Exhibit 99.2

Trammell Crow Company

Audited Consolidated Financial Statements

As of December 31, 2005 and 2004

and for the years ended December 31, 2005,

2004 and 2003

		Page
FINANCIAL STATEMENTS		2
Report of Independent Auditors		3
Consolidated Balance Sheets — December 31, 2005 and 2004		4
Consolidated Statements of Operations — Years Ended December 31, 2005, 2004 and 2003		5
Consolidated Statements of Stockholder’s Equity — Years Ended December 31, 2005, 2004 and 2003		6
Consolidated Statements of Cash Flows — Years Ended December 31, 2005, 2004 and 2003		7
Consolidated Statements of Comprehensive Income — Years Ended December 31, 2005, 2004 and 2003		8
Notes to Consolidated Financial Statements

 

All other financial statements and schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

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REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders

Trammell Crow Company

 

                We have audited the accompanying consolidated balance sheets of Trammell Crow Company and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, stockholders’ equity, cash flows and comprehensive income for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

                We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

                In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Trammell Crow Company and subsidiaries at December 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

 

	/s/ ERNST & YOUNG LLP,
Dallas, Texas
March 13, 2006
except for Note 23—Discontinued Operations and Real Estate
and Other Assets Held for Sale, as to which the date is November 9, 2006

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TRAMMELL CROW COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

		December 31, 2005			December 31, 2004
ASSETS
Current assets
Cash and cash equivalents		$	76,919		$	163,637
Restricted cash		1,416			9,950
Accounts receivable, net of allowance for doubtful accounts of $3,235 in 2005 and $3,144 in 2004		127,784			103,551
Receivables from affiliates		2,146			1,626
Notes and other receivables		15,922			19,521
Deferred income taxes		3,935			4,021
Real estate under development		120,697			1,867
Real estate and other assets held for sale		55,434			75,513
Available for sale securities		542			—
Other current assets		26,870			17,205
Total current assets		431,665			396,891
Furniture and equipment, net		19,787			18,649
Deferred income taxes		16,270			22,935
Real estate under development		106,659			56,394
Real estate held for investment		76,145			90,035
Investments in unconsolidated subsidiaries		175,411			74,090
Goodwill		75,239			74,357
Receivables from affiliates		7,458			—
Available for sale securities		18,089			—
Other assets		21,444			15,599
		$	948,167		$	748,950
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable		$	31,698		$	23,731
Accrued expenses		155,294			144,280
Income taxes payable		16,313			18,121
Current portion of long-term debt		1,302			6
Current portion of notes payable on real estate		122,932			2,289
Liabilities related to real estate and other assets held for sale		40,916			52,575
Other current liabilities		5,842			12,525
Total current liabilities		374,297			253,527
Long-term debt, less current portion		35,034			8
Notes payable on real estate, less current portion		94,389			99,682
Other liabilities		13,448			10,027
Total liabilities		517,168			363,244
Minority interest		29,528			44,756
Stockholders’ equity
Preferred stock; $0.01 par value; 30,000,000 shares authorized; none issued or outstanding		—			—
Common stock; $0.01 par value; 100,000,000 shares authorized; 37,903,058 shares issued and 36,040,317 shares outstanding in 2005 and 37,902,998 shares issued and 35,605,007 shares outstanding in 2004		379			379
Paid-in capital		205,084			196,314
Retained earnings		240,887			190,252
Accumulated other comprehensive income		1,713			2,043
Less: Treasury stock		(32,776		)	(36,921		)
Unearned stock compensation, net		(13,816		)	(11,117		)
Total stockholders’ equity		401,471			340,950
		$	948,167		$	748,950

 

See accompanying notes.

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TRAMMELL CROW COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)

		Years Ended December 31,
		2005			2004			2003
REVENUES
User Services:
Facilities management		$	237,659		$	211,062		$	208,936
Corporate advisory services		186,847			143,266			123,335
Project management services		118,678			91,599			65,500
		543,184			445,927			397,771
Investor Services:
Property management		136,665			137,193			143,727
Brokerage		138,416			114,478			95,593
Construction management		11,973			11,187			10,736
		287,054			262,858			250,056
Development and construction		44,324			36,851			43,203
TOTAL REVENUES		874,562			745,636			691,030
COSTS AND EXPENSES
Salaries, wages and benefits		553,304			493,273			452,195
Commissions		151,672			120,345			98,957
General and administrative		138,830			126,305			116,434
Depreciation		8,875			9,859			14,704
Amortization		320			1,124			1,856
Interest		4,559			3,843			5,953
TOTAL EXPENSES		857,560			754,749			690,099
Gain on disposition of real estate		18,553			26,742			13,199
Operating income		35,555			17,629			14,130
Interest and other income		2,833			2,796			2,236
Income from continuing operations before income taxes, minority interest and income from investments in unconsolidated subsidiaries		38,388			20,425			16,366
Income tax expense		(14,200		)	(7,757		)	(6,636		)
Minority interest, net of income tax (expense) benefit of $(1,485), $1,840 and $(839) in 2005, 2004 and 2003, respectively		2,528			(3,006		)	1,231
Income from investments in unconsolidated subsidiaries, net of income tax expense of $8,898, $6,718 and $6,711 in 2005, 2004 and 2003, respectively		15,154			10,971			9,839
Income from continuing operations		41,870			20,633			20,800
Income from discontinued operations, net of income tax expense of $10,297, $11,319 and $164 in 2005, 2004 and 2003, respectively		17,537			18,486			240
Net income		$	59,407		$	39,119		$	21,040
Income per share from continuing operations:
Basic		$	1.24		$	0.59		$	0.58
Diluted		$	1.15		$	0.55		$	0.56
Income per share from discontinued operations, net of income taxes:
Basic		$	0.52		$	0.53		$	0.01
Diluted		$	0.48		$	0.50		$	0.01
Net income per share:
Basic		$	1.76		$	1.12		$	0.59
Diluted		$	1.63		$	1.05		$	0.57
Weighted-average common shares outstanding:
Basic		33,786,147			35,064,453			35,572,493
Diluted		36,440,940			37,239,801			36,780,515

 

See accompanying notes.

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TRAMMELL CROW COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years ended December 31, 2005, 2004 and 2003
(in thousands, except share data)

		Common Shares				Common Stock Par			Paid-In			Retained			Accumulated Other Comprehensive			Treasury			Unearned Stock
		Issued		Treasury		Value			Capital			Earnings			Income			Stock			Compensation			Total
Balance at January 1, 2003		36,227,820		48,647		$	362		$	178,977		$	130,874		$	(589	)	$	(464	)	$	(806	)	$	308,354
Net income		—		—		—			—			21,040			—			—			—			21,040
Issuance of restricted stock		1,413,000		(223,500	)	14			12,269			—			—			2,028			(14,311		)	—
Forfeiture of restricted stock		—		237,570		—			(26		)	—			—			(1,996		)	1,807			(215		)
Amortization of unearned stock compensation		—		—		—			—			—			—			—			3,923			3,923
Issuance of common stock		142,775		(275,764	)	1			1,116			(354		)	—			2,504			—			3,267
Stock repurchase		—		1,134,400		—			—			—			—			(10,435		)	—			(10,435		)
Foreign currency translation adjustment, net of tax		—		—		—			—			—			1,358			—			—			1,358
Change in fair value of interest rate swap agreement, net of tax		—		—		—			—			—			337			—			—			337
Balance at December 31, 2003		37,783,595		921,353		377			192,336			151,560			1,106			(8,363		)	(9,387		)	327,629
Net income		—		—		—			—			39,119			—			—			—			39,119
Issuance of restricted stock		28,000		(644,313	)	1			2,846			—			—			5,870			(8,717		)	—
Forfeiture of restricted stock		—		32,632		—			—			—			—			(394		)	304			(90		)
Amortization of unearned stock compensation		—		—		—			—			—			—			—			6,683			6,683
Issuance of common stock		91,403		(366,118	)	1			1,132			(427		)	—			3,900			—			4,606
Stock repurchase		—		2,354,437		—			—			—			—			(37,934		)	—			(37,934		)
Foreign currency translation adjustment, net of tax		—		—		—			—			—			937			—			—			937
Balance at December 31, 2004		37,902,998		2,297,991		379			196,314			190,252			2,043			(36,921		)	(11,117		)	340,950
Net income		—		—		—			—			59,407			—			—			—			59,407
Issuance of restricted stock		—		(431,589	)	—			2,677			—			—			7,603			(10,280		)	—
Forfeiture of restricted stock		—		196,255		—			—			—			—			(3,593		)	513			(3,080		)
Amortization of unearned stock compensation		—		—		—			2,905			—			—			—			7,068			9,973
Issuance of common stock		60		(1,170,058	)	—			3,188			(8,772		)	—			20,185			—			14,601
Stock repurchase		—		970,142		—			—			—			—			(20,050		)	—			(20,050		)
Foreign currency translation adjustment, net of tax		—		—		—			—			—			(475		)	—			—			(475		)
Unrealized holding gains/(losses) on available for sale securities, net of tax		—		—		—			—			—			145			—			—			145
Balance at December 31, 2005		37,903,058		1,862,741		$	379		$	205,084		$	240,887		$	1,713		$	(32,776	)	$	(13,816	)	$	401,471

 

See accompanying notes.

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TRAMMELL CROW COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

		Years Ended December 31,
		2005			2004			2003
Operating activities
Cash flows from earnings:
Net Income		$	59,407		$	39,119		$	21,040
Reconciliation of net income to net cash provided by earnings:
Depreciation		9,574			10,210			15,001
Amortization		1,053			1,394			1,995
Amortization of employment contracts and unearned stock compensation		10,045			9,213			5,103
Amortization of contract intangibles		1,777			2,205			2,079
Bad debt expense		853			1,116			2,764
Provision for losses and writedowns for impairment on real estate		23			672			5,908
Loss (gain) on disposition of real estate held for investment		(11,661		)	(17,084		)	41
Minority interest		(4,013		)	15,687			(2,070		)
Deferred income tax expense (benefit)		7,003			(3,978		)	(356		)
Income from investments in unconsolidated subsidiaries		(24,052		)	(17,689		)	(16,550		)
Distributions of earnings from unconsolidated subsidiaries		7,721			2,702			1,899
Net cash provided by earnings		57,730			43,567			36,854
Changes in operating assets and liabilities:
Restricted cash		8,534			(2,303		)	1,274
Accounts receivable		(25,114		)	(7,182		)	16,834
Receivables from affiliates		(7,978		)	16,365			(12,240		)
Notes receivable and other assets		(4,711		)	(8,776		)	(7,715		)
Real estate held for sale and under development		(146,387		)	(9,287		)	(7,271		)
Notes payable on real estate held for sale and under development		109,824			7,953			3,651
Accounts payable and accrued expenses		2,687			39,550			6,167
Payables to affiliates		(36		)	(64		)	104
Income taxes payable		4,285			10,653			4,347
Other liabilities		(1,844		)	3,972			8,704
Net cash flows from changes in working capital		(60,740		)	50,881			13,855
Net cash provided by (used in) operating activities		(3,010		)	94,448			50,709
Investing activities
Expenditures for furniture and equipment		(9,819		)	(5,735		)	(10,458		)
Proceeds from sales and maturities of securities		6,699			—			—
Payment for purchase of securities		(25,101		)	—			—
Additions to real estate held for investment		(39,492		)	(105,809		)	(26,303		)
Net proceeds from disposition of real estate held for investment		38,881			67,298			16,479
Investments in unconsolidated subsidiaries		(114,515		)	(6,715		)	(6,594		)
Distributions from unconsolidated subsidiaries		28,542			13,849			28,838
Net cash provided by (used in) investing activities		(114,805		)	(37,112		)	1,962
Financing activities
Principal payments on long-term debt and capital lease obligations		(146,081		)	(121,934		)	(98,695		)
Proceeds from long-term debt		182,400			108,538			86,923
Contributions from minority interest		18,444			19,742			3,488
Distributions to minority interest		(27,510		)	(19,569		)	(11,497		)
Proceeds from notes payable on real estate held for investment		30,130			77,832			5,148
Payments on notes payable on real estate held for investment		(17,649		)	(30,596		)	(3,259		)
Proceeds from exercise of stock options		8,218			1,691			904
Proceeds from issuance of common stock		3,195			2,915			2,363
Purchase of common stock		(20,050		)	(37,934		)	(10,435		)
Net cash provided by (used in) financing activities		31,097			685			(25,060		)
Net increase (decrease) in cash and cash equivalents		(86,718		)	58,021			27,611
Cash and cash equivalents, beginning of period		163,637			105,616			78,005
Cash and cash equivalents, end of period		$	76,919		$	163,637		$	105,616

 

See accompanying notes.

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TRAMMELL CROW COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)

		Years Ended December 31,
		2005			2004			2003
Net income		$	59,407		$	39,119		$	21,040
Other comprehensive income:
Foreign currency translation adjustments, net of tax (expense) benefit of $336 in 2005, $(674) in 2004 and $(1,033) in 2003		(475		)	937			1,358
Unrealized holding gains/(losses) on available for sale securities, net of tax expense of $84 in 2005		145			—			—
Change in fair value of interest rate swap agreement, net of tax expense of $229 in 2003		—			—			337
Comprehensive income		$	59,077		$	40,056		$	22,735

 

See accompanying notes.

 

7

TRAMMELL CROW COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2005
(dollars in thousands, except per share data)

 

1.   Organization and Summary of Significant Accounting Policies

Organization

Trammell Crow Company (the “Company”) is one of the largest diversified commercial real estate service companies in the world. The Company delivers brokerage, project management and building management services through its Global Services group and undertakes development and investment activities through its Development and Investment group. The Company serves two different types of clients: user clients, who include large corporations, healthcare systems, public sector clients and other end users that occupy commercial property in connection with their business operations; and investor clients, who include pension funds, advisors and others who own or manage real estate assets primarily for investment purposes.

Services provided to user clients by the Company’s Global Services group are: corporate advisory services, project management and facilities management. Corporate advisory services are brokerage and brokerage-related services that include primarily tenant representation brokerage services, as well as other transaction or portfolio services such as acquisition/disposition brokerage, lease administration and lease audits. Project management services include facility planning, construction oversight, space planning, site consolidations, multi-location expansion programs, facilities design, signage conversions, portfolio-wide operational refits and upgrades, and workplace moves, adds, and changes. Facilities management services are building management services that include administration and day-to-day operation, maintenance and repair of client-occupied facilities; office services; and call center services.

Services provided to investor clients by the Company’s Global Services group are: brokerage, construction management and property management. Brokerage services include project leasing (when the Company is engaged as the owner’s leasing agent for renewals, expansions and leasing of vacant space in investor-owned properties) and capital markets (investment sales and capital sourcing) services.  Construction management services are project management services that primarily include space planning and tenant finish coordination, typically in conjunction with property management and leasing assignments. Property management services are building management services that include all aspects of building operations, maintenance and repair, tenant relations and oversight of building improvement processes.

Global Services clients are served through a network of offices in the United States, Canada, Europe, Asia-Pacific and Latin/South America. Operations outside of the United States are primarily focused on the provision of services to user clients, which generally include U.S.-based multi-nationals who have outsourced their services requirements to the Company on a portfolio basis. The Company’s international service delivery is enhanced by its affiliations and alliances with Savills plc (“Savills”), a leading property services company based in the United Kingdom with operations throughout Europe and Asia; Trammell Crow Meghraj, a leading property services company in India; and JJ Barnicke, a leading Canadian real estate services provider.

The Development and Investment group provides development services to users and pursues opportunistic but risk-mitigated development and investment in commercial real estate across a wide spectrum of product types, including industrial, office and retail properties; healthcare facilities of all types (medical office buildings, hospitals and ambulatory surgery centers); higher education facilities, including student housing; and residential/mixed-use projects. The Company acts as the general manager of the development process, providing services that are vital in all stages of the process, including: (i) site identification, due diligence and acquisition; (ii) evaluating project feasibility, budgeting, scheduling and cash flow analysis; (iii) procurement of approvals and permits, including zoning and other entitlements; (iv) project finance advisory services; (v) coordination of project design and engineering; (vi) construction bidding and management and tenant finish coordination; and (vii) project close-out and tenant move coordination. The Company may pursue development and investment activity on behalf of its user and investor clients (with no ownership), in partnership with its clients (through co-

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investment—either on an individual project basis or through a fund or program) or for its own account (100% Company ownership).

Reclassifications

In accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“FAS 144”), certain assets and liabilities at December 31, 2004, and certain revenues and expenses for the first three quarters of 2005, and the years ended December 31, 2004 and 2003, were reclassified to conform to the presentation at and for the year ended December 31, 2005 (see Notes 10 and 15). As a result, certain balances differ from the amounts reported in previously filed documents. Certain distributions from unconsolidated subsidiaries have been reclassified in the Company’s consolidated statements of cash flows. As a result, cash flows from operating activities and investing activities differ from previously filed documents. These reclassifications had no impact on the Company’s consolidated balance sheets, statements of operations or earnings per share amounts.

Use of Estimates

The preparation of the financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Consolidation

The Company’s consolidated financial statements include the accounts of the Company, variable interest entities (“VIEs”) in which the Company is the primary beneficiary and other subsidiaries over which the Company has control.

Variable Interest Entities

The Company’s determination of the appropriate accounting method with respect to its variable interests, including co-investments with its clients, is based on Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (“FIN 46R”). The Company consolidates any VIE of which the Company is the primary beneficiary and discloses significant variable interests in VIEs of which the Company is not the primary beneficiary.

Limited Partnerships, Limited Liability Companies and Other Subsidiaries

The Company’s determination of the appropriate accounting method with respect to its investments in limited partnerships, limited liability companies and other subsidiaries is based on control. For the Company’s general partner interests, the Company is presumed to control (and therefore consolidates) the entity, unless the other limited partners have substantive rights that overcome this presumption of control. These substantive rights allow the limited partners to participate in significant decisions made in the ordinary course of the entity’s business. The Company accounts for its non-controlling general partner investments in these entities under the equity method. This treatment also applies to the Company’s managing member interests in limited liability companies.  See New Accounting Pronouncements below for additional discussion of EITF Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or

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Similar Entity When the Limited Partners Have Certain Rights (“EITF 04-5”) regarding the Company’s general partner interests.

The Company’s determination of the appropriate accounting method for all other investments in subsidiaries is based on the amount of influence the Company has (including its ownership interest) in the underlying entity. Those other investments where the Company has the ability to exercise significant influence (but not control) over operating and financial policies of such subsidiaries (including certain subsidiaries where the Company has less than 20% ownership) are accounted for using the equity method. The Company eliminates transactions with such equity method subsidiaries to the extent of its ownership in such subsidiaries. Accordingly, the Company’s share of the earnings or losses of these equity method subsidiaries is included in consolidated net income. All remaining investments of the Company are carried at cost. Under either the equity or cost method, impairment losses are recognized upon evidence of other-than-temporary losses of value.

Revenue Recognition

The Company recognizes fees from property management and facilities management services over the terms of the respective management contracts. Most of the property management contracts are cancelable at will or with 30 days notice. The terms of the facilities management contracts generally range from three to five years, although many provide for shorter terms or earlier termination rights under certain circumstances. Also, the Company earns incentive fees for facilities management services based on various quantitative and/or qualitative criteria specified in the management agreement. These fees are recognized when quantitative criteria have been met or, for those incentive fees based on qualitative criteria, upon approval of the fee by the client. The Company’s management and incentive fee revenues are not recognized to the extent that such revenues are subject to future performance contingencies, but are recognized once the contingency has been resolved.

The Company’s project leasing and tenant representation transactions are subject to commission agreements that typically describe the calculation of the fee and when the Company earns such fee. The recognition of revenue for each transaction is dictated by the terms of the relevant commission agreement, each of which may be unique. The commission agreements generally provide that 50% of the commission is earned and payable upon execution of the lease and 50% is earned and payable upon the tenant’s occupancy of the space. Generally the first 50% of the commission is not contingent on the subsequent occupancy of the space. However, sometimes these agreements contain refund provisions whereby the first 50% of the commission may be refundable should the tenant not occupy the subject space. In cases where refund provisions or other contingencies exist, the Company does not recognize the revenue until the contingency is eliminated. Investment sales brokerage revenue is recognized upon closing of the underlying real estate transaction. The Company does not recognize these revenues until there is evidence of an arrangement, services have been rendered, the price is determinable, and collectibility is reasonably assured. These policies have been in place since the Company’s initial public offering in 1997.

Development services and project management services generate fees from development and construction management projects and net construction revenues, which are gross construction revenues net of subcontract costs. For projects where the Company operates as a general contractor, fees are generally recognized using the percentage-of-completion method based on costs incurred as a percentage of total expected costs. Gross construction services revenues totaled $46,641, $35,438 and $33,526 and subcontract costs totaled $41,775, $30,986 and $26,215 in 2005, 2004 and 2003, respectively. Some development and construction management and project management assignments are subject to agreements that describe the calculation of fees and when the Company earns such fees. The earnings terms of these agreements dictate when the Company recognizes the related revenues. The Company may earn incentive fees for project management services based upon achievement of certain performance criteria as set forth in the project management services agreement. The

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Company may also earn incentive development fees by reaching specified time table, leasing, budget or value creation targets, as defined in the relevant development services agreement. Certain incentive development fees allow the Company to share in the fair value of the developed real estate asset above cost. This sharing creates additional revenue potential to the Company with no exposure to loss other than opportunity cost. The Company recognizes such fees when the specified target is attained.

The Company records deferred income to the extent that cash payments have been received in accordance with the terms of underlying agreements, but such amounts have not yet met the criteria for revenue recognition in accordance with GAAP. The Company recognizes such revenues when the appropriate criteria are met.

Certain of the Company’s contracts provide for reimbursement for employee-related costs which the Company recognizes as revenue. Also, in accordance with EITF 01-14, Income Statement Characterization of Reimbursements Received for “Out-of-Pocket” Expenses Incurred, certain reimbursements received from clients for out-of-pocket expenses are characterized as revenue in the statement of income rather than as a reduction of the expenses incurred. Since the Company is the primary obligor, has supplier discretion and bears credit risk for such expenses, the Company records reimbursement revenue for such out-of-pocket expenses. Reimbursement revenue is recognized when the underlying reimbursable costs are incurred.

Real Estate

Classification and Impairment Evaluation

The Company classifies real estate in accordance with the criteria of FAS 144 as follows: (i) Real estate held for sale, which includes completed assets or land for sale in its present condition that meet all of the FAS 144 “held for sale” criteria, (ii) Real estate under development (current), which includes real estate that the Company is in the process of developing that is expected to be completed and disposed of within one year of the balance sheet date; (iii) Real estate under development (non-current), which includes real estate that the Company is in the process of developing that is expected to be completed and disposed of more than one year from the balance sheet date; or (iv) Real estate held for investment, which consists of completed assets not expected to be disposed of within one year of the balance sheet date and land on which development activities have not yet commenced. Any asset reclassified from real estate held for sale to real estate under development (current or non-current) or real estate held for investment is recorded individually at the lower of its fair value at the date of the reclassification or its carrying amount before it was classified as “held for sale,” adjusted (in the case of real estate held for investment) for any depreciation that would have been recognized had the asset been continuously classified as real estate held for investment.

Real estate held for sale is recorded at the lower of cost or fair value less cost to sell. If an asset’s fair value less cost to sell, based on discounted future cash flows or market comparisons, is less than its carrying amount, an allowance is recorded against the asset.

Real estate under development and real estate held for investment are carried at cost less depreciation, as applicable. When indicators of impairment are present, real estate under development and real estate held for investment are evaluated for impairment and losses are recorded when undiscounted cash flows estimated to be generated by an asset are less than the asset’s carrying amount. The amount of the impairment loss is calculated as the excess of the asset’s carrying value over its fair value, which is determined using a discounted cash flow analysis or market comparisons. Buildings and improvements included in real estate held for investment are depreciated using the straight-line method over estimated useful lives, generally 39 years. Tenant improvements included in real estate held for investment are amortized using the straight-line method over the shorter of their estimated useful lives or terms of the respective leases.

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Cost Capitalization and Allocation

When acquiring, developing and constructing real estate assets, the Company capitalizes costs in accordance with Statement of Financial Accounting Standards No. 67, Accounting for Costs and the Initial Rental Operations of Real Estate Properties (“FAS 67”). Capitalization begins when the activities related to development have begun and ceases when activities are complete. Costs capitalized under FAS 67 include pursuit costs, or pre-acquisition/pre-construction costs, taxes and insurance, development and construction costs and costs of incidental operations. Pursuit costs capitalized in connection with a potential development project that the Company has determined not to pursue are written off in the period that determination is made.

The Company often purchases bulk land that it intends to sell or develop in phases. The land basis allocated to each phase is based on the relative estimated fair value of the phases before construction. The Company allocates construction costs incurred relating to more than one phase between the various phases; if the costs cannot be specifically identified to a certain phase or the improvements benefit more than one phase, the Company allocates the costs between the phases based on their relative estimated sales values. Relative allocations of the costs are changed as the estimates are revised.

When acquiring real estate with existing buildings, the Company allocates the purchase price between land, building and intangibles related to in-place leases, if any, based on their relative fair values. The fair values of acquired land and buildings are determined based on an estimated discounted future cash flow model with lease-up assumptions as if the building was vacant upon acquisition. The fair value of in-place leases includes the value of net lease intangibles for above or below-market rents and tenant origination costs, determined on a lease by lease basis. The capitalized values for both net lease intangibles and tenant origination costs are amortized over the term of the underlying leases. Amortization related to net lease intangibles is recorded as either an increase to or a reduction of rental income and amortization for tenant origination costs is recorded to amortization expense.

Dispositions of Real Estate

Gains on disposition of real estate are recognized upon sale of the underlying project in accordance with Statement of Financial Accounting Standards No. 66, Accounting for Sales of Real Estate. The Company evaluates each real estate sale transaction to determine if it qualifies for gain recognition under the full accrual method. If the transaction does not meet the criteria for the full accrual method of profit recognition based on the Company’s assessment, the Company accounts for a sale based on an appropriate deferral method determined by the nature and extent of the buyer’s investment and the Company’s continuing involvement.

Discontinued Operations

FAS 144 extends the reporting of a discontinued operation to a “component of an entity,” but further requires that a component be classified as a discontinued operation if the operations and cash flows of the component have been or will be eliminated from the ongoing operations of the entity in the disposal transaction and the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. As defined in FAS 144, a “component of an entity” comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. Because each of the Company’s real estate assets is generally accounted for in a discrete subsidiary, almost every real estate asset constitutes a component of an entity under FAS 144, increasing the likelihood that the disposition of assets the Company holds for sale in the ordinary course of business must be reported as a discontinued operation unless the Company has significant continuing involvement in the operations of the asset after its disposition. Furthermore, operating profits and losses on such assets are required to be recognized and reported as operating profits and losses on discontinued operations in the periods in which they occur. The Company has certain real estate assets that are land parcels and may constitute a component of an entity. From time to time, the

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Company disposes of these land parcels in smaller lots. An individual lot that is part of a larger land parcel may constitute a component of an entity within the meaning of paragraph 41 of FAS 144 when it is either classified as held for sale in accordance with FAS 144 or sold.

Goodwill

Goodwill reflects the excess of purchase price over the fair value of specifically identified net assets purchased.  In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangibles (“FAS 142”), goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests. These impairment tests are based on the comparison of the fair value of each of the Company’s reporting units to the carrying value of such unit. If the fair value of the reporting unit falls below its carrying value, goodwill is deemed to be impaired and a writedown of goodwill is recognized. The Company’s reporting units mirror its two segments, Global Services and Development and Investment, as each segment’s underlying business units have similar long-term economic characteristics and service delivery capabilities. All of the Company’s goodwill relates to its Global Services segment. The Company has performed the required impairment tests under FAS 142 and determined that no impairment of its goodwill existed at December 31, 2005.

Intangible Assets

The Company’s intangible assets primarily include contract intangibles, employment-related contracts and the value of management contracts acquired by the Company through business acquisitions. Intangible assets are evaluated when indicators of impairment are present and losses are recorded when undiscounted cash flows estimated to be generated by an asset are less than an asset’s carrying amount. The amount of the impairment loss is calculated as the excess of the asset’s carrying value over its fair value, which is determined using a discounted cash flow analysis.

The Company’s contract intangibles consist of upfront cash payments to clients and direct third party costs incurred in order to enter into new long-term outsourcing contracts. These costs are considered part of the total contract cost when negotiating the future revenue to be received under a new contract. These payments and costs are capitalized and amortized as a reduction of the related revenue over the life of the underlying contract. The Company also classifies any writedowns of such capitalized upfront payments or costs due to impairment in value, such as might occur upon the early termination of a contract, as a reduction of revenue.

From time to time, the Company enters into contracts with certain management-level employees and brokers, as well as employees hired in connection with acquisitions of real estate services companies. To the extent that any amount paid or loaned to an employee (generally at the inception of the employment relationship or in connection with employee relocations) in accordance with these agreements is contractually tied to an employee’s future performance with the Company, the amount is expensed as compensation over the period that such performance is achieved, as stipulated in the applicable agreement. Amounts loaned to employees under these arrangements are included in notes and other receivables and other assets in the Company’s consolidated balance sheet.

In connection with certain acquisitions, the Company has recorded intangible assets related to the value of certain management contracts acquired. These intangible assets are amortized over the estimated life of the contracts, generally from five to six years.

Marketable Securities

The Company accounts for investments in marketable debt and equity securities in accordance with Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity

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Securities (“FAS 115”). The Company determines the appropriate classification of debt and equity securities at the time of purchase and reevaluates such designation as of each balance sheet date. The Company classifies marketable securities it acquires with the intent to generate a profit from short-term movements in market prices as trading securities. Debt securities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity. Marketable equity and debt securities not classified as trading or held to maturity are classified as available for sale. All of the marketable securities held by the Company at December 31, 2005 were classified as available for sale.

In accordance with FAS 115, the available for sale securities are carried at their fair market value and any difference between cost and market value expected to be temporary is recorded as unrealized gain or loss, net of income taxes, and is reported as accumulated other comprehensive income in the consolidated statement of stockholders’ equity. Premiums and discounts are recognized in interest and other income using the effective interest method. Realized gains and losses and declines in value expected to be other-than-temporary on available for sale securities are included in interest and other income. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available for sale are included in interest and other income.

Income Taxes

The Company accounts for income taxes using the liability method. Deferred income taxes result from temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for federal income tax purposes, and are measured using the enacted tax rates and laws that are expected to be in effect when the differences reverse.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and short-term, highly liquid investments with original maturities of 90 days or less when purchased.

Restricted Cash

At December 31, 2005 and 2004, restricted cash primarily consisted of $950 and $8,254, respectively, received by the Company from clients for future development costs on buildings being renovated or constructed by the Company on behalf of such clients. Contractual restrictions provide that these funds can only be used to pay for construction costs related to the underlying renovation or construction projects. In addition, restricted cash included $449 and $1,696 at December 31, 2005 and 2004, respectively, related to cash held by a VIE that the Company consolidates as the primary beneficiary (see Note 2).

Furniture and Equipment

Furniture and equipment are stated at cost and include assets under capital leases. Depreciation is computed using the straight-line method over estimated useful lives, which generally range from three to five years, and includes amortization of assets recorded under capital leases.

Concentration of Credit Risk

The Company provides services to owners and users of real estate assets primarily in the United States. The Company generally does not require collateral from its clients. The risk associated with this concentration is mitigated because of the large number of clients and their geographic dispersion.

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Earnings Per Share

The weighted-average common shares outstanding used to calculate diluted earnings per share reflect the dilutive effect of common stock equivalents, including unvested restricted stock and options to purchase shares of common stock. Diluted weighted-average common shares outstanding included the following:

		Years Ended December 31,
		2005		2004		2003
Basic weighted-average common shares outstanding		33,786,147		35,064,453		35,572,493
Dilutive effect of common stock equivalents		2,654,793		2,175,348		1,208,022
Diluted weighted-average common shares outstanding		36,440,940		37,239,801		36,780,515

 

Stock-Based Compensation

The Company has elected to use the intrinsic method under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), to account for its stock-based compensation arrangements (see Note 11). Compensation expense for stock options is recognized to the extent the market price of the underlying stock on the date of grant exceeds the exercise price of the option. The Company recognizes compensation expense related to restricted stock awards over the vesting period of the underlying award in an amount equal to the fair market value of the Company’s stock on the date of grant.  For awards with graded vesting, compensation expense is recognized using the accelerated expense attribution method described in FASB Interpretation No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans.

Pro forma information regarding net income and net income per share, shown in the table below, has been determined as if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“FAS 123”). The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 2003: risk-free interest rates of 3.21%; a dividend yield of 0.00%; volatility factors of the expected market price of the Company’s common stock of 0.407; and a weighted-average expected life of the options of seven years. The Company made no option grants in 2004 or 2005.

The Company elected to use the intrinsic method in accounting for its stock-based compensation arrangements in part because the alternative fair value accounting requires the use of option valuation models that were not developed for use in valuing employee stock options. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different than those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

 

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For the purpose of pro forma disclosures, the estimated fair value of the options was amortized to expense over the options’ vesting period. Pro forma information is as follows:

		Years Ended December 31,
		2005			2004			2003
Net income, as reported		$	59,407		$	39,119		$	21,040
Add: Stock-based employee compensation expense included in net income, net of related tax effects		4,288			4,097			2,216
Deduct: Stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		5,125			5,844			5,034
Pro forma net income		$	58,570		$	37,372		$	18,222
Net income per share:
Basic—as reported		$	1.76		$	1.12		$	0.59
Basic—pro forma		$	1.73		$	1.07		$	0.51
Net income per share:
Diluted—as reported		$	1.63		$	1.05		$	0.57
Diluted—pro forma		$	1.61		$	1.00		$	0.50

 

Guarantees

The Company accounts for its guarantees of the obligations of others in accordance with FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Direct Guarantees of Indebtedness of Others (“FIN 45”). FIN 45 requires that guarantors recognize a liability for certain guarantees at the fair value of the guaranteed obligation at the inception of the guarantee, even if the likelihood of performance under the guarantee is remote. See Note 19 for disclosures related to the Company’s guarantees in accordance with FIN 45.

Non-Controlling Interests in Consolidated Limited Life Subsidiaries

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“FAS 150”). Certain provisions of FAS 150 would have required the Company to classify non-controlling interests in consolidated limited life subsidiaries as liabilities adjusted to their settlement values in the Company’s financial statements. In November 2003, the FASB indefinitely deferred application of the measurement and recognition provisions (but not the disclosure requirements) of FAS 150 with respect to these non-controlling interests. As of December 31, 2005, the estimated settlement value of non-controlling interests in the Company’s consolidated limited life subsidiaries was $4,908, as compared to book value (included in minority interest on the Company’s balance sheet) of $4,657. The excess of settlement value over book value is driven by an even larger estimated appreciation of certain consolidated real estate assets and investments from the Company’s book value, offset by estimated selling costs and debt prepayment penalties, if any.

New Accounting Pronouncements

On December 16, 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (“FAS 123R”), which is a revision of FAS 123. Generally, the approach in FAS 123R is similar to the approach described in FAS 123. However, FAS 123R requires all share-based payments to

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employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.

FAS 123R will become effective for the Company beginning January 1, 2006. FAS 123R permits public companies to adopt its requirements using one of two methods: a “modified-prospective” method or a “modified-retrospective” method. The Company plans to adopt FAS 123R using the modified-prospective method under which it will record compensation expense for all share-based awards granted after the effective date and for those unvested awards granted prior to the effective date.

As permitted by FAS 123, the Company currently accounts for share-based payments to employees using APB 25’s intrinsic value method and, as such, generally recognizes no compensation cost for the fair value of employee stock options or for the difference between the employee’s cost and the market value of stock purchased under the Company’s employee stock purchase plan. Accordingly, the adoption of FAS 123R’s fair value method could have a significant impact on the Company’s results of operations, although it is not expected to impact the Company’s overall financial position. The total impact of adoption of FAS 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, the amount of additional expense the Company will recognize subsequent to adoption related to unvested stock options granted prior to adoption (net of estimated forfeitures) is not material. FAS 123R will also require the Company to estimate forfeitures of share-based payments upon grant. Prior to the adoption of FAS 123R, the Company’s policy has been to reverse expense related to forfeitures of restricted stock as they occur. In the first quarter of 2006, the Company will record additional income of approximately $1,006, net of income taxes, as a cumulative effect of a change in accounting principle. This cumulative effect represents a reversal of expense taken for those shares of unvested restricted stock granted prior to adoption that the Company estimates will be forfeited before vesting.

FAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. While the Company cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options), the amount of operating cash flows recognized in prior periods for such excess tax deductions related to the exercise of stock options and vesting of restricted stock was $6,093 in 2005 and not material in 2004 or 2003.

In June 2005, the FASB ratified the consensus in EITF 04-5, which states that the general partner in a limited partnership is presumed to control that limited partnership. That presumption may be overcome if the limited partners have either (1) the substantive ability—either by a single limited partner or through a simple majority vote—to dissolve (liquidate) the limited partnership or otherwise remove the general partner without cause or (2) substantive participating rights. Substantive participating rights provide the limited partners with the ability to effectively participate in significant decisions that would be expected to be made in the ordinary course of the limited partnership’s business and thereby preclude the general partner from exercising unilateral control over the partnership.

The effective date for applying the guidance in EITF 04-5 to the Company’s general partner interests is June 29, 2005, for all new or amended limited partnerships and January 1, 2006, for all other limited partnerships. The Company has applied EITF 04-5 for new or amended limited partnerships after June 29, 2005, in its December 31, 2005, financial statements. The Company is evaluating the impact of the new guidance on all other limited partnerships. The Company expects that the adoption for existing partnerships will not have a material impact on the Company’s net income, earnings per share or stockholders’ equity, but could require balance sheet consolidation or de-consolidation of certain of those existing partnerships.

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2.   Variable Interest Entities

The Company was involved in the formation of a legal entity to act primarily as an agent of the Company to enter into policies with insurance carriers. The policies are for various types of insurance, including general liability, workers’ compensation and automotive. The entity is wholly-owned by an employee of the Company who holds the appropriate local insurance agent’s license required to issue these insurance policies on behalf of the insurance carriers. The entity collects premiums and remits them to the insurance carriers. In exchange, the entity receives commissions from the insurance carriers and remits a portion of the commission revenue to the Company (determined at the Company’s full discretion) in accordance with a facilities and services agreement. Based upon its evaluation, the Company consolidates this entity as the primary beneficiary of a VIE under FIN 46R. As of December 31, 2005, the Company had $449 recorded in restricted cash and $344 recorded in available for sale securities (non-current) that serve as collateral for the VIE’s obligations to the insurance carriers.

In 2005, the Company restructured a consolidated entity established to develop an office building by admitting a majority interest partner. Based upon its evaluation at this reconsideration event, the Company consolidates this entity as the primary beneficiary of a VIE. The entity’s note payable balance of $26,520 at December 31, 2005, is non-recourse to the Company and is collateralized by the underlying real estate project.

In 2005, the Company acquired $110,000 of tax credits through a program enacted by the Community Renewal Tax Relief Act of 2000. This program creates tax credits for equity investments in Community Development Entities (“CDEs”). The CDEs make qualified loans to Qualified Active Low-Income Community Businesses. Also in 2005, the Company obtained 0% to 0.01% managing interests in various CDEs established to make these loans. The CDEs’ equity used to fund the loans was contributed by its 99.99% to 100% third party investor members. Through December 31, 2005, the CDEs have made qualified loans totaling approximately $59,875. The Company has determined that each of these CDEs is a VIE. However, based upon its evaluation, the Company is not the primary beneficiary of the entities. The Company believes that its maximum exposure to loss as a result of its involvement with these VIEs is not material. Additionally, in 2005, the Company obtained a 49% membership interest in a related entity that acts as the administrative member performing loan servicing and tax matters for the CDEs. Based upon the Company’s evaluation, this entity is also a VIE since the entity’s equity was funded from up-front fees received from the CDEs. However, based upon its evaluation, the Company is not the primary beneficiary of the entity. The Company believes that its maximum exposure to loss as a result of its involvement with this VIE is not material.

In 2004, the Company issued a budget guaranty relating to a development project. Under the budget guaranty, the Company is responsible for all costs in excess of an approved budget of approximately $35,520. The Company was involved in the design of the underlying entity and has determined that its budget guaranty represents a variable interest in a VIE for which the Company is not the primary beneficiary. The Company cannot estimate its actual maximum exposure to loss as a result of its involvement with this VIE because the budget guaranty is unlimited. However, based on the Company’s experience of minimal payments under similar arrangements and the existence of a guaranteed maximum price contract between the general contractor and the owner of the project that mitigates the Company’s risk, the Company believes that its exposure to loss is not material.

The Company is part of a co-lender group with an independent third party that issued a mezzanine loan to the owner of two office buildings. In April 2000, the Company provided $567 of the total $5,667 mezzanine loan. At that time, another independent third-party lender provided the senior financing of $19,100 to the owner. The Company also provides building management and leasing services for the buildings under a long-term contract at market rates for such services. The mezzanine loan arrangement is considered to be a variable interest in the entity that owns the property, which the Company believes is a VIE. However, based upon the Company’s

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evaluation, the Company is not the primary beneficiary of the entity, and, therefore, the Company has not consolidated the VIE. The VIE sold one of its buildings in December 2004 and paid a portion of the Company’s note receivable at that time. The Company’s maximum exposure to loss as a result of its involvement with this VIE is limited to its outstanding note balance of $430 as of December 31, 2005.

3.   Real Estate

The Company provides build-to-suit services for its clients and also develops or purchases certain projects which it intends to sell to institutional investors upon project completion or redevelopment. Therefore, the Company has ownership of real estate until such projects are sold. Certain real estate assets owned by the Company secure the outstanding balances of underlying mortgage or construction loans. All real estate is included in the Company’s Development and Investment segment (see Note 21). At December 31, real estate consisted of the following:

 

(1)             Net of accumulated depreciation of $1,568 and $657 at December 31, 2005 and 2004, respectively.

(2)             Includes balances for lease intangibles and tenant origination costs of $(1,627) and $1,833 at December 31, 2005, and $(1,238) and $2,384 at December 31, 2004, respectively. The Company records lease intangibles and tenant origination costs upon acquiring buildings with in-place leases. The balances are shown net of amortization (recorded as an increase to or a reduction of rental income for lease intangibles and as amortization expense for tenant origination costs).

No material provisions for losses on real estate held for sale were recorded in 2005 or 2004. In 2003, the Company recorded provisions for losses on real estate of $1,903 to increase the allowances on real estate held for sale to reflect assets at fair value less cost to sell, of which $1,395 was included in discontinued operations in the consolidated statement of income and all remaining amounts were included in general and administrative expenses. With respect to one project to which these allowances relate, the related non-recourse note payable matured in 2004, and the Company conveyed the underlying property to the lender in order to satisfy the note.

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During 2004 and 2003, the Company recorded writedowns for impairment of real estate (not classified as held for sale at the time of such writedowns) totaling $578 and $4,005, respectively. In 2004 and 2003, $120 and $2,122 of such impairments were included in discontinued operations in the consolidated statement of income, and all remaining amounts were included in general and administrative expenses. There were no such writedowns for impairment in 2005.

The 2004 writedowns for impairment primarily relate to a vacant land parcel in a market in which rental rates continued to decline and vacancy rates continued to increase. The Company obtained market comparisons for the land parcel and determined that, based on those market comparisons, the value of the land was impaired. A portion of the 2004 and 2003 writedowns related to a real estate project located in a market with high vacancy rates and other buildings likely to lease up prior to the Company’s building. The fair value of the asset was based on market comparisons obtained by the Company. The Company sold the underlying asset and funded $316 of the recourse note payable in August 2004. The 2003 writedowns also reflected impairment related to a single-tenant office/industrial real estate project. The non-recourse note payable related to the project had matured and subsequently, the Company conveyed the underlying property to the lender to satisfy the note. The fair value of the asset was determined based on a discounted cash flow projection prior to the conveyance of the property to the lender.

In 2005, the partnership agreements of two real estate partnerships that were consolidated by the Company were amended. The other partners of the partnerships have substantive rights and therefore, the Company began using the equity method of accounting for these real estate subsidiaries, resulting in a non-cash reduction in real estate of $29,859, a non-cash decrease in other current assets of $866, a non-cash increase in investment in subsidiaries of $4,376, a non-cash decrease in other assets of $247, a non-cash increase in accrued expenses of $57, a non-cash reduction in notes payable on real estate of $24,390 and a non-cash decrease in minority interest of $2,149. No gain or loss was recognized on these transactions.

In 2003, the Company sold a parcel of land for $1,750, of which $1,125 of the consideration received was in the form of an interest-bearing note from the buyer. The Company retained a unilateral right to repurchase the property at any time through 2006, in addition to maintaining the right to approve any plans for development on the property. If the Company exercises its repurchase option, the Company would repay the amount it received from the buyer, plus a return on the buyer’s investment. Because of the Company’s continuing involvement in and option to repurchase the property, the transaction was recorded as a financing transaction rather than a sale. As of December 31, 2005, real estate and other assets held for sale included $1,408 and liabilities related to real estate and other assets held for sale included $1,750 related to this parcel of land.

The estimated costs to complete the 31 consolidated real estate projects under development or to be developed by the Company as of December 31, 2005, totaled $310,172. At December 31, 2005, the Company had commitments for the sale of five of the projects.

Rental revenues (which are included in development and construction revenue) and expenses (which are included in general and administrative expenses) relating to the Company’s operational real estate properties, excluding those reported as discontinued operations, were $6,014 and $6,101, respectively in 2005, $8,586 and $5,662, respectively, in 2004 and $9,434 and $4,632, respectively, in 2003.

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4.   Marketable Securities

The following table is a summary of marketable securities held by the Company at December 31, 2005, all of which were classified as available for sale. The Company held no marketable securities at December 31, 2004.

 

The net carrying value and estimated fair value of debt securities at December 31, 2005, by contractual maturity, are shown below. Actual repayment dates may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations.

 

The Company recorded no significant realized gains or losses related to sales of marketable securities in 2005.

5.   Furniture and Equipment

Furniture and equipment consisted of the following at December 31:

 

 

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