0		100.0		100.0		1.9		0.9		1.9		0.8
6800 Millcreek Drive	April-06	Toronto, Canada	83,758	—		1,530	100.0		100.0		N/A		N/A		N/A		1.9		0.9		1.9		0.7
3065 Gold Camp Drive	October-04	Sacramento	62,957	—		1,487	100.0		100.0		100.0		100.0		100.0		1.5		0.7		1.8		0.7
3015 Winona Avenue	December-04	Los Angeles	82,911	—		1,457	100.0		100.0		100.0		100.0		100.0		1.9		0.9		1.8		0.7
101 Aquila Way	April-06	Atlanta	313,581	—		1,411	100.0		100.0		N/A		N/A		N/A		7.3		3.4		1.7		0.7
251 Exchange Place	November-05	Northern Virginia	70,982	—		1,374	100.0		100.0		100.0		100.0		100.0		1.7		0.8		1.7		0.7
2440 Marsh Lane	January-03	Dallas	135,250	—		1,352	100.0		100.0		100.0		100.0		100.0		3.1		1.5		1.6		0.7
1125 Energy Park Drive	March-05	Minneapolis/St. Paul	112,827	—		1,340	100.0		100.0		100.0		100.0		100.0		2.6		1.2		1.6		0.7
Chemin de l’Epinglier 2	November-05	Geneva, Switzerland	59,190	—		1,328	100.0		100.0		100.0		100.0		N/A		1.4		0.6		1.6		0.6
3300 East Birch Street	August-03	Los Angeles	68,807	—		1,277	100.0		100.0		100.0		100.0		100.0		1.6		0.8		1.5		0.6
Clonshaugh Industrial Estate	February-06	Dublin, Ireland	20,000	—		1,201	100.0		100.0		0.0		N/A		N/A		0.5		0.2		1.4		0.6
375 Riverside Parkway	June-03	Atlanta	126,300	123,891		1,179	100.0		100.0		100.0		100.0		100.0		2.9		1.4		1.4		0.6
600 Winter Street	September-06	Boston	30,400	—		748	100.0		N/A		N/A		N/A		100.0		0.7		0.3		0.9		0.4
7520 Metro Center Drive	December-05	Austin	45,000	—		605	100.0		100.0		100.0		100.0		N/A		1.0		0.5		0.7		0.3
2300 NW 89th Place	September-06	Miami	64,174	—		564	100.0		N/A		N/A		N/A		N/A		1.5		0.7		0.7		0.3
7500 Metro Center Drive	December-05	Austin	—	74,962		—	0.0		0.0		0.0		0.0		N/A		—		—		—		—
3 Corporate Place	December-05	New York	—	283,124		—	0.0		0.0		0.0		0.0		N/A		—		—		—		—
115 Second Avenue	October-05	Boston	10,494	56,236		—	0.0		0.0		0.0		0.0		N/A		0.2		0.1		—		—

			4,307,657	837,762		82,897	95.1		93.7		91.6		94.9		94.4		100.0		47.2		100.0		40.4

Technology Manufacturing

34551 Ardenwood Boulevard 1-4	January-03	Silicon Valley	307,657	—		7,867	100.0		100.0		100.0		100.0		100.0		50.9		3.4		56.6		3.8
47700 Kato Road & 1055 Page Avenue	September-03	Silicon Valley	183,050	—		3,472	100.0		100.0		100.0		100.0		100.0		30.3		2.0		25.0		1.7
2010 East Centennial Circle	May-03	Phoenix	113,405	—		2,549	100.0		100.0		100.0		100.0		100.0		18.8		1.2		18.4		1.2

			604,112	—		13,888	100.0		100.0		100.0		100.0		100.0		100.0		6.6		100.0		6.7

Technology Office

100 & 200 Quannapowitt Parkway	June-04	Boston	386,956	—		7,203	100.0		94.9		100.0		100.0		100.0		37.4		4.2		35.9		3.5
4055 Valley View Lane	September-03	Dallas	240,153	—		4,674	88.3		97.0		94.3		94.3		94.3		23.2		2.7		23.4		2.3
100 Technology Center Drive	February-04	Boston	197,000	—		3,743	100.0		100.0		100.0		100.0		100.0		19.1		2.2		18.7		1.8
4849 Alpha Road	April-04	Dallas	125,538	—		2,856	100.0		100.0		100.0		100.0		100.0		12.1		1.4		14.2		1.4
4650 Old Ironsides Drive	June-05	Silicon Valley	84,383	—		1,567	100.0		100.0		100.0		100.0		100.0		8.2		0.9		7.8		0.7

			1,034,030	—		20,043	97.3		97.4		99.3		98.7		98.7		100.0		11.4		100.0		9.7

Portfolio Total/Weighted Average			9,111,904	1,248,326	$	205,846	94.7	%	94.6	%	93.1	%	94.2	%	93.3	%	100.0	%	100.0	%	100.0	%	100.0	%

(1)	Gross annualized rent represents the monthly contractual rent under existing leases as of September 30, 2006 multiplied by 12.

(2)	Occupancy excludes space held for redevelopment as of September 30, 2006.

Major Tenants

as of September 30, 2006


	Tenant			Number of Locations	Total Occupied Square Feet (1)	Percentage of Net Rentable Square Feet		Gross Annualized Rent ($000) (2)		Percentage of Gross Annualized Rent		Weighted Average Remaining Lease Term in Months
1	Savvis Communications	(3	)	11	1,401,124	15.4	%	$	29,148	14.2	%	170
2	Qwest Communications International, Inc.			12	673,718	7.4	%		20,318	9.9	%	178
3	Verio, Inc.	(4	)	2	238,051	2.6	%		7,042	3.4	%	147
4	Comverse Technology, Inc.			1	367,033	4.0	%		6,904	3.4	%	197
5	Equinix, Inc.			2	273,232	3.0	%		6,750	3.3	%	180
6	Leslie & Godwin	(5	)	1	63,233	0.7	%		6,434	3.1	%	106
7	Level 3 Communications, LLC	(6	)	12	280,732	3.1	%		5,858	2.8	%	147
8	AT & T			10	286,454	3.1	%		5,755	2.8	%	153
9	Amgen			1	131,386	1.4	%		5,311	2.6	%	113
10	AboveNet, Inc.			9	142,895	1.6	%		4,801	2.3	%	225
11	Thomas Jefferson University			1	179,707	2.0	%		3,835	1.9	%	122
12	Stone & Webster, Inc.	(7	)	1	197,000	2.2	%		3,743	1.8	%	147
13	XO Communications Services, Inc.			7	117,524	1.3	%		3,520	1.7	%	168
14	Seagate Technology	(8	)	1	183,050	2.0	%		3,472	1.7	%	96
15	JPMorgan Chase & Co.			1	27,377	0.3	%		3,330	1.6	%	120

	Total/Weighted Average				4,562,516	50.1	%	$	116,221	56.5	%	163

(1)	Occupied square footage is defined as leases that have commenced on or before September 30, 2006.

(2)	Gross annualized rent represents the monthly contractual rent under existing leases as of September 30, 2006 multiplied by 12.

(3)	Microsoft subleases 192,000 net rentable square feet (approximately $3.8 million of gross annualized rent) of this space and has the right to become tenant if the primary lessor defaults.

(4)	Verio is a wholly-owned subsidiary of Nippon Telegraph & Telephone.

(5)	Leslie & Godwin is a wholly owned subsidiary of AON Corporation

(6)	Level 3 Communications includes Wiltel Communications, OnFiber Communications.

(7)	Stone & Webster is a subsidiary of The Shaw Group.

(8)	Seagate Technology acquired Maxtor on May 22, 2006.

Lease Expirations and Lease Distribution

Lease Expirations

As of September 30, 2006


Year	Number of Leases Expiring	Square Footage of Expiring Leases	Percentage of Net Rentable Square Feet		Gross Annualized Rent ($000) (1)		Percentage of Gross Annualized Rent		Gross Annualized Rent Per Occupied Square Foot		Gross Annualized Rent Per Occupied Square Foot at Expiration		Gross Annualized Rent at Expiration ($000)
Available		485,567	5.3	%	$	—	0.0	%
2006	22	169,811	1.9	%		2,255	1.1	%	$	13.28		13.29		2,257
2007	29	96,772	1.1	%		3,332	1.6	%	$	34.43		34.56		3,344
2008	72	356,546	3.9	%		10,869	5.3	%	$	30.48		32.38		11,546
2009	86	513,260	5.6	%		17,708	8.6	%	$	34.50		35.73		18,338
2010	75	851,431	9.3	%		23,045	11.2	%	$	27.07		28.72		24,455
2011	73	1,557,933	17.1	%		30,454	14.8	%	$	19.55		21.35		33,267
2012	17	143,322	1.6	%		3,476	1.7	%	$	24.25		27.55		3,948
2013	22	676,361	7.4	%		12,554	6.1	%	$	18.56		22.22		15,032
2014	27	453,501	5.0	%		11,465	5.6	%	$	25.28		30.77		13,954
2015	50	1,436,576	15.8	%		41,440	20.1	%	$	28.85		34.05		48,915
Thereafter	91	2,370,824	26.0	%		49,248	23.9	%	$	20.77		28.57		67,741

Portfolio Total / Weighted Average	564	9,111,904	100.0	%	$	205,846	100.0	%	$	23.86	$	28.15	$	242,797

Lease Distribution

As of September 30, 2006


Square Feet Under Lease	Number of Leases	Percentage of All Leases		Total Net Rentable Square Feet	Percentage of Net Rentable Square Feet		Gross Annualized Rent ($000) (1)		Percentage of Gross Annualized Rent
Available				485,567	5.3	%			0.0	%
2,500 or less	320	56.7	%	119,832	1.3	%		18,356	8.9	%
2,501 - 10,000	88	15.6	%	459,789	5.0	%		12,666	6.2	%
10,001 - 20,000	51	9.0	%	748,533	8.2	%		17,577	8.5	%
20,001 - 40,000	41	7.3	%	1,152,950	12.7	%		23,793	11.6	%
40,001 - 100,000	41	7.3	%	2,626,620	28.8	%		65,806	32.0	%
Greater than 100,000	23	4.1	%	3,518,613	38.7	%		67,648	32.8	%

Portfolio Total	564	100.0	%	9,111,904	100.0	%	$	205,846	100.0	%

(1)	Gross annualized rent represents the monthly contractual rent under existing leases as of September 30, 2006 multiplied by 12.

Leasing Activity

As of September 30, 2006


	For the Three Months Ended September 30, 2006		% Leased
Occupied Square Feet as of June 30, 2006	8,646,824			94.9	%
Q3 2006 Dispositions:
7979 East Tufts Avenue	(366,184	)		97.2	%
Q3 2006 Acquisitions:
120 E. Van Buren Street	195,383			94.7	%
Gyroscoopweg 2E-2F	55,585			100.0	%
600 Winter Street	30,400			100.0	%
2300 NW 89th Place	64,174			100.0	%

Occupied Square Feet including Q3 2006 Acquisitions	8,626,182			94.7	%
Expirations and Reductions (including renewals)	(153,650	)		(1.7	)%
New Leases and Expansions	154,699			1.7	%
Renewals and Extensions	N/A			0.0	%
Remeasurements (1)	(894	)		(0.0	)%
Terminations	—			0.0	%

Occupied Square Feet as of September 30, 2006	8,626,337			94.7	%

GAAP Rent Growth (2)
Expiring Rent per Square Foot			$	10.66
New / Renewed Rent per Square Foot			$	76.41
Percentage Increase				616.5	%

Weighted Average Lease Term - New (in months)				59
Weighted Average Lease Term - Renewal (in months)				N/A

(1)	Represents remeasuring of building to Building Owners and Managers Association (BOMA) standards.

(2)	Represents estimated cash rent growth adjusted for straight-line rents in accordance with GAAP.

Tenant Improvements and Leasing Commissions


	Three Months Ended										Full Year 2005
	9/30/2006		6/30/2006		3/31/2006		12/31/2005		9/30/2005		Full Year 2005
Renewals (1)
Number of renewals		—		2		—		2		3		9
Square Feet		—		3,509		—		8,086		8,109		33,007
Tenant improvement costs per square foot (2)	$	—	$	—	$	—	$	1.14	$	9.67	$	6.86
Leasing commission costs per square foot (2)		—		5.19		—		2.61		2.48		5.50

Total renewal lease costs per square foot	$	—	$	5.19	$	—	$	3.75	$	12.15	$	12.36

New Leases (3)
Number of non-redevelopment leases		57		41		46		16		23		63
Non-Redevelopment square feet		87,967		51,021		84,488		41,784		8,410		107,923
Non-Redevelopment tenant improvement costs per square foot (2)	$	115.76	$	71.73	$	20.64	$	10.37	$	32.86	$	10.46
Non-Redevelopment leasing commission costs per square foot (2)		16.08		22.64		8.78		26.28		21.38		11.84
Number of redevelopment leases		2		3		1		—		—		—
Redevelopment square feet		66,732		84,421		22,685		—		—		—
Redevelopment tenant improvement costs per square foot (2) (5)	$	46.53	$	104.28	$	255.62	$	—	$	—	$	—
Redevelopment leasing commission costs per square foot (2)		13.15		13.99		2.92		—		—		—

Total new lease costs per square foot	$	100.71	$	109.26	$	77.91	$	36.65	$	54.24	$	26.30

Total (4)
Number of leases		59		46		47		18		26		72
Square Feet		154,699		138,951		107,173		49,870		16,519		140,930
Tenant improvement costs per square foot (2)	$	85.89	$	89.69	$	70.38	$	8.87	$	21.47	$	9.62
Leasing commission costs per square foot (2)		14.81		16.94		7.54		22.44		12.10		13.42

Total costs per square foot	$	100.71	$	106.64	$	77.91	$	31.31	$	33.58	$	23.04

(1)	Does not include retained tenants that have relocated to new space or expanded into new space.

(2)	Assumes all tenant improvement and leasing commissions are paid in the calendar year in which the lease commences, which may be different than the year in which they are actually paid.

(3)	Includes retained tenants that have relocated to new space or expanded into new space within our portfolio.

(4)	Recent property acquisitions may make a period over period comparison difficult. For a list of the acquisition dates of our properties see page 14.

(5)	Redevelopment Tenant Improvement costs include tenant-specific building improvements for square footage designated as space held for redevelopment.

Historical Capital Expenditures


	Three Months Ended														Full Year 2005
	9/30/2006		6/30/2006		3/31/2006		12/31/2005		9/30/2005		6/30/2005		3/31/2005		Full Year 2005
Recurring capital expenditures (1) (3)	$	233,530	$	258,169	$	652,438	$	1,167,052	$	240,025	$	91,049	$	266,974	$	1,765,100
Non-recurring capital expenditures (2) (3)	$	10,567,130	$	4,306,049	$	750,817	$	1,689,757	$	1,766,579	$	1,604,007	$	1,352,219	$	6,412,562
Total net rentable square feet at period end excluding redevelopment space		9,111,904		9,132,357		8,135,957		8,051,212		7,864,760		7,791,110		6,303,226		8,051,212
Recurring capital expenditures per square foot	$	0.03	$	0.03	$	0.08	$	0.14	$	0.03	$	0.01	$	0.04	$	0.22
Non-recurring capital expenditures per square foot (2) (3)	$	1.16	$	0.47	$	0.09	$	0.21	$	0.22	$	0.21	$	0.21	$	0.80

(1)

Recurring capital expenditures represents non-incremental building improvements required to maintain current revenues. Recurring capital expenditures do not include acquisition capital that was taken into consideration when underwriting the purchase of a building or which are incurred to bring a building up to “operating standard”.

(2)	Non-recurring capital expenditures for the three months ended September 30, 2006 and June 30, 2006 includes approximately $8.2 million and $1.9 million, respectively, related to 115 Second Avenue and 3 Corporate Place. These properties are currently unoccupied.

(3)	Recent property acquisitions may make a period over period comparison difficult. For a list of the acquisition dates of our properties see page 16.

Redevelopment


Commenced Leases	Rentable Square Feet	Weighted Average Lease Term	Average Annualized Rent ($000) (1)		Annualized Rent per Square Foot		Improvements per Square Foot (2)
Shell	62,232	120	$	1,351,799	$	21.72	$	11.09
Datacenter	32,689	98		2,917,752		89.26		327.57

Total/Weighted Average	94,921	112	$	4,269,551	$	44.98	$	120.08

(1)	Gross annualized rent represents the monthly contractual rent under existing leases as of September 30, 2006 multiplied by 12.

(2)	Improvements per square foot include Landlord’s costs to improve the space, lease commissions and tenant allowances. This amount does not include any improvement costs paid by the tenant.

Management Statements on Non-GAAP Supplemental Measures

Funds from Operations:

We calculate Funds from Operations, or FFO, in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT. FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property, real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. Management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. Other REITs may not calculate FFO in accordance with the NAREIT definition and, accordingly, our FFO may not be comparable to such other REITs’ FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of our performance. FFO for all periods presented in this supplemental information includes the results of 7979 East Tufts Avenue, a property which we classify as held for sale and which we sold on July 12, 2006.

Adjusted Funds From Operations:

We present adjusted funds from operations, or AFFO, as a supplemental operating measure because, when compared year over year, it assesses our ability to fund dividend and distribution requirements from our operating activities. We also believe that, as a widely recognized measure of the operations of REITs, AFFO will be used by investors as a basis to assess our ability to fund dividend payments in comparison to other REITs. We calculate adjusted funds from operations, or AFFO, by adding to or subtracting from FFO (i) non-real estate depreciation, (ii) amortization of deferred financing costs (iii) noncash compensation (iv) loss from early extinguishment of debt (v) straight line rents (vi) fair value of lease revenue amortization (vii) capitalized leasing payroll (viii) recurring tenant improvements and (ix) capitalized leasing commissions. Other equity REITs may not calculate AFFO in a consistent manner. Accordingly, our AFFO may not be comparable to other equity REITs’ AFFO. AFFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance. AFFO for all periods presented in this supplemental information includes the results of 7979 East Tufts Avenue, a property which we classify as held for sale and which we sold on July 12, 2006.

EBITDA and Adjusted EBITDA:

We believe that earnings before interest, income taxes, depreciation and amortization, or EBITDA and Adjusted EBITDA (as defined below), are useful supplemental performance measures because they allow investors to view our performance without the impact or noncash depreciation and amortization or the cost of debt and with respect to Adjusted EBITDA preferred dividends and minority interests. Adjusted EBITDA is EBITDA excluding minority interests and preferred stock dividends. In addition, we believe EBITDA and adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs. Because EBITDA and adjusted EBITDA are calculated before recurring cash charges including interest expense and income taxes, and are not adjusted for capital expenditures or other recurring cash requirements of our business, their utility as a measure of our performance is limited. Accordingly, EBITDA and Adjusted EBITDA should be considered only as supplements to net income (computed in accordance with GAAP) as a measure of our financial performance. Other equity REITs may calculate EBITDA and Adjusted EBITDA differently than we do; accordingly, our EBITDA and Adjusted EBITDA may not comparable to such other REITs’ EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA for all periods presented in this supplemental information include the results of 7979 East Tufts Avenue, a property which we classify as held for sale and which we sold on July 12, 2006.

NOI and Run-rate NOI:

Net Operating Income (NOI)

NOI represents rental revenue and tenant reimbursement revenue less rental property operating and maintenance, property taxes and insurance expenses (as reflected in statement of operations). NOI is commonly used by stockholders, company management and industry analysts as a measurement of operating performance of the company’s rental portfolio. However, because NOI excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of NOI as a measure of our performance is limited. Other REITs may not calculate NOI in the same manner we do and, accordingly, our NOI may not be comparable to such other REITs’ NOI. Accordingly, NOI should be considered only as a supplement to net income as a measure of our performance.

Run-rate NOI:

Run-rate NOI represents NOI as defined above adjusted for new acquisitions to show an estimate of NOI as if the property had been owned for the entire quarter. Run-rate NOI is commonly used by stockholders, company management and industry analysts as a measurement of future operating performance of the company’s rental portfolio. Run-rate NOI may not be indicative of future performance. Actual performance is subject to risks, uncertainties and assumptions. See the discussion of forward-looking statements on page 2.