Welcome to the Corporate Office Properties Trust third quarter 2008 earnings conference call. As a reminder, today’s call is being recorded. At this time I will turn the call over to Mary Ellen Fowler, the company’s Vice President and Treasurer. Miss Fowler, please go ahead.

Thank you and good morning everyone. Today we will be discussing our third quarter 2008 results. With me today are Rand Griffin, our President and CEO, Roger Waesche, our COO and Steve Riffee, our CFO. As they review the third quarter results, the management team will be referring to our quarterly supplemental information package. You can access our supplemental package as well as our press release on the Investor Relations section of our website at www.COPT.com. Within the supplemental package you will find a reconciliation of non-GAAP financial measures to GAAP measures referenced throughout this call. Also under the Investor Relations of our website you’ll find a reconciliation of our annual 2008 and 2009 annual guidance. At the conclusion of this discussion, the call will be opened up for your questions. Before we begin I must remind all of you that certain statements made during this call regarding anticipated operation results and future events are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although such statements and projections are based on what we believe to be reasonable assumptions, actual results may differ from those projected. Those factors that could cause actual results to differ materially include without limitation the ability to renew or release space under favorable terms, regulatory changes, changes in the economy, the successful and timely completion of acquisitions and development projects, availability of financing, changes in interest rates and other risks associated with a commercial real estate business as detailed in our filings from time to time with the Securities and Exchange Commission. Please note the company assumes no obligation to update any forward-looking statements. Now I will turn the call over to Rand.

We’re very pleased with our quarterly results delivering FFO for diluted share of $0.03 above consensus. As Steve and Roger go through the details of the quarter you will know the pattern of strong fundamental performance in a number of operational areas. Our ability to continue delivering strong, consistent performance is a testament to our strategy of building on relationships, providing outstanding customer service to specialized tenants and operating in strong submarkets. However, today, investors are looking beyond current results and focusing on liquidity, risk, safety of operational fundamentals and lastly growth. We are well positioned in each of these areas and let me take a moment to explain. With regard to liquidity we are in good shape. We have planned and executed carefully on a series of capital events over the year. As we mentioned on a previous call, we have taken a series of capital actions that have solved our construction funding requirements and expanded our line capacity. We have paid off all debt maturing in 2008 and have very limited and manageable loan maturities for 2009 and 2010. In addition we raised approximately $140 million of equity during the quarter to be well positioned to execute on opportunities presented by BRAC as well as provide capacity as the acquisition market returns. This equity raise along with the equity we raised through the Nottingham transaction at the beginning of 2007 has positioned the company well for next year. We do not need to raise equity through 2009. With regard to risk we have selected a strategy that does not depend upon transactional volume, does not count on promotes and sales fees or external asset management fees. Our government, defense and IT and data core tendencies is very resilient, still growing and relatively recession proof. There is safety in…

Turning to our results, diluted FFO for the third quarter of 2008 totaled $32.6 million or $0.64 per diluted share. These results represent a 10.3% increase on a per share basis over the $0.58 per diluted share or $32.4 million of diluted FFO for the comparable quarter in 2007. Third quarter FFO results of $0.64 per diluted share included approximately $2 million of third party development fees, net of cost, slightly exceeding our forecast while lease termination fees were less than $200,000 for the quarter. NOI contributions and development place and service, G&A costs and interest expense were in line with our expectations when we last gave our 2008 annual guidance. Our lease renewals remain strong at 79.6% percent for the quarter and 77.9% year to date. We reported net income available to common shareholders for the third quarter of $8.9 million or $0.19 per diluted share compared to $7.4 million or $0.15 per diluted share for the third quarter of 2007. Turning to AFFO, after adjusting per capital expenditures and the straight lining of rent, our adjusted funds from operations of $25.8 million represented an increase of 8% from $23.9 million in the third quarter of 2007. For the 9 months, AFFO is $75.4 million representing an increase of approximately 12% from $67.5 million in the first 9 months of 2007. Our diluted FFO payout ratio is 58.5% year to date and 61.4% for the third quarter. The diluted AFFO payout ratio year to date is a strong 79.7% although the third quarter ratio is 86.1% due to the uneven timing of capital expenditures. Looking at our same office cash NOI for the third quarter of 2008, for the 218 properties, or 89.9% of the consolidated portfolio square footage, same office cash NOI increased by 3.1% excluding the effect…

Turning to our operating portfolio, at September 30 our wholly owned portfolio consisted of 235 properties totaling 18.3 million square feet that were 93.2% occupied and 94.3% leased. In terms of leasing statistics, we renewed 79.6% of expiring leases at an average capital cost of $8.24. Rental renewals increased 26.7% on a straight-line basis and 13.1% on a cash basis. We have renewed 77.9% of expiring leases for the 9 months ended September 30. Total rent for the renewed and re-tenanted space increased 23.1% on a straight-line basis and increased 9.8% on a cash basis. For all renewed and re-tenanted space the average capital cost was $10.14. With regard to the credit strength of our tenants, from a portfolio standpoint, our top 50 tenants represent 70% of our revenues. We have on average 5.5 leases with these tenants, with an average space size of 42,000 square feet. Our portfolio is characterized by strong credit with 55% of our combined net operating income in the government, Defense IT, and data sector. Looking at our lease expiration schedule across our portfolio for the remainder of this year, at September 30, we had 1.9% of revenues expiring representing about 315,000 square feet. For 2009 we have 14.5% of our revenues expiring. As both Steve and Rand mentioned, we believe 2009 lease renewals will be more challenging in each of our markets than usual. Other than northern Virginia, our markets do not face a severe overbuilding going into this down cycle. Rather the challenge to our markets will come from a slightly contracting to flat employment scenario. We do think our concentration with the government and contractors will provide us with some mitigation. As we mentioned on our last call, our leases to Unisys for the entire campus in Blue Bell, Pennsylvania expire June…

Turning to our development activity, at September 30 we had 12 buildings with 1.3 million square feet under construction for a total cost of $266 million. Our construction pipeline was 41% leased as of September 30 up from 27% at the end of the previous quarter. As you will note in the supplement, the two buildings located at the Tranquil Road in San Antonio that we previously show as committed now have signed leases. Subsequent to quarter end we signed a small lease at our [Run Preserve] building and one lease at our first M square building and we expect to execute a lease shortly for 73,000 square feet at 300 NBP. With these leases, we believe our construction leasing is on track and approaching 50% leased which is consistent with our beginning of the year projections. Also during the quarter we signed a 39,000 square foot lease at 302 NBP which is now in service bringing the total leasing of this building to 79%. Our development pipeline includes buildings that are permitted, designed, and ready to start construction. We have reexamined this pipeline in detail reducing it to the building that demand dictates we start relatively soon despite our weakening economy. We’ve also delayed several building starts by a quarter primarily due to permitting challenges. This development pipeline includes nine buildings totaling 980,000 square feet at a cost of $204 million. Importantly, 87% of the square footage in the development pipeline is for the government and defense sector underlining the strength of our strategy. Looking at our land inventory with the addition of two parcels this quarter, we now control a total of 1,900 acres that can support approximately 16 million square feet of entitled office space. In summary, we are making progress with our development pipeline despite a difficult economic environment. We are laying the groundwork to be well positioned to take advantage of the upcoming BRAC opportunities. We have addressed our capital requirements to enable us to execute on our plans. At the same time, we have planned for a challenging 2009 with regards to our operating portfolio and have laid out a conservative 2009 plan that we are confident of achieving. With that we will open up the call for your questions.

(Operator Instructions) Your first question comes from John Guinee – Stifel Nicolaus.

Most of these questions are for Steve. One quick question for you, Rand. On the land acquisition did you pay 2007 prices or 2010?

Most of these questions are for Steve. One quick question for you, Rand. On the land acquisition did you pay 2007 prices or 2010?

Probably in each case we did get a reduction from what was originally discussed, fairly significant reduction in the case of property up by Fort Detrick so it’s unusual to buy ground but we have the demand there and I think we took advantage of some of the weakness in the potential market by getting the price reduced.

Okay, thanks. Steve, net service income $0.08 to $0.10 projected for 2009, what will it be in 2008 and what specifically is going on in the construction service line item for the financial statements?

Okay, thanks. Steve, net service income $0.08 to $0.10 projected for 2009, what will it be in 2008 and what specifically is going on in the construction service line item for the financial statements?

Well, it’s about $4 million for 2008 is what we’re projecting so we have a big contract for one of our primary tenants, a couple of them that are going on and really ramping up this quarter and that’s, the fees are a small percentage of the total spent of the construction spend so that’s what you’re seeing. There was, as we footnoted in the supplement, there was one small contract that we had a very tiny net fee that we would grow stuff the first and second quarter by like $1 million in one and $7 in the other but the fee had been recorded net and now that we have the contract grossed up we see that, that’s what you’re seeing in the third quarter, a lot of activity in the third quarter and it’s that kind of business, John that is representing the money for next year throughout the year.

Okay, then last question for Steve or Rand, what’s the pricing now on your deal to put on your $200 million of exchangeable notes or preferred shares outstanding and are you in the market to buyback any of that paper?

Okay, then last question for Steve or Rand, what’s the pricing now on your deal to put on your $200 million of exchangeable notes or preferred shares outstanding and are you in the market to buyback any of that paper?

John, we’re looking at it, the actual economic advantage to it is actually very small. We do analyze it; we think about it, we’ve also been making sure we preserve the capital for everything that Rand and Roger talked about. We look at it regularly, we would consider it, but the economic deterrence is really not that big at this point in time, but we are relative to the cost of our capital. It’s roughly $0.71 on the dollar today, John.

That should be a mid-teens yield to foot?

That should be a mid-teens yield to foot?

Right.

And that’s not good enough?

And that’s not good enough?

It has to do with your assumption of what you’re replacing the 3.5% cost in the spread there. You really don’t get much of an accounting benefit for that, that obviously changes next year as you have to move that to your projected expense, more like a six so then you’re comparing a different analysis at that point. It’s primarily replacing 3.5% that would pop with more permanent that’s at a higher rate when you look at the long-term modeling of it, but we are looking at it. We understand that there’s a discount from an opportunity standpoint.

Where are your preferred shares trading right now and is that, the same question on that?

Where are your preferred shares trading right now and is that, the same question on that?

I think that the preferred, if you look at the last night, the current coupon, John, is in the mid 12s so we’re in $15 to $16 versus the $25 par. I don’t think we would be looking at buying those in based on those kinds of returns.

One last question for Roger or whomever, are you just on the 419,000 square foot single story building up in Blue Bell, are you just going to tear that down and start afresh?

One last question for Roger or whomever, are you just on the 419,000 square foot single story building up in Blue Bell, are you just going to tear that down and start afresh?

I think what we’ll probably do is divide the building up into a couple smaller buildings and create parking around smaller amasses of building and redo the fascia of the buildings a little bit. That is the current thinking but we’re still working through that will architects.

Your next question comes from Michael Bilerman - Citi.

Irwin Guzman here for Michael. Just two quick questions, the first of which is the four leases with Wachovia, do any of those come up for renewal any time soon?

Irwin Guzman here for Michael. Just two quick questions, the first of which is the four leases with Wachovia, do any of those come up for renewal any time soon?

We do have a small 2,500 square foot lease with one of their mortgage subsidiaries that matures in 2009 but the big lease we have with them, Pinnacle Tower in Northern Virginia in Tyson’s Corner does not mature until 2018. I believe there is an option to terminate out in 2012 but it’s with about a 2-year bank penalty, so I think at this point we’re looking at a situation where we think we have a credit upgrade and we don’t have any near term risk of getting space back.

One other question, Rand on next year’s guidance; you mentioned that you were being more conservative on your lease of assumptions, but at the same time you mentioned that you’re expecting tenant retention to fall to about 60% and at the same time the lease roll is approximately 56% of the portfolio so I’m trying to reconcile that with the expectation that occupancy will actually grow from the beginning of the year through to the end, it would imply that there’s going to be some significant re-tenanting of space. Can you just talk about that a little bit?

One other question, Rand on next year’s guidance; you mentioned that you were being more conservative on your lease of assumptions, but at the same time you mentioned that you’re expecting tenant retention to fall to about 60% and at the same time the lease roll is approximately 56% of the portfolio so I’m trying to reconcile that with the expectation that occupancy will actually grow from the beginning of the year through to the end, it would imply that there’s going to be some significant re-tenanting of space. Can you just talk about that a little bit?

With respect to our lease maturities for 2009, 25% of our maturities relate to two specific assets. One is the Unisys maturity that we talked about which is 467,000 square feet not taken care of yet and the second is in Colombia two years ago we acquired a facility in our Columbia Gateway Business Park that was a combination office and warehouse building. The warehouse part of that building, 245,000 square feet matures on 12/31/09. That tenant will not renew. It is the goal of COPT to redevelop that property into office and the question is will we do it right away or will we go through one more round of leasing for that building and redevelop it at that point. 25% of our maturities relate to those two tenants. If you look at our maturities other than that, we are really projecting a pretty standard year in terms of renewal percentage of about 70% but those two really kick the percentages down significantly.

So the assets going to be redeveloped, that’s going to be taking out of the occupancy statistics of 92% - 93%.

So the assets going to be redeveloped, that’s going to be taking out of the occupancy statistics of 92% - 93%.

Just to let you know, the NOI is very small in that. The NOI is $4.20 per square foot net rent on 245,000 square feet so it’s a little over $1 million of NOI.

Just one last question on the market demand portion of the development pipeline that’s coming on line all but in the third quarter of 2009, what’s your best guess of the leasing when they deliver in the third quarter of next year?

Just one last question on the market demand portion of the development pipeline that’s coming on line all but in the third quarter of 2009, what’s your best guess of the leasing when they deliver in the third quarter of next year?

We have as you note in the description in the supplement we have the government which we assume may stay committed but will be usually full upon delivery. The similar situation for the defense IT buildings so the market demand which is really only on the buildings that are being built in the large office parks, we have conservatively, and you see that on the stabilization dates, allowed a 12 month lease up time frame for those and we think that as we deliver those we’ll be roughly in the 25% to 40% range going into delivery and work our way up from there to the stabilization within the year.

[Phillies]:

A couple questions if I can with development for 2008 – 2009. Steve, do you know, can you give us what has been or what will be the impact of your 2007-2008 deliveries for the 2008 year? Of course I’d like to be able to check what you guys actually. [Phillies]: A couple questions if I can with development for 2008 – 2009. Steve, do you know, can you give us what has been or what will be the impact of your 2007-2008 deliveries for the 2008 year? Of course I’d like to be able to check what you guys actually.

What I do have in front of me is the 2008 deliveries on the 2008 year and I have the 2009 deliveries on the 2009 year. Everything else is blended in my numbers for 2009.

I’m sorry; the 2008 impact on the 2008 developments is what? [Phillies]: I’m sorry; the 2008 impact on the 2008 developments is what?

The 2008 is $4 million in terms of buildings opening in 2008 and the impact on NOI 2008. It is now, in my numbers, blended in with the rest of the portfolio for 2009. The same number for 2009, the 2009 openings are contributing $4 million to 2009.

$4 million in 2009, dollar amount contributed in each of those years approximately? Dollar amount development? [Phillies]: $4 million in 2009, dollar amount contributed in each of those years approximately? Dollar amount development?

We’ll have to get that for you Chris; I don’t have that in front of me.

Okay, I would be interested in that in terms of what the future contributions would be in light of Rand’s preamble which was obviously... The commentary was arguably a little bit more bare-ish then we’ve heard and maybe more realistic then what we’ve heard from some of your peers. We would agree with it in terms of the occupancy assumptions you’ve built in, but conversely on the development side, you remain arguably more bull-ish maybe that’s just the segments that you’re focusing on. When you look at 2010, now you’re starting projects that will impact 2010 and 2011, be interested if you could expand upon your comments saying you delayed certain projects by a quarter to reflect permitting challenges but none of the projects, or there wasn’t as much commentary regarding more caution on starts due to market demand or customer demand. Can you expand upon that? [Phillies]: Okay, I would be interested in that in terms of what the future contributions would be in light of Rand’s preamble which was obviously... The commentary was arguably a little bit more bare-ish then we’ve heard and maybe more realistic then what we’ve heard from some of your peers. We would agree with it in terms of the occupancy assumptions you’ve built in, but conversely on the development side, you remain arguably more bull-ish maybe that’s just the segments that you’re focusing on. When you look at 2010, now you’re starting projects that will impact 2010 and 2011, be interested if you could expand upon your comments saying you delayed certain projects by a quarter to reflect permitting challenges but none of the projects, or there wasn’t as much commentary regarding more caution on starts due to market demand or customer demand. Can you expand upon that?

I think, Chris the reason that we’re, as you can tell from our comments, we are very cautious looking at the markets and feel the next 18 months or so are pretty difficult from a recessionary standpoint, then we go and we look at the demand from the particular tenants that we cater to and we still see strong demand. Particularly related to BRAC and we didn’t spend a lot of time on this call because it’s really not been a lot of new news. BRAC is on track, the buildings are under construction on site at the various locations and the contractors have yet to start to step forward with the leasing but there are discussions and a number of fronts going on. That’s why when we look out into the starts that come late in 2009 and then we start to look at forecasting for 2010 which we think that development volume will actually increase a fair amount, it’s directly related to the anticipated BRAC volume that’s coming on. We did have on several of the permitting delays that really related to some adjustments on the buildings, one that is requiring the longer one is really tied into a permit adjustment up at Thomas Johnson Drive up by Fort Detrick and so that one will start in late spring next year. The rest of them are just reflections of some minor adjustments on permit and time frame shifting by about a quarter. I think the other thing that sort of goes unsaid is on the development yields, we do feel that we will still be in roughly 10% cash on cash yields. While you might expect some of the rates to moderate slightly on rental rate increases; we are seeing construction costs reductions, we anticipate more of those and so we think those margins will stay intact straight through that time frame.

I appreciate that. With relation to the incremental NOI, you’re providing a numerator to the NOI impact, but obviously the permanent financing costs will dilute some of that impact, what do the permanent financing cost, have you assumed, when these projects are complete? [Phillies]: I appreciate that. With relation to the incremental NOI, you’re providing a numerator to the NOI impact, but obviously the permanent financing costs will dilute some of that impact, what do the permanent financing cost, have you assumed, when these projects are complete?

6.5% to 7% is what we’re thinking in terms of permanent cost to debt right now.

Where would that have been a year ago in your guidance? [Phillies]: Where would that have been a year ago in your guidance?

Maybe 100 basis points under that.

Okay and you’re finding continued interest from parties of various sorts to offer a permanent financing at a [inaudible] rate? [Phillies]: Okay and you’re finding continued interest from parties of various sorts to offer a permanent financing at a [inaudible] rate?

Actually, we don’t have to do a lot but we do believe in our conversations in all that we can actually keep the permanent financing that we have planned for next year in maybe $50 million increments and we think we’re going to be able to get that done.

My last question is, if I look at the remainder of 2008 – 2009 -2010 if you care, what are the capital needs excluding acquisitions that you currently are modeling or how should we look your financial package regarding maturities of debt and financial obligations regarding the development and how do you look at liquidity? If you could give us a sources and uses look that would be very helpful. [Phillies]: My last question is, if I look at the remainder of 2008 – 2009 -2010 if you care, what are the capital needs excluding acquisitions that you currently are modeling or how should we look your financial package regarding maturities of debt and financial obligations regarding the development and how do you look at liquidity? If you could give us a sources and uses look that would be very helpful.

I’ll do debt and I’ll let Roger tackle the rest of your question. I think our debt maturities are $93 million for 2009 and there is $65 million for 2010 and you’re not coming in very loudly so I didn’t hear the rest of your question. Roger is sitting a little closer.

In terms of the developments that we have budgeted for 2009, we currently have $200 million forecasted to spend of which we spent $20 million of that so far so that would be $180 million of net spend and then we will have some spend on the Unisys redevelopment probably in the $30 million range, but that probably won’t happen until 2010. With respect to 2010 development, I think we’re still uncertain to what the starts will be in 2010 but the last couple years, the starts have been in the $200+ million range for development.

I’ve got $160-ish million to $170ish million in debt plus $180 million, so $340 million whatever that is plus Unisys plus additional starts in 2010 based upon as you mentioned, BRAC activity, so in terms of capital requirements in the neighborhood of let’s just round numbers up to $400 million to $500 million and the sources for that? [Phillies]: I’ve got $160-ish million to $170ish million in debt plus $180 million, so $340 million whatever that is plus Unisys plus additional starts in 2010 based upon as you mentioned, BRAC activity, so in terms of capital requirements in the neighborhood of let’s just round numbers up to $400 million to $500 million and the sources for that?

We have around $200 million available in our primary line right now; we also have an accordion feature that we’re exploring expanding. We have $170 million available on our construction line and we’ve got some new permanent debt in probably $50 million increments that we’re pretty confident we can execute over the time frame that we’re talking about so I would say those are our sources.

Your next question comes from Bill Crow – Raymond James.

Couple of questions; you talked about cap rates creeping up for the core assets you were looking for; what’s the magnitude of that? Up 25 to 50 basis points or higher?

Couple of questions; you talked about cap rates creeping up for the core assets you were looking for; what’s the magnitude of that? Up 25 to 50 basis points or higher?

We’re thinking that in the markets in which we operate the cap rates will go into the 8% to 8.5% range.

Similar properties that you’re interested in; and then do you guys have an estimate for what you have invested on a per foot basis on the data center space?

Similar properties that you’re interested in; and then do you guys have an estimate for what you have invested on a per foot basis on the data center space?

We only have two data centers where we invested significant amounts of money and they are two Northrop Grumman data centers and in each case we invested about $280 a square foot total. That’s the data center and the office portion. The balance of the data centers that we have in our portfolio, the tenant has funded the costs for those so our investment is equal to what a standard office investment would be.

Rand, I think you touched on this with BRAC, but there have been no surprises relative to your expectation so far, is that fair?

Rand, I think you touched on this with BRAC, but there have been no surprises relative to your expectation so far, is that fair?

I think that’s fair. There’s been some articles on paper that have come out that are probably dampering some of the expectations which we thought was appropriate and the real difficulty is just that the contractors in the process that they go through with the Department of Defense don’t get notified of the contract renewals until fairly late in the process and so you have it sort of pent up demand that you don’t hear much about and then you’re rushed to delivery but the... So that’s something all of us will have to deal with and we’ll position for that in our 2010 starts a little bit in 2009 as well but as far as the actual funding in each of the BRACs it’s under construction, the delivery dates are set. What is going on that will determine somewhat of the offsite demand is how many of the government employees actually move versus retire or choose not to relocate and that will potentially increase the amount of offsite demand for the contractors and that’s yet to be determined at this point.

Thanks, and then finally, Steve, what was the capitalized interest for the quarter?

Thanks, and then finally, Steve, what was the capitalized interest for the quarter?

Let me see if I can find that, hold on a second. A little over $4 million.

Your next question comes from Richard Anderson – BMO Capital Markets.

Most of my questions have been asked and answered. Just wanted to get back to the scenario in 2009, it’s clear how that will impact your office market rate business I guess, but in the government area, are you seeing noticeable signs that the government is sort of pulling back on their real estate needs in a slowing economy or is it just something that you’re not seeing but you think could happen?

Most of my questions have been asked and answered. Just wanted to get back to the scenario in 2009, it’s clear how that will impact your office market rate business I guess, but in the government area, are you seeing noticeable signs that the government is sort of pulling back on their real estate needs in a slowing economy or is it just something that you’re not seeing but you think could happen?

No, I don’t. I think it’s the opposite. The demand is there. I think the various economic stimulus that has been thrust into the government’s budget will affect available dollars but our anticipation is that actually helps in the leasing. The government where they may have done some military construction, milcon as they call it, would instead go towards leasing in order to be able to still their demands in various sectors depending on which candidate wins, you may find yourself in a situation where government expenditures actually step up which has occurred in most previous recessions as a way to help economic stimulus. Some of the candidates have mentioned that and so we sort of anticipate that will in fact occur and then finally if expenditures in Iraq do slow down, we think our sector of the government we deal with will get an increase, a very sizeable increase on their expenditures so on my comments, don’t deal with really the government or the defense IT or even the data sectors, it’s really dealing with kind of an overview of the economy and that of course affects jobs and that will affect our non-government and defense IT sector.

Very helpful. Then, I don’t think Steve mentioned anything about dispositions in your assumptions for 2009, or did I miss it?

Very helpful. Then, I don’t think Steve mentioned anything about dispositions in your assumptions for 2009, or did I miss it?

We have an assumption here that we might dispose of, it depends on what point of the range we’re in up to possibly $40 million.

And that would be out of Harrisburg and New Jersey is that right?

And that would be out of Harrisburg and New Jersey is that right?

It would be non-core, non-strategic assets.

Your next question comes from Michael Knott – Green Street Advisors.

My question is regarding the development pipeline. When you think about starts for 2009 and 2010, do you now require higher yields to compensate for the fact that return expectations everywhere are going up and probably cap rates are moving up and so that may squeeze the value you’re creating. How do you think about that?

My question is regarding the development pipeline. When you think about starts for 2009 and 2010, do you now require higher yields to compensate for the fact that return expectations everywhere are going up and probably cap rates are moving up and so that may squeeze the value you’re creating. How do you think about that?

I don’t think we have tried to forecast that into our projections for 2009, Michael. I think we have had a lot of internal dialogue that several factors are going on. One is an expectation is, some of the people asked earlier, your permanent financing cost may go up so accordingly some of your development yields should go up somewhat parallel to that. I think that the positive is that frankly no one can get construction financing so we’re not seeing a new construction coming on in our markets and that should give us firms like ours that have access to capital a competitive advantage. We typically have not gone out and historically tried to become greedy but just maintain a fairly consistent, I think, in our past 10 years it’s ranged from 10 to 12 basis point spread on our cash on cash development yields so what will put some pressure on that, as I said, would be just your ability to increase leasing rates will be somewhat dampened by the economy. On the other hand, I think that’s more than offset by the reduction in construction costs that we’re seeing and so I think that our margins can be at that level in 2009 and probably moving up a little in 2010 would be our guess.

Is there any inferences you can draw from your land purchases in terms of where land values are today generally versus a year ago?

Is there any inferences you can draw from your land purchases in terms of where land values are today generally versus a year ago?

I don’t think really, because, what’s interesting; if you look at what you can afford to pay for land, it really comes back to what’s your rental rate and land is a component of rental rate and that hasn’t changed. I think in our markets, land has stayed at the levels; there’s not been the reductions. What we’ve done is simply take advantage of some individual situations where we had a contract, we’re looking at it and had it under an option and contract and that could have delayed closing quite a long time, accelerated that for a substantial reduction in the FAR costs and we just took advantage of that situation and the other case, our land continues to be dominated by the government in San Antonio and we did need to get some land for the defense contractors who have indicated needs to have product delivered by mid 2010 and so we moved accordingly and pretty much paid a slight discount to market there.

My last question is on the underdevelopment, the 204 million. You talked about the under construction probably being closer to 50% at least after some leases in the works are finished. What would be your senses to the level of commitment or discussion to the 204 million today?

My last question is on the underdevelopment, the 204 million. You talked about the under construction probably being closer to 50% at least after some leases in the works are finished. What would be your senses to the level of commitment or discussion to the 204 million today?

Well, I think it varies according to the tenants. If it’s government, we may start all of these on the list on page 32 of the supplement speculatively but we do anticipate that by the time of completion, the government would have signed those leases. On the defense IT sector, those related to National Business Park has pretty much been our experience that by the time we finish buildings, we’ve got good leasing activity and certainly in less than a year. We are fully leased on those on the park other than the 302 where we held out some square footage for a government commitment. We’re basically full on that entire park. 308 we would expect that would come on fairly well, at least as we’ve developed it. Really, North Gate, which is our first building, North Gate A in Aberdeen, we would expect some fairly significant pre-leasing to occur as we start that building and followed by some early on leasing in C as we get going on that building. Those are both responding to specifically to BRAC demand to the Aberdeen ground portion of BRAC. I think generally, we’re going to be in pretty good shape, Michael.

Your next question comes from Dave Rodgers - RBC Capital Markets.

My remaining question that I had left on the list for Steve, you addressed earlier your ability to access the bank markets in smaller chunks over the course of the next year or two, how has those discussions with the lenders changed just over the last 30 or 60 days? Can you give any color on that?

My remaining question that I had left on the list for Steve, you addressed earlier your ability to access the bank markets in smaller chunks over the course of the next year or two, how has those discussions with the lenders changed just over the last 30 or 60 days? Can you give any color on that?

I’ll let Mary Ellen who’s had more the direct conversation in the last week or so answer that one.

I think, Dave, probably the biggest change has been the size of deals that can get done today. I think we were looking back pretty fortunate in terms of our timing of the $220 million deal that we did earlier this summer. I think going forward, there’s capital available but it might be in smaller pieces. We can break down our debt by individual building and refinance in the $30 million to $50 million range so I think that workable plan for us is probably the biggest change.

Let me ask one more. You’ve addressed it in a couple different forms but I guess I’ve asked it in a different way. The development pipeline or the pace of the starts at this point seems to put you behind the development demand curve that you’ve laid out over the course of the next year or two potentially, I guess if that’s the case, at what point would you feel comfortable getting back into ramping that development cycle a little more specifically with respect to projects in and around [Rundill], MVP etc?

Let me ask one more. You’ve addressed it in a couple different forms but I guess I’ve asked it in a different way. The development pipeline or the pace of the starts at this point seems to put you behind the development demand curve that you’ve laid out over the course of the next year or two potentially, I guess if that’s the case, at what point would you feel comfortable getting back into ramping that development cycle a little more specifically with respect to projects in and around [Rundill], MVP etc?

As I said, the interesting part of the BRAC, we do still anticipate that specifically on the contractor demand that would be outside of Fort Meade that’s a 4.5 million to 5 million square foot number. I think that’s lagging to the extent of when those leases start to be signed and with the same time, those that have square footage there are clearly going to take advantage of that when that potentially occurs, so I think what we’ve simply tried to do is make sure we’ve got product available at each of those locations. We are in design and will go through permitting, we just haven’t put it in here yet of significant step up and ramp up on the development so that we’re ready to go with what could be fairly significant demand but we just haven’t put it in here for terms of any 2009 impact. The key is to be ready and as we see that unfolding we’ll move very quickly to have square footage available earlier than any other competitors in the market place.

Your next question comes from Chris Lucas – Robert W. Baird.

A couple of real quick questions; Rand just an update to any change of activities at Fort Richie?

A couple of real quick questions; Rand just an update to any change of activities at Fort Richie?

Not really, we did open in the quarter a community center as we promised. We paid a certain amount and Penn Mar paid for roughly half of that. That was a commitment to the community that has gone over very, very well. Discussions with several large tenants continue. We pretty well are finished with our demolition activities and we’re right now into the infrastructure portion of the activities which requires upgrading the substation and new phone lines and improving the water system and so on like that. That’s all ongoing and in the meantime we are in the final stages of design for the residential component where we will start to market that up to land acquirers next year fairly aggressively and are starting to see some signs of interest in that area. We did not for conservativeness in 2009, we did not put any land sales or activity into our forecast for Fort Richie in 2009. We remain conservative.

Okay, and then Steve, to you, a couple questions on the net service income for the quarter, was there a catch up or a ramp up issue with the amount for this quarter?

Okay, and then Steve, to you, a couple questions on the net service income for the quarter, was there a catch up or a ramp up issue with the amount for this quarter?

It’s the timing of when certain work got done and when we could recognize it. This really ramped up in this quarter, but it’s going to be at a pretty high level for a while and that’s why we’re projecting $4million to $5million for all of next year.

Is it safe for us to think about that as a consistent number quarter to quarter or is it going to be pretty lumpy?

Is it safe for us to think about that as a consistent number quarter to quarter or is it going to be pretty lumpy?

In 2009 I think you can think of that as a pretty consistent number from quarter to quarter.

Just on follow up on the dispositions, a question from earlier, just refresh my memory as it relates to the assets in New Jersey, I thought there was some expectation for sale in 2009.

Just on follow up on the dispositions, a question from earlier, just refresh my memory as it relates to the assets in New Jersey, I thought there was some expectation for sale in 2009.

Chris, we have two remaining assets in New Jersey. They are both leased to a tenant who has obligation to buy them from us. They can do that in September of 2009 or they can extend it for one year until September 2010. Our most recent conversations with them are that they will extend it to 2010 but they are a high-grade credit tenant and we’re not concerned about performing on the contract.

We have a follow up question from Chris Haley from Phillies.

Based upon your occupancy assumptions, Steve, you’re not including the lost occupancy from Unisys in your year-end or second half assumptions? Is that correct? [Phillies]: Based upon your occupancy assumptions, Steve, you’re not including the lost occupancy from Unisys in your year-end or second half assumptions? Is that correct?

We are, Chris, the occupancy percentage that we are quoting assumes that we take some of the Unisys out of service, so for instance, the 419,000 square foot building won’t be operational at the end of 2009. It’s possible that the other 200,000 square foot building could likewise be out of service. We’re not quite sure about that one yet.

So therefore, you will be capitalizing 400,000 to 600,000 square feet. Can you associate expenses? [Phillies]: So therefore, you will be capitalizing 400,000 to 600,000 square feet. Can you associate expenses?

No, we won’t be capitalizing interest on the existing asset base. We may be capitalizing property taxes and some minor operating expenses.

At this time there are no questions in the queue. I will now turn the call back to Mr. Griffin for closing remarks.

Thank you for this extended call and thanks for joining us today. As always, we do appreciate your participation and support, particularly in these difficult times, so we are available to answer any other questions you might have and have a great day.