In the company's recent earnings call, president and CEO JimThomas outlined a scenario in which leasing remains strong andlong-term fundamentals look sound in markets like Los Angeles andAustin, but he reported that buying and selling buildings hasbecome problematic in the new capital markets landscape. "Thefundamentals of our business continue to be good," Thomas said inhis opening remarks. "Our occupancies and rental rates are strong,and while the economy may be slowing down, we are not yet feelingthe effect on our occupancy and rental rates." Thomas pointed outthat most of its leases are long-term so the amount of roll-over inthe next couple of years is minimal.

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The major impact on the company's business from the creditmarkets turmoil has been in the acquisition segment of itsbusiness, according to Thomas. "We are feeling the credit crunch,"the Thomas Properties' chief said. "Our ability to execute ourstrategy of acquiring value-add core-plus assets has been seriouslyhampered by the unavailability of large financing."

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Although a fair number of properties are on the market andavailable to buy, sellers have "little inclination to reduceprices," Thomas explained, particularly owners of class Abuildings. And on lower-quality assets, he said the differencebetween the bid and ask is substantial. "Given the state of thecredit markets, only low-leverage deals with good credit can getdone so we are focusing on lower-leverage deals and properties withassumable debt," Thomas said.

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Thomas Properties' strategy includes considerable developmentand redevelopment, as its doing at the 2.6-million-sf City NationalPlaza office and retail complex at 555 S. Flower St. in DowntownLos Angeles. The improvements include turning an underground retailvenue into 500 additional parking spaces in a city where parking isprecious. The added parking will bless City National Plaza with"the best parking situation of any Downtown office building andwill add to our competitive advantage" at the City Nationalcomplex, Thomas said.

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The company's other office developments include a 250,000-sfLEED-certified office project in El Segundo, CA for which it iscompleting drawings and about to bring in a general contractor;900,000 sf of office and media production space that's in theplanning stage for the NBC Universal site in Universal City, CA; a500,000-sf office building at the Universal City site; and two100,000-sf buildings that are under way at its Four Points Centrein Austin, where it has entitlements for approximately two millionsf of mixed-use developments.

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At the 250,000-sf El Segundo project, the goal is to be 50%preleased before construction starts. Regarding the Austin project,Thomas observed that it's "typically been a market where tenantshave not planned too far in advance and we're hoping that activitywill pick up as we near completion." The Austin market "has been alittle soft in the suburbs," he said. The company's project is inthe northwest part of Austin, which has tallied the highestabsorption in the past couple years.

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In the earnings call, the company reported a loss of $1.5million and seven cents a share for fourth quarter 2007, down fromnearly $1.6 million and 11 cents per share for the comparableperiod last year. The full year's tally showed a $903,000 loss andfour cents per share in comparison to more than $2 million and 14cents per share for 2006.

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