The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. This report includes statements that are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section in this report entitled "Forward-Looking Statements." Certain risks may cause our actual results, performance or achievements to differ materially from those expressed or implied by the following discussion. For a discussion of such risks, see the section in this report entitled "Risk Factors."

When you read the financial statements and the information included in this report, you should be aware that our operations are significantly affected by both macro and micro economic forces. Our operations are directly affected by actual and perceived trends in various national and regional economic conditions that affect national and regional markets for commercial real estate services, including interest rates, the availability of credit to finance commercial real estate transactions, and the impact of tax laws affecting real estate. Periods of economic slowdown or recession, rising interest rates, tightening of the credit markets, declining demand for or increased supply of real estate, or the public perception that any of these events may occur can adversely affect our business. These conditions could result in a general decline in rents, which in turn would reduce revenue from property management fees and brokerage commissions derived from leases. In addition, these conditions could lead to a decline in property values as well as a decline in funds invested in commercial real estate and related assets, which in turn may reduce revenues from investment advisory, property management, leasing and development fees.

Forward-Looking Statements

Forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from those anticipated and you should not rely on them as predictions of future events. Although information is based on our current estimations, forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise. You are cautioned not to place undue reliance on this information as we cannot guarantee that any future expectations and events described will happen as described or that they will happen at all. You can identify forward-looking statements by the use of forward-looking terminology such as "believes," "expects," "may," "should," "seeks," "approximately," "intends," "plans," "pro forma," "estimates" or "anticipates" or the negative of these words and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans or intentions.

Overview and Background

We are a full-service real estate operating company that owns, acquires, develops and manages primarily office, as well as mixed-use and residential properties on a nationwide basis. We conduct our business through our Operating Partnership, of which we own 64.7% as of June 30, 2009 and have control over the major decisions of the Operating Partnership.

Results of Operations

The results of operations reflect the consolidation of the affiliates that own One Commerce Square, Two Commerce Square, Murano, 2100 JFK Boulevard, Four Points Centre, Campus El Segundo and our investment advisory, property management, leasing and real estate development operations. Included in our investment advisory, property management, leasing and development services operations are development fees we earn from unaffiliated third parties related to two separate entitlement projects - Universal Village and Wilshire Grand. The following properties are accounted for using the equity method of accounting:

2121 Market Street

City National Plaza (as of January 2003, the date of acquisition)

Reflections I (as of October 2004, the date of acquisition)

Reflections II (as of October 2004, the date of acquisition)

Four Falls Corporate Center (as of March 2005, the date of acquisition)

Oak Hill Plaza (as of March 2005, the date of acquisition)

Walnut Hill Plaza (as of March 2005, the date of acquisition)

San Felipe Plaza (as of August 2005, the date of acquisition)

2500 City West (as of August 2005, the date of acquisition)

Brookhollow Central I, II, and III (as of August 2005, the date of acquisition)

2500 City West land (as of December 2005, the date of acquisition)

CityWestPlace (as of June 2006, the date of acquisition)

CityWestPlace land (as of June 2006, the date of acquisition)

Centerpointe I & II (as of January 2007, the date of acquisition)

Fair Oaks Plaza (as of January 2007, the date of acquisition)

The following investment entity that holds a mortgage loan receivable related to Brookhollow Central is accounted for using the equity method of accounting:

BH Note B Lender, LLC (as of October 2008, the date of formation)

TPG/CalSTRS, LLC also owns a 25% interest in the Austin Portfolio Joint Venture which owns the following properties ("Austin Portfolio Joint Venture Properties"):

San Jacinto Center (as of June 2007, the date of acquisition)

Frost Bank Tower (as of June 2007, the date of acquisition)

One Congress Plaza (as of June 2007, the date of acquisition)

One American Center (as of June 2007, the date of acquisition)

300 West 6th Street (as of June 2007, the date of acquisition)

Research Park Plaza I & II (as of June 2007, the date of acquisition)

Park Centre (as of June 2007, the date of acquisition)

Great Hills Plaza (as of June 2007, the date of acquisition)

Stonebridge Plaza II (as of June 2007, the date of acquisition)

Westech 360 I-IV (as of June 2007, the date of acquisition)

Comparison of three months ended June 30, 2009 to three months ended June 30, 2008

Total revenues. Total revenues decreased by $78.7 million, or 78.0%, to $22.2 million for the three months ended June 30, 2009 compared to $100.9 million for the three months ended June 30, 2008. The significant components of revenue are discussed below.

Rental revenues. Rental revenue decreased by $0.3 million, or 3.8% to $7.7 million for the three months ended June 30, 2009 compared to $8 million for the three months ended June 30, 2008. The decrease was primarily related to a scheduled expiration in June 2008 of a significant tenant at Two Commerce Square representing approximately 375,000 rentable square feet. Approximately 66% of the space from this lease expiration has been leased to former subtenants or new tenants at current market rates, which are lower than the expired lease rates.

Tenant reimbursements. Tenant reimbursements decreased by $1.7 million, or 23.3%, to $5.6 million for the three months ended June 30, 2009 compared to $7.3 million for the three months ended June 30, 2008. The decrease was primarily related to a scheduled expiration in June 2008 of a significant tenant at Two Commerce Square representing approximately 375,000 rentable square feet, offset by revenues from former subtenants or new tenants that are now direct tenants.

Parking and other revenues. Parking and other revenues decreased by $0.1 million, or 11.1%, to $0.8 million for the three months ended June 30, 2009 from $0.9 million for the three months ended June 30, 2008. The decrease was primarily related to a decrease in transient parking revenue related to a non-recurring exhibition adjacent to our Commerce Square property in 2008, and lower occupancy in 2009 at Commerce Square.

Investment advisory, management, leasing and development services revenues. This caption represents revenues earned from services provided to unaffiliated entities in which we have no ownership interest. Revenues from these services increased by $0.8 million, or 38.1%, from $2.1 million for the three months ended June 30, 2008 to $2.9 million for the three months ended June 30, 2009 primarily due to an increase in lease commissions related to two tenants at the 800 South Hope property. There was also an increase in developer fees related to the Wilshire Grand project offset by a decrease in lease commissions from the 1835 Market Street property. We began earning fees on the Wilshire Grand project in April 2009.

Investment advisory, management, leasing and development services revenues - unconsolidated real estate entities. This caption represents revenues earned from services provided to entities for which we use the equity method to account for our ownership interest since we have significant influence, but not control, over the entities. Revenues from these services from unconsolidated real estate entities decreased by $1.2 million, or 23.5%, from $5.1 million for the three months ended June 30, 2008 to $3.9 million for the three months ended June 30, 2009 primarily due to a decrease of $0.9 million in lease commission revenue generated from our Research Park Plaza investment for the three months ended June 30, 2009 compared to the three months ended June 30, 2008. A decrease of $0.3 million was due to an overall decrease in leasing activity.

Reimbursement of property personnel costs. This caption represents the reimbursement for property personnel salary, payroll taxes and benefits. The decrease of $0.3 million or 20% to $1.2 million for the three months ended June 30, 2009 compared to $1.5 million for the three months ended June 30, 2008 was primarily due to cost saving measures.

Condominium sales. This caption represents the revenue recognized on the percentage of completion method of accounting for the Murano condominium units and parking spaces which closed or were under a binding sales contract as of June 30, 2009. The decrease of $76.1 million or 100% for the three months ended June 30, 2009 compared to $76.1 million for the three months ended June 30, 2008 is due to a reduction in the sales volume as compared to the prior year. For the three months ended June 30, 2009, we had eight forfeitures of units previously put under contract, and we entered into six new contracts for sale, which amounted to a net profit of approximately $0.1 million. There were no forfeitures and we had 123 units either closed or under contract for sale in the corresponding three-month period ended June 30, 2008.

Total expenses. Total expenses decreased by $60.0 million, or by 69.7%, to $26.1 million for the three months ended June 30, 2009 compared to $86.1 million for the three months ended June 30, 2008. The significant components of expense are discussed below.

Property operating and maintenance expense. Property operating and maintenance decreased by $0.5 million, or 7.2%, to $6.4 million for the three months ended June 30, 2009 compared to $6.9 million for the three months ended June 30, 2008, primarily due to lower operating expenditures due to lower occupancy at Commerce Square, partially offset by a $0.3 million increase in the homeowner's association fees at Murano.

Real estate taxes. Real estate taxes remained consistent for each of the three month periods ended June 30, 2009 and 2008.

Investment advisory, management, leasing and development services expenses. Expenses for these services decreased by $2.3 million, or 44.2%, to $2.9 million for the three months ended June 30, 2009 compared to $5.2 million for the three months ended June 30, 2008, primarily due to compensation and professional fee reductions related to cost saving measures.

Reimbursable property personnel costs. This caption represents the reimbursement of property personnel salary, payroll taxes and benefits. The decrease of $0.3 million or 20% to $1.2 million for the three months ended June 30, 2009 compared to $1.5 million for the three months ended June 30, 2008 was primarily due to cost saving measures.

Cost of condominium sales. This caption represents the cost recognized on the percentage of completion method of accounting for the Murano condominium units and parking spaces which closed or were put under a binding sales contract during the relevant period. The decrease of $59.1 million or 100.0% for the three months ended June 30, 2009 compared to the three months ended June 30, 2008 is due to lower sales volume in the current quarter. For the three months ended June 30, 2009, we had eight forfeitures of units previously put under contract, and we entered into six new contracts for sale, which amounted to a net profit of approximately $0.1 million. There were no forfeitures and we had 123 units either closed or under contract for sale in the corresponding three-month period ended June 30, 2008.

Rent - unconsolidated entities. Rent - unconsolidated entities remained consistent for each of the three month periods ended June 30, 2009 and 2008.

Interest expense. Interest expense increased by $2.9 million, or 74.4%, to $6.8 million for the three month period ended June 30, 2009 from $3.9 million for the three month period ended June 30, 2008. The increase in interest expense is primarily attributable to interest costs no longer being capitalized on Murano and our Four Points Centre office buildings due to the substantial completion of development on these projects in the second half of 2008.

Depreciation and amortization expense. Depreciation and amortization expense increased by $0.4 million or 14.3% to $3.2 million for the three months ended June 30, 2009 compared to $2.8 million for the three months ended June 30, 2008 due to depreciation of routine additions to fixed assets at Commerce Square.

General and administrative. General and administrative expense decreased by $1.5 million, or 28.3%, to $3.8 million for the three months ended June 30, 2009 compared to $5.3 million for the three months ended June 30, 2008. This was primarily due to a reduction in compensation, professional fees, information technology, travel and entertainment expenses as a result of cost saving measures.

Gain on sale of real estate. Gain on sale of real estate decreased by $1.1 million, or 100%, for the three months ended June 30, 2009 from $1.1 million for the three months ended June 30, 2008 due to the 2008 recognition of deferred gain upon completion of infrastructure costs related to the sale of a 14.1 acre parcel at Campus El Segundo.

Interest income. Interest income decreased by $0.6 million, or 85.7%, to $0.1 million for the three months ended June 30, 2009 compared to $0.7 million for the three months ended June 30, 2008 primarily due to declining investment balances and lower interest rates.

Equity in net loss of unconsolidated real estate entities. Set forth below is a summary of the unconsolidated condensed financial information for the unconsolidated real estate entities and our share of net loss and equity in net loss for the three months ended June 30, 2009 and 2008 (in thousands):

                                                               Three months ended
                                                                    June 30,
                                                              2009           2008
Revenues                                                    $  82,703      $  82,897

Expenses:
Operating and other                                            41,378         42,158
Interest                                                       25,440         32,120
Depreciation and amortization                                  30,468         31,153

Total expenses                                                 97,286        105,431

Loss from continuing operations                               (14,583 )      (22,534 )
Income (loss) from discontinued operations                          3            (63 )

Net loss                                                    $ (14,580 )    $ (22,597 )

Thomas Properties' share of net loss                           (1,616 )       (3,311 )
Intercompany eliminations                                       1,036            736

Equity in net loss of unconsolidated real estate entities   $    (580 )    $  (2,575 )

Aggregate revenue decreased due to a decrease in occupancy for the three months ended June 30, 2009 compared to the three months ended June 30, 2008. Aggregate operating and other expenses for unconsolidated real estate entities for the three months ended June 30, 2009 compared to the three months ended June 30, 2008 decreased primarily due to lower occupancy. Interest expense for the three months ended June 30, 2009 compared to the three months ended June 30, 2008 decreased primarily due to declining interest rates. Depreciation and amortization for unconsolidated real estate entities increased for the three months ended June 30, 2009 compared to the three months ended June 30, 2008 primarily due to depreciation of routine additions to fixed assets.

Provision for income taxes. Provision for income taxes decreased by $3.2 million to a provision of $0.5 million for the three months ended June 30, 2009 compared to a provision of $3.7 million for the three months ended June 30, 2008. The decrease was primarily due to the Company's loss before provision for income taxes and noncontrolling interests of $4.4 million for the three months ended June 30, 2009, compared to income before provision for income taxes and noncontrolling interests of $14.2 million for the three months ended June 30, 2008. The Company also recorded a valuation allowance of $3.5 million on its net deferred tax asset as of June 30, 2009.

Comparison of six months ended June 30, 2009 to six months ended June 30, 2008

Total revenues. Total revenues decreased by $81.1 million, or 65.1%, to $43.4 million for the six months ended June 30, 2009 compared to $124.5 million for the six months ended June 30, 2008. The significant components of revenue are discussed below.

Rental revenues. Rental revenue decreased by $0.7 million, or 4.4% to $15.1 million for the six months ended June 30, 2009 compared to $15.8 million for the six months ended June 30, 2008. The decrease was primarily related to a scheduled expiration in June 2008 of a significant tenant at Two Commerce Square representing approximately 375,000 rentable square feet. Approximately 66% of the space from this lease expiration has been leased to former subtenants or new tenants at current market rates, which are lower than the expired lease rates.

Tenant reimbursements. Tenant reimbursements decreased by $2.5 million, or 17.7%, to $11.6 million for the six months ended June 30, 2009 compared to $14.1 million for the six months ended June 30, 2008. The decrease was primarily related to a scheduled expiration in June 2008 of a significant tenant at Two Commerce Square representing approximately 375,000 rentable square feet, offset by revenues from former subtenants or new tenants that are now direct tenants.

Parking and other revenues. Parking and other revenues decreased by $0.2 million, or 11.1%, to $1.6 million for the six months ended June 30, 2009 from $1.8 million for the six months ended June 30, 2008. The decrease was primarily related to a decrease in transient parking revenue related to a special exhibition adjacent to our Commerce Square property in 2008. There was no corresponding event in 2009.

Investment advisory, management, leasing and development services revenues. This caption represents revenues earned from services provided to unaffiliated entities in which we have no ownership interest. Revenues from these services increased by $0.7 million, or 18.4%, from $3.8 million for the six months ended June 30, 2008 to $4.5 million for the six months ended June 30, 2009 primarily due to an increase in lease commissions related to two tenants at the 800 South Hope property. There was also an increase in developer fees related to the Wilshire Grand project offset by a decrease in lease commissions from the 1835 Market Street property. We began earning fees on the Wilshire Grand project in April 2009.

Investment advisory, management, leasing and development services revenues - unconsolidated real estate entities. This caption represents revenues earned from services provided to entities for which we use the equity method to account for our ownership interest since we have significant influence, but not control, over the entities. Revenues from these services from unconsolidated real estate

entities decreased by $1.6 million, or 17%, from $9.4 million for the six months ended June 30, 2008 to $7.8 million for the six months ended June 30, 2009 primarily due to a decrease of $1.3 million in lease commission revenue generated from our Research Park Plaza investment, a decrease of $0.4 million due to a decrease in developer fees in connection with reduced capital expenditures, offset by an increase of $0.1 million related to management and advisor fees.

Reimbursement of property personnel costs. This caption represents the reimbursement for property personnel salary, payroll taxes and benefits. The decrease of $0.6 million or 17.6% to $2.8 million for the six months ended June 30, 2009 compared to $3.4 million for the six months ended June 30, 2008 was primarily due to cost saving measures.

Condominium sales. This caption represents the revenue recognized on the percentage of completion method of accounting for the Murano condominium units and parking spaces which closed or were under a binding sales contract as of June 30, 2009. The decrease of $76.1 million or 100.0% for the six months ended June 30, 2009 compared to the six months ended June 30, 2008 is due to a reduction in the sales volume as compared to the prior year. For the six months ended June 30, 2009, we had eight forfeitures of units previously put under contract, and we entered into six new contracts for sale, which amounted to a net profit of approximately $0.1 million. There were no forfeitures and we had 123 units either closed or under contract for sale in the corresponding six-month period ended June 30, 2008.

Total expenses. Total expenses decreased by $57.0 million, or by 51.8%, to $53.0 million for the six months ended June 30, 2009 compared to $110 million for the six months ended June 30, 2008. The significant components of expense are discussed below.

Property operating and maintenance expense. Property operating and maintenance decreased by $0.4 million, or 3.1%, to $12.5 million for the six months ended June 30, 2009 compared to $12.9 million for the six months ended June 30, 2008, primarily due to lower operating expenditures due to lower occupancy, offset by a $0.6 million increase in the homeowner's association fees at Murano.

Real estate taxes. Real estate taxes remained consistent for each of the six month periods ended June 30, 2009 and 2008.

Investment advisory, management, leasing and development services expenses. Expenses for these services decreased by $2.6 million, or 31%, to $5.8 million for the six months ended June 30, 2009 compared to $8.4 million for the six months ended June 30, 2008, primarily due to compensation and professional fee reductions related to cost saving measures.

Reimbursable property personnel costs. This caption represents the reimbursement of property personnel salary, payroll taxes and benefits. The decrease of $0.6 million or 17.6% to $2.8 million for the six months ended June 30, 2009 compared to $3.4 million for the six months ended June 30, 2008 was primarily due to cost saving measures.

Cost of condominium sales. This caption represents the cost recognized on the percentage of completion method of accounting for the Murano condominium units and parking spaces which closed or were put under a binding sales contract during the relevant period. The decrease of $59.1 million or 100.0% for the six months ended June 30, 2009 compared to $59.1 million for the six months ended June 30, 2008 was due to lower sales volume as compared to the prior year. For the six months ended June 30, 2009, we had eight forfeitures of units previously put under contract, and we entered into six new contracts for sale, which amounted to a net profit of approximately $0.1 million. There were no forfeitures and we had 123 units either closed or under contract for sale in the corresponding six-month period ended June 30, 2008.

Rent - unconsolidated entities. Rent - unconsolidated entities remained consistent for each of the six month periods ended June 30, 2009 and 2008.

Interest expense. Interest expense increased by $5.7 million, or 72.2%, to $13.6 million for the six month period ended June 30, 2009 from $7.9 million for the six month period ended June 30, 2008. The increase in interest expense is primarily attributable to interest costs no longer being capitalized on Murano and our Four Points Centre office buildings due to the substantial completion of development on these projects in the second half of 2008.

Depreciation and amortization expense. Depreciation and amortization expense increased by $0.8 million or 14.3% to $6.4 million for the six months ended June 30, 2009 compared to $5.6 million for the six months ended June 30, 2008 due to depreciation of routine additions to fixed assets at Commerce Square.

General and administrative. General and administrative expense decreased by $1.2 million, or 12.8%, to $8.2 million for the six months ended June 30, 2009 compared to $9.4 million for the six months ended June 30, 2008. This was primarily due to a reduction in compensation, professional fees, information technology, travel and entertainment expenses as a result of cost saving measures.

Gain on sale of real estate. Gain on sale of real estate decreased by $3.6 million, or 100%, for the six months ended June 30, 2009 from $3.6 million for the six months ended June 30, 2008 due to the 2008 recognition of deferred gain upon completion of infrastructure costs related to the sale of a 14.1 acre parcel at Campus El Segundo.

Gain from early extinguishment of debt. Gain from early extinguishment of debt increased by $0.2 million to $0.5 million for the six months ended June 30, 2009 from $0.3 million for the six months ended June 30, 2008. During the six months ended June 30, 2009, we repaid an unsecured loan at a discount of $0.5 million. The gain from early extinguishment of debt recognized during the six months ended June 30, 2008 resulted from the One Commerce Square mortgage defeasance.

Interest income. Interest income decreased by $1.5 million, or 83.3%, to $0.3 million for the six months ended June 30, 2009 compared to $1.8 million for the six months ended June 30, 2008 primarily due to declining investment balances and lower interest rates.

Equity in net income (loss) of unconsolidated real estate entities. Set forth below is a summary of the unconsolidated condensed financial information for the unconsolidated real estate entities and our share of net income (loss) and equity in net income (loss) for the six months ended June 30, 2009 and 2008 (in thousands):

                                                                  Six months ended
                                                                      June 30,
                                                                2009            2008
Revenues                                                      $ 164,264       $ 162,557

. . .