EXHIBIT 99.3
 FIRST POTOMAC REALTY TRUST
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
  FIRST POTOMAC REALTY TRUST AND SUBSIDIARIES
 PageReport of independent registered public accounting firm
    
    
    2Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    3Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008
    
    
    4Consolidated Statements of Equity and Comprehensive Income (Loss) for the years ended
December 31, 2010, 2009 and 2008
    
    
    5Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008
    
    
    6Notes to consolidated financial statements
    
    
    8FINANCIAL STATEMENT SCHEDULESchedule III: Real Estate and Accumulated Depreciation
    
    
    47




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##### 



Report of Independent Registered Public Accounting Firm
 
     
  2




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##### 



FIRST POTOMAC REALTY TRUST AND SUBSIDIARIES
 2010
    
    
    2009Assets:Rental property, net
    
    $
    1,217,897
    
    
    $
    987,475Cash and cash equivalents
    
    
    33,280
    
    
    
    9,320Escrows and reserves
    
    
    8,070
    
    
    
    9,978Accounts and other receivables, net of allowance for
doubtful accounts of $3,246 and $2,346, respectively
    
    
    7,238
    
    
    
    7,049Accrued straight-line rents, net of allowance for
doubtful accounts of $849 and $1,185, respectively
    
    
    12,771
    
    
    
    10,967Notes receivable, net
    
    
    24,750
    
    
    
    Investment in affiliates
    
    
    23,721
    
    
    
    1,819Deferred costs, net
    
    
    20,174
    
    
    
    17,837Prepaid expenses and other assets
    
    
    14,230
    
    
    
    6,625Intangible assets, net
    
    
    34,551
    
    
    
    20,103Total assets
    
    $
    1,396,682
    
    
    $
    1,071,173Liabilities:Mortgage loans
    
    $
    319,096
    
    
    $
    301,463Exchangeable senior notes, net
    
    
    29,936
    
    
    
    48,718Senior notes
    
    
    75,000
    
    
    
    75,000Secured term loans
    
    
    110,000
    
    
    
    60,000Unsecured revolving credit facility
    
    
    191,000
    
    
    
    159,900Financing obligation
    
    
    
    
    
    
    5,066Accounts payable and other liabilities
    
    
    16,827
    
    
    
    13,100Accrued interest
    
    
    2,170
    
    
    
    2,072Rents received in advance
    
    
    7,049
    
    
    
    7,267Tenant security deposits
    
    
    5,390
    
    
    
    5,235Deferred market rent, net
    
    
    6,032
    
    
    
    6,008Total liabilities
    
    
    762,500
    
    
    
    683,829Noncontrolling interests in the Operating Partnership
    
    
    16,122
    
    
    
    9,585Equity:Series A Preferred Shares, $25 par value, 4,600 shares
authorized and none outstanding
    
    
    
    
    
    
    Common shares, $0.001 par value, 150,000 shares authorized;
49,922 and 30,589 shares issued and outstanding,
respectively
    
    
    50
    
    
    
    31Additional paid-in capital
    
    
    794,051
    
    
    
    517,940Noncontrolling interests in consolidated partnerships
    
    
    3,077
    
    
    
    Accumulated other comprehensive loss
    
    
    (545
    )
    
    
    (1,879
    )Dividends in excess of accumulated earnings
    
    
    (178,573
    )
    
    
    (138,333
    )Total equity
    
    
    618,060
    
    
    
    377,759Total liabilities, noncontrolling interests and equity
    
    $
    1,396,682
    
    
    $
    1,071,173
   3




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##### 



FIRST POTOMAC REALTY TRUST AND SUBSIDIARIES
 2010
    
    
    2009
    
    
    2008Revenues:Rental
    
    $
    111,860
    
    
    $
    106,122
    
    
    $
    99,003Tenant reimbursements and other
    
    
    26,687
    
    
    
    24,526
    
    
    
    21,895Total revenues
    
    
    138,547
    
    
    
    130,648
    
    
    
    120,898Operating expenses:Property operating
    
    
    33,714
    
    
    
    32,150
    
    
    
    26,497Real estate taxes and insurance
    
    
    12,954
    
    
    
    12,666
    
    
    
    11,859General and administrative
    
    
    14,523
    
    
    
    13,219
    
    
    
    11,938Acquisition costs
    
    
    7,169
    
    
    
    1,076
    
    
    
    Depreciation and amortization
    
    
    42,613
    
    
    
    40,174
    
    
    
    36,260Impairment of real estate assets
    
    
    2,386
    
    
    
    
    
    
    
    Contingent consideration related to acquisition of property
    
    
    710
    
    
    
    
    
    
    
    Total operating expenses
    
    
    114,069
    
    
    
    99,285
    
    
    
    86,554Operating income
    
    
    24,478
    
    
    
    31,363
    
    
    
    34,344Other expenses, net:Interest expense
    
    
    33,758
    
    
    
    32,412
    
    
    
    35,628Interest and other income
    
    
    (634
    )
    
    
    (516
    )
    
    
    (660
    )Equity in losses of affiliates
    
    
    124
    
    
    
    95
    
    
    
    Gains on early retirement of debt
    
    
    (164
    )
    
    
    (6,167
    )
    
    
    (4,374
    )Total other expenses, net
    
    
    33,084
    
    
    
    25,824
    
    
    
    30,594(Loss) income from continuing operations before income taxes
    
    
    (8,606
    )
    
    
    5,539
    
    
    
    3,750Provision for income taxes
    
    
    (31
    )
    
    
    
    
    
    
    (Loss) income from continuing operations
    
    
    (8,637
    )
    
    
    5,539
    
    
    
    3,750Discontinued operations:(Loss) income from operations of disposed properties
    
    
    (3,595
    )
    
    
    (1,483
    )
    
    
    2,117Gain on sale of real estate properties
    
    
    557
    
    
    
    
    
    
    
    14,274Income from discontinued operations
    
    
    (3,038
    )
    
    
    (1,483
    )
    
    
    16,391Net (loss) income
    
    
    (11,675
    )
    
    
    4,056
    
    
    
    20,141Less: Net loss (income) attributable to noncontrolling
interests
    
    
    232
    
    
    
    (124
    )
    
    
    (615
    )Net (loss) income attributable to common shareholders
    
    $
    (11,443
    )
    
    $
    3,932
    
    
    $
    19,526Net (loss) income attributable to common shareholders per
share  basic and diluted:(Loss) income from continuing operations
    
    $
    (0.25
    )
    
    $
    0.17
    
    
    $
    0.13Income from discontinued operations
    
    
    (0.08
    )
    
    
    (0.05
    )
    
    
    0.64Net (loss) income
    
    $
    (0.33
    )
    
    $
    0.12
    
    
    $
    0.77Weighted average common shares outstanding  basic
    
    
    36,984
    
    
    
    27,956
    
    
    
    24,838Weighted average common shares outstanding  diluted
    
    
    36,984
    
    
    
    28,045
    
    
    
    24,858
   4




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##### 



FIRST POTOMAC REALTY TRUST AND SUBSIDIARIES
 Accumulated
    
    
    Noncontrolling
    
    
    Dividends inCommon
    
    
    
    
    
    
    Other
    
    
    Interests in
    
    
    Excess ofShares
    
    
    Additional
    
    
    Comprehensive
    
    
    Consolidated
    
    
    Accumulated
    
    
    
    
    
    
    ComprehensivePar Value
    
    
    Paid-in Capital
    
    
    Loss
    
    
    Partnerships
    
    
    Earnings
    
    
    Total Equity
    
    
    Income (Loss)Balance at December 31, 2007
    
    $
    24
    
    
    $
    438,566
    
    
    $
    
    
    
    $
    
    
    
    $
    (101,070
    )
    
    $
    337,520Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,141
    
    
    
    20,141
    
    
    $
    20,141Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    (3,931
    )
    
    
    
    
    
    
    
    
    
    
    (3,931
    )
    
    
    (3,931
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,210Attributable to noncontrolling
Interests
    
    
    
    
    
    
    
    
    
    
    108
    
    
    
    
    
    
    
    (615
    )
    
    
    (507
    )
    
    
    (507
    )Total comprehensive income attributable to common
shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    15,703Dividends paid to shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,192
    )
    
    
    (34,192
    )Acquisition of partnership units
    
    
    
    
    
    
    (34
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )Shares issued in exchange for
Operating Partnership units
    
    
    
    
    
    
    358
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    358Restricted stock expense
    
    
    
    
    
    
    1,791
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,791Exercise of stock options
    
    
    
    
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38Stock option expense
    
    
    
    
    
    
    201
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    201Issuance of common stock
    
    
    3
    
    
    
    43,905
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,908Balance at December 31, 2008
    
    
    27
    
    
    
    484,825
    
    
    
    (3,823
    )
    
    
    
    
    
    
    (115,736
    )
    
    
    365,293Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,056
    
    
    
    4,056
    
    
    $
    4,056Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    1,314
    
    
    
    
    
    
    
    
    
    
    
    1,314
    
    
    
    1,314Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,370Attributable to noncontrolling
Interests
    
    
    
    
    
    
    
    
    
    
    (32
    )
    
    
    
    
    
    
    (124
    )
    
    
    (156
    )
    
    
    (156
    )Total comprehensive income attributable to
common shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,214Dividends paid to shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,529
    )
    
    
    (26,529
    )Acquisition of partnership units
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Shares issued in exchange for Operating Partnership units
    
    
    
    
    
    
    483
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    483Restricted stock expense
    
    
    
    
    
    
    2,906
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,906Stock option expense
    
    
    
    
    
    
    207
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    207Issuance of common stock
    
    
    4
    
    
    
    29,518
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,522Deconsolidation of joint venture
    
    
    
    
    
    
    
    
    
    
    662
    
    
    
    
    
    
    
    
    
    
    
    662Balance at December 31, 2009
    
    
    31
    
    
    
    517,940
    
    
    
    (1,879
    )
    
    
    
    
    
    
    (138,333
    )
    
    
    377,759Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,675
    )
    
    
    (11,675
    )
    
    $
    (11,675
    )Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    1,067
    
    
    
    
    
    
    
    
    
    
    
    1,067
    
    
    
    1,067Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,608
    )Attributable to noncontrolling
Interests
    
    
    
    
    
    
    
    
    
    
    (23
    )
    
    
    
    
    
    
    232
    
    
    
    209
    
    
    
    209Total comprehensive loss attributable to common shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (10,399
    )Dividends paid to shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,797
    )
    
    
    (28,797
    )Acquisition of partnership units
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )Shares issued in exchange for Operating Partnership units
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55Restricted stock expense
    
    
    
    
    
    
    3,465
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,465Exercise of stock options
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44Stock option and employee stock purchase plan expense
    
    
    
    
    
    
    270
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    270Issuance of common stock, net of net settlements
    
    
    19
    
    
    
    275,872
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    275,891Adjustment of Operating Partnership units to fair value
    
    
    
    
    
    
    (3,594
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,594
    )Noncontrolling interest in consolidated joint venture, at
acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,079
    
    
    
    
    
    
    
    3,079Loss attributable to noncontrolling interest in consolidated
joint venture
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )Deconsolidation of joint venture
    
    
    
    
    
    
    
    
    
    
    290
    
    
    
    
    
    
    
    
    
    
    
    290Balance at December 31, 2010
    
    $
    50
    
    
    $
    794,051
    
    
    $
    (545
    )
    
    $
    3,077
    
    
    $
    (178,573
    )
    
    $
    618,060
   5




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##### 



FIRST POTOMAC REALTY TRUST AND SUBSIDIARIES
 2010
    
    
    2009
    
    
    2008Cash flow from operating activities:Net (loss) income
    
    $
    (11,675
    )
    
    $
    4,056
    
    
    $
    20,141Adjustments to reconcile net (loss) income to net cash
provided by operating activities:Discontinued operations:Gain on sale of properties
    
    
    (557
    )
    
    
    
    
    
    
    (14,274
    )Depreciation and amortization
    
    
    597
    
    
    
    698
    
    
    
    1,427Impairment of real estate assets
    
    
    4,013
    
    
    
    2,541
    
    
    
    Depreciation and amortization
    
    
    43,439
    
    
    
    41,039
    
    
    
    37,131Stock based compensation
    
    
    3,735
    
    
    
    3,113
    
    
    
    1,985Bad debt expense
    
    
    1,290
    
    
    
    2,302
    
    
    
    533Amortization of deferred market rent
    
    
    (1,356
    )
    
    
    (1,572
    )
    
    
    (1,730
    )Amortization of financing costs and fair value discounts
    
    
    757
    
    
    
    445
    
    
    
    3,208Equity in losses of affiliates
    
    
    124
    
    
    
    95
    
    
    
    Distributions from investments in affiliates
    
    
    623
    
    
    
    107
    
    
    
    Contingent consideration related to acquisition of property
    
    
    710
    
    
    
    
    
    
    
    Impairment of real estate assets
    
    
    2,386
    
    
    
    
    
    
    
    Change in financing obligation
    
    
    
    
    
    
    (378
    )
    
    
    (81
    )Gains on early retirement of debt
    
    
    (164
    )
    
    
    (6,167
    )
    
    
    (4,374
    )Changes in assets and liabilities:Escrows and reserves
    
    
    69
    
    
    
    (1,454
    )
    
    
    4,552Accounts and other receivables
    
    
    (1,844
    )
    
    
    (1,937
    )
    
    
    (2,936
    )Accrued straight-line rents
    
    
    (1,711
    )
    
    
    (1,180
    )
    
    
    (1,081
    )Prepaid expenses and other assets
    
    
    107
    
    
    
    (658
    )
    
    
    (661
    )Tenant security deposits
    
    
    382
    
    
    
    28
    
    
    
    (179
    )Accounts payable and accrued expenses
    
    
    3,372
    
    
    
    3,139
    
    
    
    2,414Accrued interest
    
    
    150
    
    
    
    (334
    )
    
    
    (285
    )Rents received in advance
    
    
    (172
    )
    
    
    2,543
    
    
    
    143Deferred costs
    
    
    (7,611
    )
    
    
    (6,418
    )
    
    
    (7,869
    )Total adjustments
    
    
    48,339
    
    
    
    35,952
    
    
    
    17,923Net cash provided by operating activities
    
    
    36,664
    
    
    
    40,008
    
    
    
    38,064Cash flows from investing activities:Purchase deposit on future acquisitions
    
    
    (7,403
    )
    
    
    (500
    )
    
    
    Investment in note receivable
    
    
    (24,750
    )
    
    
    
    
    
    
    Proceeds from sale of real estate assets
    
    
    11,414
    
    
    
    
    
    
    
    50,573Distributions from joint venture for contribution of real estate assets
    
    
    
    
    
    
    
    
    
    
    11,572Additions to rental property
    
    
    (18,917
    )
    
    
    (21,928
    )
    
    
    (26,502
    )Additions to construction in progress
    
    
    (5,793
    )
    
    
    (1,200
    )
    
    
    (10,328
    )Cash held by joint venture at deconsolidation
    
    
    (896
    )
    
    
    
    
    
    
    Investment in unconsolidated joint ventures
    
    
    (21,015
    )
    
    
    
    
    
    
    Acquisition of land parcel
    
    
    (3,200
    )
    
    
    
    
    
    
    Acquisition of rental property and associated intangible assets
    
    
    (279,248
    )
    
    
    (39,310
    )
    
    
    (46,377
    )Net cash used in investing activities
    
    
    (349,808
    )
    
    
    (62,938
    )
    
    
    (21,062
    )Cash flows from financing activities:Financing costs
    
    
    (1,745
    )
    
    
    (3,234
    )
    
    
    (1,145
    )Issuance of debt
    
    
    361,998
    
    
    
    109,500
    
    
    
    217,300Issuance of stock, net
    
    
    264,573
    
    
    
    29,522
    
    
    
    43,908Repayments of debt
    
    
    (258,331
    )
    
    
    (92,640
    )
    
    
    (230,555
    )Distributions to noncontrolling interests
    
    
    (631
    )
    
    
    (718
    )
    
    
    (1,057
    )Dividends to shareholders
    
    
    (28,797
    )
    
    
    (26,529
    )
    
    
    (34,192
    )Redemption of partnership units
    
    
    (5
    )
    
    
    (3
    )
    
    
    (145
    )Stock option exercises
    
    
    42
    
    
    
    
    
    
    
    38Net cash provided by (used in) financing activities
    
    
    337,104
    
    
    
    15,898
    
    
    
    (5,848
    )Net increase (decrease) in cash and cash equivalents
    
    
    23,960
    
    
    
    (7,032
    )
    
    
    11,154Cash and cash equivalents, beginning of year
    
    
    9,320
    
    
    
    16,352
    
    
    
    5,198Cash and cash equivalents, end of year
    
    $
    33,280
    
    
    $
    9,320
    
    
    $
    16,352
   6




---



##### 



FIRST POTOMAC REALTY TRUST AND SUBSIDIARIES
  2010
    
    
    2009
    
    
    2008Cash paid for interest, net
    
    $
    32,769
    
    
    $
    32,638
    
    
    $
    35,928Non-cash investing and financing activities:Debt assumed in connection with
acquisitions of real estate
    
    
    14,699
    
    
    
    
    
    
    
    Conversion of Operating Partnership units
into common shares
    
    
    55
    
    
    
    483
    
    
    
    358Issuance of Operating Partnership units in
exchange for limited partnership interests
    
    
    3,519
    
    
    
    
    
    
    
    
    Investment in Affiliates.
   7




---



##### 



FIRST POTOMAC REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (1) Description of Business
     Segment Information
 (2) Summary of Significant Accounting Policies
 (a) Principles of Consolidation
   8




---



##### 



(b) Use of Estimates
  (c) Revenue Recognition and Accounts Receivable
    (d) Cash and Cash Equivalents
  (e) Escrows and Reserves
   9




---



##### 



(f) Deferred Costs
   Deferred Financing
    
    
    Leasing(1)2011
    
    $
    2,148
    
    
    $
    3,5652012
    
    
    1,778
    
    
    
    2,9042013
    
    
    412
    
    
    
    2,2472014
    
    
    296
    
    
    
    1,4122015
    
    
    182
    
    
    
    1,028Thereafter
    
    
    206
    
    
    
    2,146$
    5,022
    
    
    $
    13,302
 (1)
    
    Excludes the amortization of $1.5 million of leasing costs that have
yet to be placed in-service as the associated tenants have not moved into their
related spaces and, therefore, the future amortization of these leasing costs have
yet to be determined. (g) Rental Property
  Buildings
    
    39 yearsBuilding improvements
    
    5 to 20 yearsFurniture, fixtures and equipment
    
    5 to 15 yearsTenant improvements
    
    Shorter of the useful lives of the
assets or the terms of the related
leases
    10




---



##### 



(h) Purchase Accounting
  
    
    the fair value of leases in-place on the date of acquisition is based on absorption
costs for the estimated lease-up period in which vacancy and foregone revenue are avoided
due to the presence of the acquired leases;
    
    the fair value of above and below-market in-place leases based on the present value
(using a discount rate that reflects the risks associated with the acquired leases) of the
difference between the contractual rent amounts to be paid under the assumed lease and the
estimated market lease rates for the corresponding spaces over the remaining non-cancelable
terms of the related leases, which range from one to fifteen years; and
    
    the fair value of intangible tenant or customer relationships.
  (i) Investment in Affiliates
 .
  11




---



##### 



( j) Sales of Real Estate
    (k) Intangible Assets
   12




---



##### 



(l) Derivatives and Hedging
    13




---



##### 



(m) Income Taxes
    2010
    
    
    2009
    
    
    2008Ordinary income
    
    
    70.38
    %
    
    
    100.00
    %
    
    
    59.42
    %Return of capital
    
    
    29.62
    %
    
    
    
    
    
    
    Long-term capital gain
    
    
    
    
    
    
    
    
    
    
    40.58
    %
 (n) Noncontrolling Interests in Operating Partnership
    14




---



##### 



(o) Earnings Per Share
   15




---



##### 



2010
    
    
    2009
    
    
    2008Numerator for basic and diluted (loss) earnings
per share calculations:(Loss) income from continuing operations
    
    $
    (8,637
    )
    
    $
    5,539
    
    
    $
    3,750(Loss) income from discontinued operations
    
    
    (3,038
    )
    
    
    (1,483
    )
    
    
    16,391Net (loss) income
    
    
    (11,675
    )
    
    
    4,056
    
    
    
    20,141Less: Net loss (income) from continuing
operations attributable to noncontrolling
interests
    
    
    174
    
    
    
    (156
    )
    
    
    (111
    )Less: Net loss (income) from discontinued
operations attributable to noncontrolling
interests
    
    
    58
    
    
    
    32
    
    
    
    (504
    )Net (loss) income attributable to common
shareholders
    
    
    (11,443
    )
    
    
    3,932
    
    
    
    19,526Less: Allocation to participating securities
    
    
    (596
    )
    
    
    (516
    )
    
    
    (419
    )Total (loss) earnings attributable to
common shareholders
    
    $
    (12,039
    )
    
    $
    3,416
    
    
    $
    19,107Denominator for basic and diluted (loss) earnings
per share calculations:Weighted average shares outstanding  basic
    
    
    36,984
    
    
    
    27,956
    
    
    
    24,838Effect of dilutive shares:Employee stock options and non-vested shares
    
    
    
    
    
    
    89
    
    
    
    20Weighted average shares outstanding  diluted
    
    
    36,984
    
    
    
    28,045
    
    
    
    24,858Amounts attributable to common shareholders per
share   basic and diluted:(Loss) income from continuing operations
    
    $
    (0.25
    )
    
    $
    0.17
    
    
    $
    0.13(Loss) income from discontinued operations
    
    
    (0.08
    )
    
    
    (0.05
    )
    
    
    0.64Net (loss) income
    
    $
    (0.33
    )
    
    $
    0.12
    
    
    $
    0.77
  2010
    
    
    2009
    
    
    2008Stock option awards
    
    
    836
    
    
    
    767
    
    
    
    706Non-vested share awards
    
    
    323
    
    
    
    228
    
    
    
    88Conversion of Exchangeable Senior Notes(1)
    
    
    1,098
    
    
    
    1,735
    
    
    
    2,7802,257
    
    
    
    2,730
    
    
    
    3,574
 (1)
    
    At December 31, 2010, 2009 and 2008, each $1,000 principal amount of the
Exchangeable Senior Notes was convertible into 28.039 shares.
 (p) Share-Based Compensation
   16




---



##### 



(q) Reclassifications
  (r) Application of New Accounting Standards
 Investment in Affiliates
 Fair Value
Measurements
    17




---



##### 



(3) Rental Property
  2010
    
    
    2009Land
    
    $
    315,229
    
    
    $
    237,385Buildings and improvements
    
    
    930,077
    
    
    
    795,901Construction in process
    
    
    41,685
    
    
    
    9,832Tenant improvements
    
    
    92,002
    
    
    
    75,940Furniture, fixtures and equipment
    
    
    9,894
    
    
    
    9,8981,388,887
    
    
    
    1,128,956Less: accumulated depreciation
    
    
    (170,990
    )
    
    
    (141,481
    )$
    1,217,897
    
    
    $
    987,475
  Development and Redevelopment Activity
      18




---



##### 



(4) Acquisitions
  Leased
    
    
    Occupied
    
    
    AggregateAcquisition
    
    
    Property
    
    
    
    
    
    
    at
    
    
    at
    
    
    PurchaseLocation
    
    Date
    
    
    Type
    
    
    Square Feet
    
    
    12/31/10
    
    
    12/31/10
    
    
    Price2010:Three Flint Hill
    
    Oakton, VA
    
    
    4/28/2010
    
    
    Office
    
    
    173,762
    
    
    
    0
    %(1)
    
    
    0
    %(1)
    
    $
    13,653500 First Street, NW
    
    Washington, DC
    
    
    6/30/2010
    
    
    Office
    
    
    129,035
    
    
    
    100
    %
    
    
    100
    %
    
    
    67,838Battlefield Corporate Center
    
    Chesapeake, VA
    
    
    10/28/2010
    
    
    Office park
    
    
    96,720
    
    
    
    100
    %
    
    
    100
    %
    
    
    8,310
    (2)Redland Corporate Center
    
    Rockville, MD
    
    
    11/10/2010
    
    
    Office
    
    
    347,462
    
    
    
    44
    %
    
    
    40
    %
    
    
    86,358
    (3)Atlantic Corporate Park
    
    Sterling, VA
    
    
    11/19/2010
    
    
    Office
    
    
    220,610
    
    
    
    4
    %(4)
    
    
    0
    %(4)
    
    
    22,5501211 Connecticut Ave, NW
    
    Washington, DC
    
    
    12/9/2010
    
    
    Office
    
    
    125,119
    
    
    
    100
    %
    
    
    100
    %
    
    
    49,500440 First Street, NW
    
    Washington, DC
    
    
    12/28/2010
    
    
    Office
    
    
    105,000
    
    
    
    0
    %(5)
    
    
    0
    %(5)
    
    
    15,311
    (5)7458 Candlewood Road
    
    Hanover, MD
    
    
    12/29/2010
    
    
    Industrial
    
    
    295,673
    
    
    
    99
    %
    
    
    92
    %
    
    
    22,641
    (6)1,493,381
    
    
    
    
    
    
    
    
    
    
    $
    286,1612009:Cloverleaf Center
    
    Germantown, MD
    
    
    10/08/2009
    
    
    Office park
    
    
    173,655
    
    
    
    100
    %
    
    
    100
    %
    
    $
    25,310
    (7)Ashburn Center
    
    Ashburn, VA
    
    
    12/31/2009
    
    
    Business park
    
    
    194,183
    
    
    
    100
    %
    
    
    76
    %
    
    
    14,688367,838
    
    
    
    
    
    
    
    
    
    
    $
    39,998
 (1)
    
    The property was vacant at acquisition. The Company began redevelopment efforts and
plans to fully renovate the building.(2)
    
    The Company issued a new $4.3 million mortgage loan to partial fund the acquisition
of the property.(3)
    
    The property was acquired through a consolidated joint venture in which the Company
has a 97% economic interest.(4)
    
    The property was vacant at acquisition.(5)
    
    The property was vacant at acquisition. The Company intends to complete
redevelopment of the property and may add an additional 13,000 square feet. On January 11,
2011, the Company purchased the fee interest in the propertys ground lease for $8.0 million
of available cash. Also, on February 24, 2011, the Company acquired transferable development
rights for 30 thousand square feet for approximately $0.3 million.(6)
    
    The Company assumed two mortgage loans totaling $14.7 million to partially fund the
acquisition.(7)
    
    The Company issued a new $17.5 million mortgage to partially fund the acquisition.
  Fair Value Measurements
  19




---



##### 



2010
    
    
    2009Land
    
    $
    87,786
    
    
    $
    9,779Acquired tenant improvements
    
    
    9,858
    
    
    
    3,285Building and improvements
    
    
    151,190
    
    
    
    20,382Construction in progress
    
    
    15,311
    
    
    
    In-place leases
    
    
    15,736
    
    
    
    5,578Acquired leasing commissions
    
    
    4,386
    
    
    
    798Customer relationships
    
    
    651
    
    
    
    Above-market leases acquired
    
    
    712
    
    
    
    420Total assets acquired
    
    
    285,630
    
    
    
    40,242Below-market leases acquired
    
    
    (1,855
    )
    
    
    (244
    )Debt assumed
    
    
    (14,699
    )
    
    
    Acquisition related contingent consideration
    
    
    
    
    
    
    (688
    )Net assets acquired
    
    $
    269,076
    
    
    $
    39,310
    Pro Forma Financial Information
  2010
    
    
    2009Pro forma total revenues
    
    $
    152,773
    
    
    $
    155,107Pro forma net loss
    
    $
    (3,883
    )
    
    $
    (7,295
    )Pro forma net loss per share  basic and diluted
    
    $
    (0.08
    )
    
    $
    (0.15
    )
  20




---



##### 



(5) Investment in Affiliates
  2010Ownership
    
    
    CompanyInterest
    
    
    Investment
    
    
    Debt
    
    
    Recourse Debt1750 H Street, NW
    
    
    50
    %
    
    $
    16,830
    
    
    $
    31,287
    
    
    $
    Aviation Business Park
    
    
    50
    %
    
    
    4,190
    
    
    
    
    
    
    
    RiversPark I and II
    
    
    25
    %
    
    
    2,701
    
    
    
    28,000
    
    
    
    7,000$
    23,721
    
    
    $
    59,287
    
    
    $
    7,000
 2009Ownership
    
    
    CompanyInterest
    
    
    Investment
    
    
    Debt
    
    
    Recourse DebtRiversPark II
    
    
    25
    %
    
    $
    1,819
    
    
    $
    18,144
    
    
    $
    4,536
      21




---



##### 



2010
    
    
    2009Assets:Rental property, net
    
    $
    104,559
    
    
    $
    25,037Cash and cash equivalents
    
    
    1,706
    
    
    
    357Other assets
    
    
    11,442
    
    
    
    1,879Total assets
    
    
    117,707
    
    
    
    27,273Liabilities:Mortgage loans
    
    
    59,914
    
    
    
    18,144Other liabilities
    
    
    4,316
    
    
    
    1,443Total liabilities
    
    
    64,230
    
    
    
    19,587Net assets
    
    $
    53,477
    
    
    $
    7,686
  The period fromMarch 17, 2009Year Ended
    
    
    throughDecember 31, 2010
    
    
    December 31, 2009Total revenues
    
    $
    5,923
    
    
    $
    2,121Total operating expenses
    
    
    (1,547
    )
    
    
    (458
    )Net operating income
    
    
    4,376
    
    
    
    1,663Depreciation and amortization
    
    
    (2,695
    )
    
    
    (1,087
    )Interest expense, net
    
    
    (2,160
    )
    
    
    (955
    )Income tax expense
    
    
    (24
    )
    
    
    Net loss
    
    $
    (503
    )
    
    $
    (379
    )
 (6) Note Receivable
   22




---



##### 



(7) Intangible Assets
  2010
    
    
    2009Gross
    
    
    Accumulated
    
    
    Net
    
    
    Gross
    
    
    Accumulated
    
    
    NetIntangibles
    
    
    Amortization
    
    
    Intangibles
    
    
    Intangibles
    
    
    Amortization
    
    
    IntangiblesIn-place leases
    
    $
    53,974
    
    
    $
    (29,548
    )
    
    $
    24,426
    
    
    $
    42,097
    
    
    $
    (27,706
    )
    
    $
    14,391Customer relationships
    
    
    884
    
    
    
    (248
    )
    
    
    636
    
    
    
    235
    
    
    
    (184
    )
    
    
    51Leasing commissions
    
    
    7,906
    
    
    
    (2,039
    )
    
    
    5,867
    
    
    
    3,887
    
    
    
    (1,562
    )
    
    
    2,325Deferred market rent asset
    
    
    2,525
    
    
    
    (1,003
    )
    
    
    1,522
    
    
    
    3,059
    
    
    
    (1,823
    )
    
    
    1,236Goodwill
    
    
    2,100
    
    
    
    
    
    
    
    2,100
    
    
    
    2,100
    
    
    
    
    
    
    
    2,100$
    67,389
    
    
    $
    (32,838
    )
    
    $
    34,551
    
    
    $
    51,378
    
    
    $
    (31,275
    )
    
    $
    20,103Deferred market rent
liability
    
    $
    11,822
    
    
    $
    (5,790
    )
    
    $
    6,032
    
    
    $
    13,973
    
    
    $
    (7,965
    )
    
    $
    6,008
   2011
    
    $
    6,0752012
    
    
    4,8932013
    
    
    4,0082014
    
    
    3,3232015
    
    
    2,746Thereafter
    
    
    5,374$
    26,419
 (8) Income Taxes
   23




---



##### 



(9) Discontinued Operations
       24




---



##### 



2010
    
    
    2009
    
    
    2008Revenues
    
    $
    1,743
    
    
    $
    3,229
    
    
    $
    5,868Property operating expenses
    
    
    (734
    )
    
    
    (1,487
    )
    
    
    (1,780
    )Depreciation and amortization
    
    
    (597
    )
    
    
    (698
    )
    
    
    (1,427
    )Interest expense, net of interest income
    
    
    6
    
    
    
    14
    
    
    
    (544
    )Impairment of real estate assets
    
    
    (4,013
    )
    
    
    (2,541
    )
    
    
    (Loss) income from operations of disposed
properties
    
    
    (3,595
    )
    
    
    (1,483
    )
    
    
    2,117Gain on sale of real estate properties
    
    
    557
    
    
    
    
    
    
    
    14,274Net (loss) income from discontinued operations
    
    $
    (3,038
    )
    
    $
    (1,483
    )
    
    $
    16,391
 (10) Debt
  2010
    
    
    2009Mortgage loans, effective interest rates ranging from 4.26% to 7.28%, maturing at various dates
through June 2021
    
    $
    319,096
    
    
    $
    301,463Exchangeable senior notes, net of discounts, effective interest rate of 5.84%, maturing December
2011(1)
    
    
    29,936
    
    
    
    48,718Series A senior notes, effective interest rate of 6.41%, maturing June 2013
    
    
    37,500
    
    
    
    37,500Series B senior notes, effective interest rate of 6.55%, maturing June 2016
    
    
    37,500
    
    
    
    37,500Secured term loan, effective interest rate of LIBOR plus 2.50%, maturing January 2014(2)
    
    
    40,000
    
    
    
    40,000Secured term loan, effective interest rate of LIBOR plus 2.50%, maturing August 2011
    
    
    20,000
    
    
    
    20,000Secured term loan, effective interest rate of LIBOR plus 3.50%, maturing May 2011(3)
    
    
    50,000
    
    
    
    Unsecured revolving credit facility, effective interest rate of LIBOR plus 3.00%, maturing January
2014(4)
    
    
    191,000
    
    
    
    159,900$
    725,032
    
    
    $
    645,081
 (1)
    
    The principal balance of the Exchangeable Senior Notes was $30.4
million and $50.5 million at December 31, 2010 and 2009, respectively.(2)
    
    The loan is divided into four $10 million loans, with their maturities
staggered in one-year intervals beginning January 15, 2011 and ending on January 15, 2014. The
Company repaid $10 million of the outstanding loan balance in January 2011. Interest on the
loan is LIBOR plus 250 basis points, which increases by 100 basis points each year beginning
on January 1, 2011, to a maximum of 550 basis points.(3)
    
    In February 2011, the Company extended the maturity date of the loan to
May 2011.(4)
    
    The unsecured revolving credit facility matures in January 2013 with a
one-year extension at the Companys option, which it intends to exercise.
  25




---



##### 



(a) Mortgage Loans
  EffectiveContractual
    
    
    Interest
    
    
    Maturity
    
    
    December 31,
    
    
    December 31,Encumbered Property
    
    Interest Rate
    
    
    Rate
    
    
    Date
    
    
    2010
    
    
    20094212 Tech Court(1)
    
    
    8.53
    %
    
    
    8.53
    %
    
    
    
    
    
    $
    
    
    
    $
    1,665Park Central II(2)
    
    
    8.32
    %
    
    
    5.66
    %
    
    
    
    
    
    
    
    
    
    
    5,591Enterprise Center (3)
    
    
    8.03
    %
    
    
    5.20
    %
    
    
    
    
    
    
    
    
    
    
    17,393Indian Creek Court (4)
    
    
    7.80
    %
    
    
    5.90
    %
    
    January 2011
    
    
    
    11,982
    
    
    
    12,413403/405 Glenn Drive
    
    
    7.60
    %
    
    
    5.50
    %
    
    July 2011
    
    
    
    7,960
    
    
    
    8,2524612 Navistar Drive (5)
    
    
    7.48
    %
    
    
    5.20
    %
    
    July 2011
    
    
    
    12,189
    
    
    
    12,672RiversPark I (6)
    
    LIBOR+2.50%
    
    
    5.97
    %
    
    September 2011
    
    
    
    
    
    
    
    9,856Campus at Metro Park (5)
    
    
    7.11
    %
    
    
    5.25
    %
    
    February 2012
    
    
    
    22,556
    
    
    
    23,3761434 Crossways Blvd Building II
    
    
    7.05
    %
    
    
    5.38
    %
    
    August 2012
    
    
    
    9,484
    
    
    
    9,852Crossways Commerce Center
    
    
    6.70
    %
    
    
    6.70
    %
    
    October 2012
    
    
    
    24,179
    
    
    
    24,607Newington Business Park Center
    
    
    6.70
    %
    
    
    6.70
    %
    
    October 2012
    
    
    
    15,252
    
    
    
    15,522Prosperity Business Center
    
    
    6.25
    %
    
    
    5.75
    %
    
    January 2013
    
    
    
    3,502
    
    
    
    3,627Aquia Commerce Center I
    
    
    7.28
    %
    
    
    7.28
    %
    
    February 2013
    
    
    
    353
    
    
    
    4861434 Crossways Blvd Building I
    
    
    6.25
    %
    
    
    5.38
    %
    
    March 2013
    
    
    
    8,225
    
    
    
    8,493Linden Business Center
    
    
    6.01
    %
    
    
    5.58
    %
    
    October 2013
    
    
    
    7,080
    
    
    
    7,224Owings Mills Business Center
    
    
    5.85
    %
    
    
    5.75
    %
    
    March 2014
    
    
    
    5,448
    
    
    
    5,552Annapolis Commerce Park East
    
    
    5.74
    %
    
    
    6.25
    %
    
    June 2014
    
    
    
    8,491
    
    
    
    8,613Cloverleaf Center
    
    
    6.75
    %
    
    
    6.75
    %
    
    October 2014
    
    
    
    17,204
    
    
    
    17,490Plaza 500, Van Buren Business
Park, Rumsey Center, Snowden
Center, Greenbrier Technology
Center II, Norfolk Business
Center, Northridge I & II and
15395 John Marshall Highway
    
    
    5.19
    %
    
    
    5.19
    %
    
    August 2015
    
    
    
    99,151
    
    
    
    99,625Hanover Business Center:Building D
    
    
    8.88
    %
    
    
    6.63
    %
    
    August 2015
    
    
    
    642
    
    
    
    756Building C
    
    
    7.88
    %
    
    
    6.63
    %
    
    December 2017
    
    
    
    1,041
    
    
    
    1,154Chesterfield Business Center:Buildings C,D,G and H
    
    
    8.50
    %
    
    
    6.63
    %
    
    August 2015
    
    
    
    1,681
    
    
    
    1,972Buildings A,B,E and F
    
    
    7.45
    %
    
    
    6.63
    %
    
    June 2021
    
    
    
    2,398
    
    
    
    2,5407458 Candlewood Road  Note 1
    
    
    6.57
    %
    
    
    6.30
    %
    
    January 2016
    
    
    
    9,938
    
    
    
    7458 Candlewood Road  Note 2
    
    
    4.67
    %
    
    
    6.04
    %
    
    January 2016
    
    
    
    4,761
    
    
    
    Gateway Centre, Building I
    
    
    7.35
    %
    
    
    5.88
    %
    
    November 2016
    
    
    
    1,189
    
    
    
    1,340500 First Street, NW
    
    
    5.72
    %
    
    
    5.79
    %
    
    July 2020
    
    
    
    38,793
    
    
    
    Battlefield Corporate Center
    
    
    4.26
    %
    
    
    4.40
    %
    
    November 2020
    
    
    
    4,289
    
    
    
    Airpark Business Center
    
    
    7.45
    %
    
    
    6.63
    %
    
    June 2021
    
    
    
    1,308
    
    
    
    1,392Total Mortgage Debt
    
    
    
    
    
    
    5.71
    %(7)
    
    
    
    
    
    $
    319,096
    
    
    $
    301,463
 
 (1)
    
    The loan was repaid in June 2010.(2)
    
    The loan was repaid in November 2010.(3)
    
    The loan was repaid in December 2010.(4)
    
    The loan was repaid in January 2011.(5)
    
    The maturity date presented for these loans represents the anticipated
repayment date of the loans, after which date the interest rates on the loans will increase to
a predetermined amount identified in the debt agreement. The effective interest rate was
calculated based on the anticipated period the debt is expected to be outstanding.(6)
    
    On January 1, 2010, the Company deconsolidated RiversPark I and,
therefore, the assets and liabilities, which include $9.9 million of mortgage debt, and the
operating results of RiversPark I, are no longer included in the Companys consolidated
financial statements. For more information see footnote 5, Investment in Affiliates.(7)
    
    Weighted average interest rate on total mortgage debt.
  26




---



##### 



EffectiveMonth
    
    Year
    
    
    Property
    
    
    Interest Rate
    
    
    AmountJanuary
    
    
    2011
    
    
    Indian Creek Court
    
    
    5.90
    %
    
    $
    11,982December
    
    
    2010
    
    
    Enterprise Center
    
    
    5.20
    %
    
    
    16,712November
    
    
    2010
    
    
    Park Central II
    
    
    5.66
    %
    
    
    5,305June
    
    
    2010
    
    
    4212 Tech Court
    
    
    8.53
    %
    
    
    1,654November
    
    
    2009
    
    
    Park Central I
    
    
    5.66
    %
    
    
    4,540October
    
    
    2009
    
    
    4200 Tech Court
    
    
    8.07
    %
    
    
    1,706May
    
    
    2009
    
    
    Glen Dale Business Center
    
    
    5.13
    %
    
    
    8,033$
    49,932
    27




---



##### 



Non-Financial Covenants in Mortgage Loan Documents
  (b) Exchangeable Senior Notes
   28




---



##### 



2010
    
    
    2009Principal amount
    
    $
    30,450
    
    
    $
    50,500Unamortized discount
    
    
    (514
    )
    
    
    (1,782
    )$
    29,936
    
    
    $
    48,718Equity component
    
    $
    8,696
    
    
    $
    8,696
  2010
    
    
    2009
    
    
    2008Contractual cash interest
    
    $
    1,609
    
    
    $
    2,484
    
    
    $
    4,018Amortization of the discount on the
liability component
    
    
    540
    
    
    
    866
    
    
    
    1,385Amortization of the issuance discount
    
    
    175
    
    
    
    280
    
    
    
    448
 (c) Senior Notes
   29




---



##### 



(d) Secured Term Loans
     (e) Unsecured Revolving Credit Facility
   30




---



##### 



(f) Interest Rate Swap Agreements
    Aggregate Debt Maturities
  2011(1)
    
    $
    149,3482012
    
    
    87,5522013
    
    
    66,1982014(2)
    
    
    234,3242015
    
    
    108,451Thereafter
    
    
    79,673725,546Discount on Exchangeable Senior Notes
    
    
    (514
    )$
    725,032
 (1)
    
    In January 2011, the Company repaid the $12.0 million mortgage loan encumbering
Indian Creek Court and repaid a $10.0 million principal payment on one of the secured term
loans.(2)
    
    The Companys unsecured revolving credit facility matures in January 2013 and
provides for a one-year extension of the maturity date at the Companys option, which it
intends to exercise. The table above assumes the Company exercises the one-year extension.
  31




---



##### 



(11) Derivative Instruments and Comprehensive (Loss) Income
  
    
    available interest rate hedging may not correspond directly with the interest rate risk
for which the Company seeks protection;
    
    the duration of the hedge may not match the duration of the related liability;
    
    the party owing money in the hedging transaction may default on its obligation to pay;
and
    
    the credit quality of the party owing money on the hedge may be downgraded to such an
extent that it impairs the Companys ability to sell or assign its side of the hedging
transaction.
  Interest RateContractual
    
    
    Fixed EffectiveTransaction Date
    
    
    Maturity Date
    
    
    Amount
    
    
    Component
    
    
    Interest RateConsolidated:
    
    July 2010
    
    January 2014
    
    $
    50,000
    
    
    LIBOR
    
    
    1.474
    %Unconsolidated:
    
    September 2008
    
    September 2011
    
    
    28,000
    (1)
    
    LIBOR
    
    
    3.47
    %
 (1)
    
    The Company remains liable, in the event of default by the joint venture, for
$7.0 million, or 25% of the total, which reflects its ownership percentage in the joint
venture.
   2010
    
    
    2009
    
    
    2008Net (loss) income
    
    $
    (11,675
    )
    
    $
    4,056
    
    
    $
    20,141Unrealized gain (loss) on derivative instruments
    
    
    1,067
    
    
    
    1,314
    
    
    
    (3,931
    )Total comprehensive (loss) income
    
    
    (10,608
    )
    
    
    5,370
    
    
    
    16,210Comprehensive loss (income) attributable to
noncontrolling interests
    
    
    209
    
    
    
    (156
    )
    
    
    (507
    )Comprehensive (loss) income attributable to
common shareholders
    
    $
    (10,399
    )
    
    $
    5,214
    
    
    $
    15,703
 (12) Fair Value Measurements
   32




---



##### 



Balance atDecember 31,2010
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Non-recurring Measurements:Impaired real estate and intangible assets
    
    $
    10,950
    
    
    $
    
    
    
    $
    10,950
    
    
    $
    Recurring Measurements:Derivative instrument-swap agreement
    
    
    396
    
    
    
    
    
    
    
    396
    
    
    
    Contingent consideration related to
acquisition of property
    
    
    1,398
    
    
    
    
    
    
    
    
    
    
    
    1,398
 Balance atDecember 31,2009
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Non-recurring Measurements:Impaired real estate asset
    
    $
    8,175
    
    
    $
    
    
    
    $
    8,175
    
    
    $
    Recurring Measurements:Derivative instrument-swap agreements
    
    
    1,741
    
    
    
    
    
    
    
    1,741
    
    
    
    Contingent consideration related to
acquisition of property
    
    
    688
    
    
    
    
    
    
    
    
    
    
    
    688
  33




---



##### 



Impairment of Real Estate and Intangible Assets
     Interest Rate Derivatives
     34




---



##### 



Contingent Consideration
   Balance at December 31, 2009
    
    $
    688Contingent consideration charge recognized in earnings
    
    
    710Balance at December 31, 2010
    
    $
    1,398
  Financial Instruments
  2010
    
    
    2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    ValueMortgage debt
    
    $
    319,096
    
    
    $
    316,169
    
    
    $
    301,463
    
    
    $
    289,679Exchangeable senior notes(1)
    
    
    29,936
    
    
    
    30,412
    
    
    
    48,718
    
    
    
    48,164Series A senior notes
    
    
    37,500
    
    
    
    37,850
    
    
    
    37,500
    
    
    
    37,118Series B senior notes
    
    
    37,500
    
    
    
    37,251
    
    
    
    37,500
    
    
    
    36,146Secured term loans
    
    
    110,000
    
    
    
    109,976
    
    
    
    60,000
    
    
    
    54,390Unsecured revolving credit facility
    
    
    191,000
    
    
    
    191,073
    
    
    
    159,900
    
    
    
    143,953Total
    
    $
    725,032
    
    
    $
    722,731
    
    
    $
    645,081
    
    
    $
    609,450
 (1)
    
    The face value of the notes were $30.4 million and $50.5 million at
December 31, 2010 and 2009, respectively.
  35




---



##### 



(13) Commitments and Contingencies
 (a) Operating Leases
  % of square feetFuture
    
    
    under leasesminimum rents
    
    
    expiring2011
    
    $
    123,503
    
    
    
    20
    %2012
    
    
    110,502
    
    
    
    18
    %2013
    
    
    95,614
    
    
    
    16
    %2014
    
    
    72,309
    
    
    
    12
    %2015
    
    
    58,358
    
    
    
    10
    %Thereafter
    
    
    142,118
    
    
    
    24
    %$
    602,404
    
    
    
    100
    %
  Related Party Transaction
   Futureminimum rentexpense, net2011
    
    $
    6192012
    
    
    534$
    1,153
 (b) Legal Proceedings
   36




---



##### 



(c) Guarantees
  (d) Contingent Consideration
 Acquisitions,
 Investment in Affiliates
 (e) Capital Commitments
    (f) Deposits
   37




---



##### 



(g) Insurance
  (14) Related Party Transaction
  (15) Equity
       38




---



##### 



RedeemableFirst Potomac
    
    
    noncontrollingRealty Trust
    
    
    interestsBalance, December 31, 2008
    
    $
    365,293
    
    
    $
    10,627Net income
    
    
    3,932
    
    
    
    124Changes in ownership, net(1)
    
    
    33,781
    
    
    
    (480
    )Distributions to owners
    
    
    (26,529
    )
    
    
    (718
    )Other comprehensive income
    
    
    1,282
    
    
    
    32Balance, December 31, 2009
    
    
    377,759
    
    
    
    9,585Net loss
    
    
    (11,443
    )
    
    
    (230
    )Changes in ownership, net(1)
    
    
    279,497
    
    
    
    7,375Distributions to owners
    
    
    (28,797
    )
    
    
    (631
    )Other comprehensive income
    
    
    1,044
    
    
    
    23Balance, December 31, 2010
    
    $
    618,060
    
    
    $
    16,122
 (1)
    
    Includes a joint venture partners portion of accumulated other
comprehensive loss related to RiversPark II and RiversPark I, which were
deconsolidated from the Companys consolidated financial statements on March 17, 2009
and January 1, 2010, respectively. (16) Benefit Plans
 (a) Share-based compensation
   Stock Options Summary
   39




---



##### 



WeightedAverage
    
    
    Weighted Average
    
    
    AggregateExercise
    
    
    Remaining
    
    
    IntrinsicShares
    
    
    Price
    
    
    Contractual Term
    
    
    ValueBalance, December 31, 2007
    
    
    637,470
    
    
    $
    19.11
    
    
    6.6 years
    
    $
    815,455Granted
    
    
    99,500
    
    
    
    17.24Exercised
    
    
    (2,500
    )
    
    
    15.00Forfeited
    
    
    (51,001
    )
    
    
    23.86Balance, December 31, 2008
    
    
    683,469
    
    
    
    18.49
    
    
    5.9 years
    
    $
    Granted
    
    
    103,250
    
    
    
    9.30Forfeited
    
    
    (35,315
    )
    
    
    17.74Balance, December 31, 2009
    
    
    751,404
    
    
    
    17.27
    
    
    5.4 years
    
    $
    307,380Granted
    
    
    106,750
    
    
    
    12.57Exercised
    
    
    (4,931
    )
    
    
    9.30Forfeited
    
    
    (41,643
    )
    
    
    16.92Balance, December 31, 2010
    
    
    811,580
    
    
    $
    16.72
    
    
    4.8 years
    
    $
    1,641,148Exercisable at December 31:2010
    
    
    646,804
    
    
    $
    17.78
    
    
    3.9 years
    
    $
    889,5762009
    
    
    593,369
    
    
    $
    18.13
    
    
    4.6 years
    
    $
    2008
    
    
    545,965
    
    
    $
    17.77
    
    
    5.3 years
    
    $
    Options expected to vest,
December 31, 2010
    
    
    147,664
    
    
    $
    12.28
    
    
    8.4 years
    
    $
    687,151
  Options Outstanding
    
    
    Options ExercisableWeighted Average
    
    
    Weighted
    
    
    
    
    
    
    WeightedYear
    
    Range of
    
    
    
    
    
    
    Remaining
    
    
    Average
    
    
    
    
    
    
    AverageIssued
    
    Exercise Prices
    
    
    Shares
    
    
    Contractual Life
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise Price2003
    
    $
    15.00
    
    
    
    343,469
    
    
    2.7 years
    
    $
    15.00
    
    
    
    343,469
    
    
    $
    15.002004
    
    
    18.70  19.78
    
    
    
    65,000
    
    
    3.4 years
    
    
    19.03
    
    
    
    65,000
    
    
    
    19.032005
    
    
    22.42  22.54
    
    
    
    68,750
    
    
    4.0 years
    
    
    22.46
    
    
    
    68,750
    
    
    
    22.462006
    
    
    26.60
    
    
    
    33,450
    
    
    5.0 years
    
    
    26.60
    
    
    
    33,450
    
    
    
    26.602007
    
    
    29.11  29.24
    
    
    
    54,063
    
    
    6.0 years
    
    
    29.12
    
    
    
    50,925
    
    
    
    29.122008
    
    
    14.32  17.29
    
    
    
    71,687
    
    
    7.0 years
    
    
    17.23
    
    
    
    50,385
    
    
    
    17.232009
    
    
    9.30
    
    
    
    81,911
    
    
    8.0 years
    
    
    9.30
    
    
    
    34,825
    
    
    
    9.302010
    
    
    12.57
    
    
    
    93,250
    
    
    9.0 years
    
    
    12.57
    
    
    
    
    
    
    
    811,580
    
    
    
    
    
    
    
    
    
    
    
    646,804
   40




---



##### 



2010
    
    
    2009
    
    
    2008Risk-free interest rate
    
    
    2.69
    %
    
    
    1.55
    %
    
    
    3.45
    %Expected volatility
    
    
    46.6
    %
    
    
    39.6
    %
    
    
    24.6
    %Expected dividend yield
    
    
    5.15
    %
    
    
    5.54
    %
    
    
    4.04
    %Weighted average expected life of options
    
    5 years
    
    
    5 years
    
    
    5 years
  Option Exercises
   Non-vested share awards
     41




---



##### 



Weighted AverageNon-vested
    
    
    Grant DateShares
    
    
    Fair ValueNon-vested at December 31, 2007
    
    $
    175,091
    
    
    $
    23.26Granted
    
    
    198,367
    
    
    
    9.46Vested
    
    
    (19,060
    )
    
    
    26.69Non-vested at December 31, 2008
    
    
    354,398
    
    
    
    15.35Granted
    
    
    437,976
    
    
    
    9.03Vested
    
    
    (26,060
    )
    
    
    20.93Non-vested at December 31, 2009
    
    
    766,314
    
    
    
    11.55Granted
    
    
    217,742
    
    
    
    12.91Vested
    
    
    (272,024
    )
    
    
    12.01Expired
    
    
    (9,279
    )
    
    
    16.09Non-vested at December 31, 2010
    
    
    702,753
    
    
    
    11.76
   2010
    
    
    2009
    
    
    2008Risk-free interest rate
    
    
    3.6
    %
    
    
    3.3
    %
    
    
    3.2
    %Volatility
    
    
    42.4
    %
    
    
    43.5
    %
    
    
    26.0
    %
  (b) 401(k) Plan
   42




---



##### 



(c) Employee Share Purchase Plan
  (17) Subsequent Events
   (18) Segment Information
    43




---



##### 



2010Maryland
    
    
    Northern Virginia(1)
    
    
    Southern Virginia
    
    
    ConsolidatedNumber of buildings
    
    
    71
    
    
    
    55
    
    
    
    55
    
    
    
    181Square feet
    
    
    4,052,196
    
    
    
    3,769,139
    
    
    
    5,359,763
    
    
    
    13,181,098Total revenues
    
    $
    44,324
    
    
    $
    45,354
    
    
    $
    48,869
    
    
    $
    138,547Property operating expense
    
    
    (11,258
    )
    
    
    (10,425
    )
    
    
    (12,031
    )
    
    
    (33,714
    )Real estate taxes and insurance
    
    
    (4,348
    )
    
    
    (4,518
    )
    
    
    (4,088
    )
    
    
    (12,954
    )Total property operating income
    
    $
    28,718
    
    
    $
    30,411
    
    
    $
    32,750
    
    
    
    91,879Depreciation and amortization
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42,613
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,523
    )Acquisition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,169
    )Other expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,211
    )Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,038
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (11,675
    )Total assets(2)
    
    $
    491,566
    
    
    $
    488,592
    
    
    $
    338,319
    
    
    $
    1,396,682Capital expenditures(3)
    
    $
    5,765
    
    
    $
    10,046
    
    
    $
    8,579
    
    
    $
    24,710
 2009Maryland
    
    
    Northern Virginia
    
    
    Southern Virginia
    
    
    ConsolidatedNumber of buildings
    
    
    76
    
    
    
    51
    
    
    
    54
    
    
    
    181Square feet
    
    
    3,784,099
    
    
    
    3,016,035
    
    
    
    5,265,457
    
    
    
    12,065,591Total revenues
    
    $
    42,499
    
    
    $
    39,837
    
    
    $
    48,312
    
    
    $
    130,648Property operating expense
    
    
    (11,118
    )
    
    
    (9,359
    )
    
    
    (11,673
    )
    
    
    (32,150
    )Real estate taxes and insurance
    
    
    (4,120
    )
    
    
    (4,284
    )
    
    
    (4,262
    )
    
    
    (12,666
    )Total property operating income
    
    $
    27,261
    
    
    $
    26,194
    
    
    $
    32,377
    
    
    
    85,832Depreciation and amortization
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,174
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,219
    )Acquisition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,076
    )Other expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,824
    )Loss from discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,483
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,056Total assets(2)
    
    $
    411,083
    
    
    $
    305,633
    
    
    $
    317,695
    
    
    $
    1,071,173Capital expenditures(3)
    
    $
    5,276
    
    
    $
    9,094
    
    
    $
    8,693
    
    
    $
    23,128
  44




---



##### 



2008Maryland
    
    
    Northern Virginia
    
    
    Southern Virginia
    
    
    ConsolidatedNumber of buildings
    
    
    75
    
    
    
    47
    
    
    
    54
    
    
    
    176Square feet
    
    
    3,754,980
    
    
    
    2,814,799
    
    
    
    5,257,728
    
    
    
    11,827,507Total revenues
    
    $
    39,048
    
    
    $
    36,542
    
    
    $
    45,308
    
    
    $
    120,898Property operating expense
    
    
    (8,061
    )
    
    
    (7,766
    )
    
    
    (10,670
    )
    
    
    (26,497
    )Real estate taxes and insurance
    
    
    (3,608
    )
    
    
    (4,086
    )
    
    
    (4,165
    )
    
    
    (11,859
    )Total property operating income
    
    $
    27,379
    
    
    $
    24,690
    
    
    $
    30,473
    
    
    
    82,542Depreciation and amortization
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,260
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,938
    )Other expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,594
    )Income from discontinued
Operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,391Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    20,141Total assets(2)
    
    $
    433,269
    
    
    $
    282,690
    
    
    $
    311,466
    
    
    $
    1,077,951Capital expenditures(3)
    
    $
    11,983
    
    
    $
    11,565
    
    
    $
    13,009
    
    
    $
    36,830
 (1)
    
    Includes 500 First Street, NW, 1211 Connecticut Ave, NW and 440 First
Street, NW, which were acquired in 2010 and located in Washington, D.C.(2)
    
    Corporate assets not allocated to any of our reportable segments totaled
$78,205, $36,762 and $50,526 at December 31, 2010, 2009 and 2008, respectively.(3)
    
    Capital expenditures for corporate assets not allocated to any of our reportable
segments totaled $320, $65 and $273 at December 31, 2010, 2009 and 2008, respectively. (19) Quarterly Financial Information

(unaudited)
 2010(1)First
    
    
    Second
    
    
    Third
    
    
    Fourth(amounts in thousands, except per share amounts)
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterRevenues
    
    $
    34,773
    
    
    $
    33,125
    
    
    $
    34,282
    
    
    $
    36,367Operating expenses
    
    
    27,635
    
    
    
    25,915
    
    
    
    25,495
    
    
    
    35,024(Loss) income from continuing operations
    
    
    (1,650
    )
    
    
    (619
    )
    
    
    361
    
    
    
    (6,729
    )(Loss) income from discontinued operations
    
    
    (558
    )
    
    
    652
    
    
    
    (3,296
    )
    
    
    164Less: Net loss (income) attributable to
noncontrolling interests
    
    
    49
    
    
    
    (1
    )
    
    
    55
    
    
    
    129Net (loss) income attributable to common
shareholders
    
    $
    (2,159
    )
    
    $
    32
    
    
    $
    (2,880
    )
    
    $
    (6,436
    )Net loss attributable to common
shareholders per share  basic and diluted:(Loss) income from continuing operations
    
    $
    (0.06
    )
    
    $
    (0.02
    )
    
    $
    0.01
    
    
    $
    (0.15
    )(Loss) income from discontinued operations
    
    
    (0.02
    )
    
    
    0.02
    
    
    
    (0.09
    )
    
    
    Net loss
    
    $
    (0.08
    )
    
    $
    
    
    
    $
    (0.08
    )
    
    $
    (0.15
    )
  45




---



##### 



2009(1)First
    
    
    Second
    
    
    Third
    
    
    Fourth(amounts in thousands, except per share amounts)
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterRevenues
    
    $
    32,785
    
    
    $
    31,720
    
    
    $
    32,086
    
    
    $
    34,057Operating expenses
    
    
    23,991
    
    
    
    23,596
    
    
    
    24,647
    
    
    
    27,051Income (loss) from continuing operations
    
    
    4,935
    
    
    
    1,447
    
    
    
    257
    
    
    
    (1,100
    )Income (loss) from discontinued operations
    
    
    203
    
    
    
    205
    
    
    
    367
    
    
    
    (2,258
    )Less: Net (income) loss attributable to
noncontrolling interests
    
    
    (141
    )
    
    
    (45
    )
    
    
    (16
    )
    
    
    78Net income (loss) attributable to common
shareholders
    
    $
    4,997
    
    
    $
    1,607
    
    
    $
    608
    
    
    $
    (3,280
    )Net income (loss) attributable to common
shareholders per share  basic and diluted:Income (loss) from continuing operations
    
    $
    0.17
    
    
    $
    0.05
    
    
    $
    0.01
    
    
    $
    (0.04
    )Income (loss) from discontinued operations
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    (0.08
    )Net income (loss)
    
    $
    0.18
    
    
    $
    0.06
    
    
    $
    0.02
    
    
    $
    (0.12
    )
 (1)
    
    These figures are rounded to the nearest thousand, which may impact
crossfooting in reconciling to full year totals.   46




---



##### 



SCHEDULE III
FIRST POTOMAC REALTY TRUST
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2010
 Encumbrances atProperty
    
    Location
    
    Date Acquired
    
    Property Type(1)
    
    December 31, 2010MarylandRumsey Center
    
    Columbia
    
    Oct-02
    
    BP
    
    $
    9,071Snowden Center
    
    Columbia
    
    Oct-02
    
    BP
    
    
    12,3136900 English Muffin Way
    
    Frederick
    
    Jul-04
    
    I
    
    
    Gateway Center
    
    Gaithersburg
    
    Jul-04
    
    Office
    
    
    Gateway West
    
    Westminster
    
    Jul-04
    
    OP
    
    
    4451 Georgia Pacific Boulevard
    
    Frederick
    
    Jul-04
    
    I
    
    
    20270 Goldenrod Lane
    
    Germantown
    
    Jul-04
    
    Office
    
    
    Girard Business Center
    
    Gaithersburg
    
    Jul-04
    
    BP
    
    
    Girard Place
    
    Gaithersburg
    
    Jul-04
    
    BP
    
    
    Patrick Center
    
    Frederick
    
    Jul-04
    
    Office
    
    
    Old Courthouse Square
    
    Martinsburg, WV
    
    Jul-04
    
    Retail
    
    
    15 Wormans Mill Court
    
    Frederick
    
    Jul-04
    
    OP
    
    
    West Park
    
    Frederick
    
    Jul-04
    
    Office
    
    
    Woodlands Business Center
    
    Largo
    
    Jul-04
    
    Office
    
    
    Airpark Place
    
    Gaithersburg
    
    Aug-04
    
    BP
    
    
    4612 Navistar Drive
    
    Frederick
    
    Dec-04
    
    I
    
    
    12,189Campus at Metro Park
    
    Rockville
    
    Dec-04
    
    OP
    
    
    22,556Glenn Dale Business Center
    
    Glenn Dale
    
    May-05
    
    I
    
    
    Owings Mills Business Center
    
    Owings Mills
    
    Nov-05
    
    BP
    
    
    5,448Gateway 270
    
    Clarksburg
    
    Jul-06
    
    BP
    
    
    Indian Creek Court
    
    Beltsville
    
    Aug-06
    
    BP
    
    
    11,982Owings Mills Commerce Center
    
    Owings Mills
    
    Nov-06
    
    BP
    
    
    Ammendale Commerce Center
    
    Beltsville
    
    Mar-07
    
    BP
    
    
    Annapolis Commerce Park East
    
    Annapolis
    
    Jun-07
    
    OP
    
    
    8,491Triangle Business Center
    
    Columbia
    
    Aug-08
    
    BP
    
    
    Cloverleaf Center
    
    Germantown
    
    Oct-09
    
    OP
    
    
    17,204Redland Corporate Center
    
    Rockville
    
    Nov-10
    
    Office
    
    
    7458 Candlewood Road
    
    Hanover
    
    Dec-10
    
    I
    
    
    14,699Total:
    
    
    
    
    
    
    
    
    113,953Northern Virginia13129 Airpark Road
    
    Culpeper
    
    Dec-97
    
    I
    
    
    Plaza 500
    
    Alexandria
    
    Dec-97
    
    I
    
    
    33,640Van Buren Business Park
    
    Herndon
    
    Dec-97
    
    OP
    
    
    7,544Tech Court
    
    Chantilly
    
    Oct-98
    
    OP
    
    
    Newington Business Park
    
    Lorton
    
    Dec-99
    
    I
    
    
    15,252Interstate Plaza
    
    Alexandria
    
    Dec-03
    
    I
    
    
    Herndon Corporate Center
    
    Herndon
    
    Apr-04
    
    OP
    
    
    Aquia Commerce Center I & II
    
    Stafford
    
    Jun-04
    
    OP
    
    
    35315395 John Marshall Highway
    
    Haymarket
    
    Oct-04
    
    I
    
    
    20,523Windsor at Battlefield
    
    Manassas
    
    Dec-04
    
    OP
    
    
    Reston Business Campus
    
    Reston
    
    Mar-05
    
    OP
    
    
    Enterprise Center
    
    Chantilly
    
    Apr-05
    
    OP
    
    
    Gateway Centre
    
    Manassas
    
    Jul-05
    
    BP
    
    
    1,189403/405 Glenn Drive
    
    Sterling
    
    Oct-05
    
    BP
    
    
    7,960Linden Business Center
    
    Manassas
    
    Oct-05
    
    BP
    
    
    7,080Prosperity Business Center
    
    Merrifield
    
    Nov-05
    
    BP
    
    
    3,502Sterling Park Business Center
    
    Sterling
    
    Feb-06
    
    BP
    
    
    Davis Drive
    
    Sterling
    
    Aug-06
    
    BP
    
    
    Ashburn Center
    
    Ashburn
    
    Dec-09
    
    BP
    
    
    Three Flint Hill
    
    Oakton
    
    Apr-10
    
    Office
    
    
    500 First Street, NW
    
    Washington, DC
    
    Jun-10
    
    Office
    
    
    38,793Atlantic Corporate Park
    
    Sterling
    
    Nov-10
    
    Office
    
    
    440 First Street, NW
    
    Washington, DC
    
    Dec-10
    
    Office
    
    
    1211 Connecticut Ave, NW
    
    Washington, DC
    
    Dec-10
    
    Office
    
    
    Total:
    
    
    
    
    
    
    
    
    135,836Southern VirginiaCrossways Commerce Center
    
    Chesapeake
    
    Dec-99
    
    BP
    
    
    24,179Greenbrier Technology Center II
    
    Chesapeake
    
    Oct-02
    
    BP
    
    
    4,576Norfolk Business Center
    
    Norfolk
    
    Oct-02
    
    BP
    
    
    4,643Virginia Center
    
    Glen Allen
    
    Oct-03
    
    BP
    
    
    Crossways II
    
    Chesapeake
    
    Oct-04
    
    BP
    
    
    Norfolk Commerce Park II
    
    Norfolk
    
    Oct-04
    
    BP
    
    
    Cavalier Industrial Park
    
    Chesapeake
    
    Apr-05
    
    I
    
    
    1434 Crossways Boulevard
    
    Chesapeake
    
    Aug-05
    
    BP
    
    
    17,709Enterprise Parkway
    
    Hampton
    
    Sep-05
    
    BP
    
    
    Diamond Hill Distribution Center
    
    Chesapeake
    
    Oct-05
    
    I
    
    
    1000 Lucas Way
    
    Hampton
    
    Dec-05
    
    BP
    
    
    Rivers Bend Center
    
    Chester
    
    Jan-06
    
    I
    
    
    Northridge I&II
    
    Ashland
    
    Jan-06
    
    I
    
    
    6,841Crossways I
    
    Chesapeake
    
    Feb-06
    
    BP
    
    
    1408 Stephanie Way
    
    Chesapeake
    
    May-06
    
    BP
    
    
    Airpark Business Center
    
    Richmond
    
    Jun-06
    
    BP
    
    
    1,308Chesterfield Business Center
    
    Richmond
    
    Jun-06
    
    BP
    
    
    4,079Hanover Business Center
    
    Ashland
    
    Jun-06
    
    BP
    
    
    1,683Gateway II
    
    Norfolk
    
    Nov-06
    
    BP
    
    
    Park Central
    
    Richmond
    
    Nov-06
    
    BPGreenbrier Circle Corporate Center
    
    Chesapeake
    
    Jan-07
    
    BP
    
    
    Greenbrier Technology Center I
    
    Chesapeake
    
    Jan-07
    
    BP
    
    
    Pine Glen
    
    Richmond
    
    Feb-07
    
    BP
    
    
    Rivers Bend Center II
    
    Chester
    
    May-07
    
    I
    
    
    Battlefield Corporate Center
    
    Chesapeake
    
    Oct-10
    
    OP
    
    
    4,289Total:
    
    
    
    
    
    
    
    
    69,307Land held for future development
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    $
    319,096
  47




---



##### 



Initial Costs
    
    
    Gross Amount at End of YearBuilding and
    
    
    
    
    
    
    
    
    
    
    Building and
    
    
    
    
    
    
    AccumulatedLand
    
    
    Improvements
    
    
    Since Acquisition
    
    
    Land
    
    
    Improvements
    
    
    Total
    
    
    Depreciation$
    2,675
    
    
    $
    10,196
    
    
    $
    2,372
    
    
    $
    2,675
    
    
    $
    12,568
    
    
    $
    15,243
    
    
    $
    4,1103,404
    
    
    
    12,824
    
    
    
    3,382
    
    
    
    3,404
    
    
    
    16,206
    
    
    
    19,610
    
    
    
    4,8413,136
    
    
    
    8,642
    
    
    
    25
    
    
    
    3,136
    
    
    
    8,667
    
    
    
    11,803
    
    
    
    1,4971,715
    
    
    
    3,943
    
    
    
    166
    
    
    
    1,715
    
    
    
    4,109
    
    
    
    5,824
    
    
    
    750890
    
    
    
    6,925
    
    
    
    1,533
    
    
    
    890
    
    
    
    8,458
    
    
    
    9,348
    
    
    
    1,6813,445
    
    
    
    8,923
    
    
    
    5
    
    
    
    3,445
    
    
    
    8,928
    
    
    
    12,373
    
    
    
    1,5461,415
    
    
    
    2,060
    
    
    
    183
    
    
    
    1,415
    
    
    
    2,243
    
    
    
    3,658
    
    
    
    4194,671
    
    
    
    7,151
    
    
    
    1,506
    
    
    
    4,671
    
    
    
    8,657
    
    
    
    13,328
    
    
    
    1,7805,134
    
    
    
    9,507
    
    
    
    784
    
    
    
    5,134
    
    
    
    10,291
    
    
    
    15,425
    
    
    
    1,7451,777
    
    
    
    8,721
    
    
    
    1,183
    
    
    
    1,777
    
    
    
    9,904
    
    
    
    11,681
    
    
    
    1,6903,485
    
    
    
    12,862
    
    
    
    (3,079
    )
    
    
    2,649
    
    
    
    10,619
    
    
    
    13,268
    
    
    
    2,462545
    
    
    
    3,329
    
    
    
    41
    
    
    
    545
    
    
    
    3,370
    
    
    
    3,915
    
    
    
    625520
    
    
    
    5,177
    
    
    
    643
    
    
    
    520
    
    
    
    5,820
    
    
    
    6,340
    
    
    
    1,0821,322
    
    
    
    2,920
    
    
    
    640
    
    
    
    1,322
    
    
    
    3,560
    
    
    
    4,882
    
    
    
    6162,697
    
    
    
    7,141
    
    
    
    284
    
    
    
    2,697
    
    
    
    7,425
    
    
    
    10,122
    
    
    
    1,2803,808
    
    
    
    18,658
    
    
    
    
    
    
    
    3,808
    
    
    
    18,658
    
    
    
    22,466
    
    
    
    2,9199,220
    
    
    
    32,056
    
    
    
    43
    
    
    
    9,220
    
    
    
    32,099
    
    
    
    41,319
    
    
    
    5,7493,369
    
    
    
    14,504
    
    
    
    1,612
    
    
    
    3,369
    
    
    
    16,116
    
    
    
    19,485
    
    
    
    2,5511,382
    
    
    
    7,416
    
    
    
    1,318
    
    
    
    1,382
    
    
    
    8,734
    
    
    
    10,116
    
    
    
    1,49718,302
    
    
    
    20,562
    
    
    
    4,264
    
    
    
    18,302
    
    
    
    24,826
    
    
    
    43,128
    
    
    
    3,5405,673
    
    
    
    17,168
    
    
    
    1,305
    
    
    
    5,673
    
    
    
    18,473
    
    
    
    24,146
    
    
    
    2,3143,304
    
    
    
    12,295
    
    
    
    766
    
    
    
    3,304
    
    
    
    13,061
    
    
    
    16,365
    
    
    
    2,0442,398
    
    
    
    7,659
    
    
    
    5,527
    
    
    
    2,398
    
    
    
    13,186
    
    
    
    15,584
    
    
    
    2,1366,101
    
    
    
    12,602
    
    
    
    271
    
    
    
    6,101
    
    
    
    12,873
    
    
    
    18,974
    
    
    
    1,4051,279
    
    
    
    2,480
    
    
    
    1,058
    
    
    
    1,237
    
    
    
    3,580
    
    
    
    4,817
    
    
    
    3477,097
    
    
    
    14,211
    
    
    
    230
    
    
    
    7,097
    
    
    
    14,441
    
    
    
    21,538
    
    
    
    86017,272
    
    
    
    63,480
    
    
    
    750
    
    
    
    17,272
    
    
    
    64,230
    
    
    
    81,502
    
    
    
    3455,924
    
    
    
    13,832
    
    
    
    
    
    
    
    5,924
    
    
    
    13,832
    
    
    
    19,756
    
    
    
    121,960
    
    
    
    347,244
    
    
    
    26,812
    
    
    
    121,082
    
    
    
    374,934
    
    
    
    496,016
    
    
    
    51,831442
    
    
    
    3,103
    
    
    
    1,205
    
    
    
    442
    
    
    
    4,308
    
    
    
    4,750
    
    
    
    1,6746,265
    
    
    
    35,433
    
    
    
    3,442
    
    
    
    6,265
    
    
    
    38,875
    
    
    
    45,140
    
    
    
    13,0523,592
    
    
    
    7,652
    
    
    
    2,319
    
    
    
    3,592
    
    
    
    9,971
    
    
    
    13,563
    
    
    
    3,5791,056
    
    
    
    4,844
    
    
    
    808
    
    
    
    1,056
    
    
    
    5,652
    
    
    
    6,708
    
    
    
    1,8173,135
    
    
    
    10,354
    
    
    
    5,316
    
    
    
    3,135
    
    
    
    15,670
    
    
    
    18,805
    
    
    
    5,2232,185
    
    
    
    8,972
    
    
    
    3,015
    
    
    
    2,185
    
    
    
    11,987
    
    
    
    14,172
    
    
    
    2,3044,082
    
    
    
    14,651
    
    
    
    1,267
    
    
    
    4,082
    
    
    
    15,918
    
    
    
    20,000
    
    
    
    3,1691,795
    
    
    
    8,689
    
    
    
    518
    
    
    
    1,795
    
    
    
    9,207
    
    
    
    11,002
    
    
    
    1,6362,736
    
    
    
    7,301
    
    
    
    8,270
    
    
    
    2,736
    
    
    
    15,571
    
    
    
    18,307
    
    
    
    2,7003,228
    
    
    
    11,696
    
    
    
    3,275
    
    
    
    3,228
    
    
    
    14,971
    
    
    
    18,199
    
    
    
    3,2201,996
    
    
    
    8,778
    
    
    
    630
    
    
    
    1,996
    
    
    
    9,408
    
    
    
    11,404
    
    
    
    1,7753,727
    
    
    
    27,274
    
    
    
    3,174
    
    
    
    3,727
    
    
    
    30,448
    
    
    
    34,175
    
    
    
    4,8053,015
    
    
    
    6,734
    
    
    
    936
    
    
    
    3,015
    
    
    
    7,670
    
    
    
    10,685
    
    
    
    1,9433,940
    
    
    
    12,547
    
    
    
    2,966
    
    
    
    3,940
    
    
    
    15,513
    
    
    
    19,453
    
    
    
    2,3474,829
    
    
    
    10,978
    
    
    
    512
    
    
    
    4,829
    
    
    
    11,490
    
    
    
    16,319
    
    
    
    1,6825,881
    
    
    
    3,495
    
    
    
    290
    
    
    
    5,881
    
    
    
    3,785
    
    
    
    9,666
    
    
    
    57419,897
    
    
    
    10,750
    
    
    
    15,310
    
    
    
    18,011
    
    
    
    27,946
    
    
    
    45,957
    
    
    
    2,9021,614
    
    
    
    3,611
    
    
    
    (33
    )
    
    
    1,614
    
    
    
    3,578
    
    
    
    5,192
    
    
    
    4962,682
    
    
    
    9,456
    
    
    
    2,786
    
    
    
    2,675
    
    
    
    12,249
    
    
    
    14,924
    
    
    
    378
    
    
    
    13653
    
    
    
    1,361
    
    
    
    
    
    
    
    15,014
    
    
    
    15,014
    
    
    
    25,806
    
    
    
    33,883
    
    
    
    83
    
    
    
    25,806
    
    
    
    33,966
    
    
    
    59,772
    
    
    
    5165,895
    
    
    
    11,655
    
    
    
    5,000
    
    
    
    5,895
    
    
    
    16,655
    
    
    
    22,550
    
    
    
    36
    
    
    
    15,300
    
    
    
    11
    
    
    
    
    
    
    
    15,311
    
    
    
    15,311
    
    
    
    27,077
    
    
    
    17,520
    
    
    
    
    
    
    
    27,077
    
    
    
    17,520
    
    
    
    44,597
    
    
    
    58134,875
    
    
    
    298329
    
    
    
    62,461
    
    
    
    132,982
    
    
    
    362,683
    
    
    
    495,665
    
    
    
    55,8865,160
    
    
    
    23,660
    
    
    
    11,629
    
    
    
    5,160
    
    
    
    35,289
    
    
    
    40,449
    
    
    
    11,0301,365
    
    
    
    5,119
    
    
    
    1,748
    
    
    
    1,365
    
    
    
    6,867
    
    
    
    8,232
    
    
    
    2,6021,323
    
    
    
    4,967
    
    
    
    572
    
    
    
    1,323
    
    
    
    5,539
    
    
    
    6,862
    
    
    
    2,3911,922
    
    
    
    7,026
    
    
    
    2,165
    
    
    
    1,922
    
    
    
    9,191
    
    
    
    11,113
    
    
    
    3,3571,036
    
    
    
    6,254
    
    
    
    810
    
    
    
    1,036
    
    
    
    7,064
    
    
    
    8,100
    
    
    
    1,0981,221
    
    
    
    8,693
    
    
    
    1,857
    
    
    
    1,221
    
    
    
    10,550
    
    
    
    11,771
    
    
    
    2,1641,387
    
    
    
    11,362
    
    
    
    7,509
    
    
    
    1,387
    
    
    
    18,871
    
    
    
    20,258
    
    
    
    2,6974,447
    
    
    
    24,739
    
    
    
    253
    
    
    
    4,815
    
    
    
    24,624
    
    
    
    29,439
    
    
    
    5,0984,132
    
    
    
    10,674
    
    
    
    4,748
    
    
    
    4,132
    
    
    
    15,422
    
    
    
    19,554
    
    
    
    2,3933,290
    
    
    
    24,949
    
    
    
    3,043
    
    
    
    3,290
    
    
    
    27,992
    
    
    
    31,282
    
    
    
    4,0862,592
    
    
    
    8,563
    
    
    
    1,782
    
    
    
    2,592
    
    
    
    10,345
    
    
    
    12,937
    
    
    
    2,1733,153
    
    
    
    26,294
    
    
    
    3,013
    
    
    
    3,482
    
    
    
    28,978
    
    
    
    32,460
    
    
    
    4,8701,172
    
    
    
    7,417
    
    
    
    1,178
    
    
    
    1,172
    
    
    
    8,595
    
    
    
    9,767
    
    
    
    1,7372,657
    
    
    
    11,597
    
    
    
    1,714
    
    
    
    2,657
    
    
    
    13,311
    
    
    
    15,968
    
    
    
    2,3141,292
    
    
    
    3,899
    
    
    
    518
    
    
    
    1,292
    
    
    
    4,417
    
    
    
    5,709
    
    
    
    621250
    
    
    
    2,814
    
    
    
    497
    
    
    
    250
    
    
    
    3,311
    
    
    
    3,561
    
    
    
    573900
    
    
    
    13,335
    
    
    
    2,186
    
    
    
    900
    
    
    
    15,521
    
    
    
    16,421
    
    
    
    2,3001,794
    
    
    
    11,561
    
    
    
    705
    
    
    
    1,794
    
    
    
    12,266
    
    
    
    14,060
    
    
    
    1,6931,320
    
    
    
    2,293
    
    
    
    374
    
    
    
    1,320
    
    
    
    2,667
    
    
    
    3,987
    
    
    
    3981,789
    
    
    
    19,712
    
    
    
    2,236
    
    
    
    1,789
    
    
    
    21,948
    
    
    
    23,737
    
    
    
    3,6164,164
    
    
    
    18,984
    
    
    
    2,262
    
    
    
    4,164
    
    
    
    21,246
    
    
    
    25,410
    
    
    
    2,7842,024
    
    
    
    7,960
    
    
    
    918
    
    
    
    2,024
    
    
    
    8,878
    
    
    
    10,902
    
    
    
    1,366618
    
    
    
    4,517
    
    
    
    383
    
    
    
    618
    
    
    
    4,900
    
    
    
    5,518
    
    
    
    5785,634
    
    
    
    11,533
    
    
    
    606
    
    
    
    5,634
    
    
    
    12,139
    
    
    
    17,773
    
    
    
    1,2961,860
    
    
    
    6,071
    
    
    
    
    
    
    
    1,860
    
    
    
    6,071
    
    
    
    7,931
    
    
    
    3656,502
    
    
    
    283,993
    
    
    
    52,706
    
    
    
    57,199
    
    
    
    336,002
    
    
    
    393,201
    
    
    
    63,2713,642
    
    
    
    
    
    
    
    253
    
    
    
    3,895
    
    
    
    
    
    
    
    3,895
    
    
    
    71
    
    
    
    39
    
    
    
    
    
    
    
    71
    
    
    
    39
    
    
    
    110
    
    
    
    2$
    317,050
    
    
    $
    929,605
    
    
    $
    142,232
    
    
    $
    315,229
    
    
    $
    1,073,658
    
    
    $
    1,388,887
    
    
    $
    170,990
 (1)
    
    I =Industrial; BP=Business Park; OP=Office Park  48




---



##### 



(a) Reconciliation of Real Estate
  2010
    
    
    2009
    
    
    2008Beginning balance
    
    $
    1,128,956
    
    
    $
    1,106,571
    
    
    $
    1,065,181Acquisitions of rental property(1)
    
    
    267,312
    
    
    
    33,446
    
    
    
    43,528Capital expenditures
    
    
    24,952
    
    
    
    18,961
    
    
    
    39,922Impairments
    
    
    (3,448
    )
    
    
    (2,541
    )
    
    
    Cost of real estate sold(2)
    
    
    (26,065
    )
    
    
    (25,060
    )
    
    
    (38,131
    )Dispositions
    
    
    (2,820
    )
    
    
    (2,421
    )
    
    
    (3,929
    )Ending balance
    
    $
    1,388,887
    
    
    $
    1,128,956
    
    
    $
    1,106,571
 (b) Reconciliation of Accumulated Depreciation
  2010
    
    
    2009
    
    
    2008Beginning balance
    
    $
    141,481
    
    
    $
    111,658
    
    
    $
    88,075Depreciation of acquisitions of
rental property
    
    
    991
    
    
    
    168
    
    
    
    347Depreciation of all other rental
property and capital expenditures
    
    
    32,822
    
    
    
    31,862
    
    
    
    27,539Dispositions
    
    
    (1,988
    )
    
    
    (200
    )
    
    
    (3,508
    )Dispositions  write-off
    
    
    (2,316
    )
    
    
    (2,007
    )
    
    
    (795
    )Ending balance
    
    $
    170,990
    
    
    $
    141,481
    
    
    $
    111,658
 (1)
    
    Includes a $2.4 million impairment for the year ended December 31, 2010
related to a property that was acquired in the fourth quarter of 2010.(2)
    
    Includes a $0.6 million impairment for the year ended December 31, 2010
related to a property that was sold in the second quarter of 2010.  49