Additionally, the FFO dropped from $17 million or a 63 cents per fully diluted share to $11 million or 51 cents per share.

The termination of a management contract with AP-Knight, however, and increased insurance premiums in the second half of 2002 could cut into revenue, Koger CEO Thomas Crocker says in a prepared statement. Operating margins for the REIT increased to 62.6% from 62.1%.

The AP-Knight contract termination also lead to the resignation of John Jacobsson from the company's board of directors.

"We are encouraged by our stronger than expected second quarter results and are starting to experience a slight recovery in our Southeastern office markets due to modest absorption and a stabilizing job market," Crocker says in the statement.

"Although we continued to believe that economic uncertainty is a reality that may affect results, we believe Koger's current asset portfolio is well positioned," he says.

For the first six months of 2002, leasing activity reached 799,000 sf.

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