UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010.
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to .
 Commission File Number 1-31824
 FIRST POTOMAC REALTY TRUST
  MARYLAND
    
    37-1470730(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 7600 Wisconsin Avenue, 11 th Floor, Bethesda, MD 20814
 (301) 986-9200
 þ o
 o o
  o Large Accelerated Filer
    
    þ Accelerated Filer
    
    o Non-Accelerated Filer(Do not check if a smaller
reporting company)
    
    o Smaller Reporting Company
 o þ




---



##### 



FIRST POTOMAC REALTY TRUST
 FORM 10-Q
 INDEX
 PagePart I: Financial InformationItem 1. Financial StatementsConsolidated balance sheets as of June 30, 2010 (unaudited) and December 31, 2009
    
    
    3Consolidated statements of operations (unaudited) for the three and six months ended June 30, 2010 and
2009
    
    
    4Consolidated statements of cash flows (unaudited) for the six months ended June 30, 2010 and 2009
    
    
    5Notes to condensed consolidated financial statements (unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    43Item 4. Controls and Procedures
    
    
    44Part II: Other InformationItem 1. Legal Proceedings
    
    
    44Item 1A. Risk Factors
    
    
    44Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    44Item 3. Defaults Upon Senior Securities
    
    
    44Item 4. Removed and Reserved
    
    
    44Item 5. Other Information
    
    
    44Item 6. Exhibits
    
    
    44Signatures
 2




---



##### 



FIRST POTOMAC REALTY TRUST
 
 
 June 30, 2010
    
    
    December 31, 2009(unaudited)Assets:Rental property, net
    
    $
    1,029,050
    
    
    $
    987,475Cash and cash equivalents
    
    
    11,481
    
    
    
    9,320Escrows and reserves
    
    
    10,010
    
    
    
    9,978Accounts and other receivables, net of allowance for doubtful
accounts of $2,660 and $2,346, respectively
    
    
    7,036
    
    
    
    7,049Accrued straight-line rents, net of allowance for doubtful
accounts of $1,133 and $1,185, respectively
    
    
    11,910
    
    
    
    10,915Investment in affiliates
    
    
    3,093
    
    
    
    1,819Deferred costs, net
    
    
    22,641
    
    
    
    21,208Prepaid expenses and other assets
    
    
    5,795
    
    
    
    6,625Intangible assets, net
    
    
    24,610
    
    
    
    20,103Total assets
    
    $
    1,125,626
    
    
    $
    1,074,492Liabilities:Mortgage loans
    
    $
    325,879
    
    
    $
    301,463Exchangeable senior notes, net
    
    
    29,656
    
    
    
    48,718Senior notes
    
    
    75,000
    
    
    
    75,000Secured term loans
    
    
    60,000
    
    
    
    60,000Unsecured revolving credit facility
    
    
    123,000
    
    
    
    159,900Financing obligation
    
    
    
    
    
    
    5,066Accounts payable and other liabilities
    
    
    19,247
    
    
    
    16,419Accrued interest
    
    
    2,141
    
    
    
    2,072Rents received in advance
    
    
    7,480
    
    
    
    7,267Tenant security deposits
    
    
    4,831
    
    
    
    5,235Deferred market rent, net
    
    
    5,031
    
    
    
    6,008Total liabilities
    
    
    652,265
    
    
    
    687,148Noncontrolling interests in the Operating Partnership
    
    
    10,525
    
    
    
    9,585Shareholders equity:Common shares, $0.001 par value, 100,000 common
shares authorized: 37,947 and 30,589 shares issued and
outstanding, respectively
    
    
    38
    
    
    
    31Additional paid-in capital
    
    
    617,271
    
    
    
    517,940Accumulated other comprehensive loss
    
    
    (489
    )
    
    
    (1,879
    )Dividends in excess of accumulated earnings
    
    
    (153,984
    )
    
    
    (138,333
    )Total shareholders equity
    
    
    462,836
    
    
    
    377,759Total liabilities, noncontrolling interests and shareholders equity
    
    $
    1,125,626
    
    
    $
    1,074,492
  3




---



##### 



FIRST POTOMAC REALTY TRUST
 
 
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Rental
    
    $
    27,413
    
    
    $
    26,344
    
    
    $
    54,740
    
    
    $
    52,988Tenant reimbursements and other
    
    
    6,081
    
    
    
    5,751
    
    
    
    13,932
    
    
    
    12,270Total revenues
    
    
    33,494
    
    
    
    32,095
    
    
    
    68,672
    
    
    
    65,258Operating expenses:Property operating
    
    
    7,058
    
    
    
    7,847
    
    
    
    17,228
    
    
    
    15,975Real estate taxes and insurance
    
    
    3,240
    
    
    
    3,168
    
    
    
    6,612
    
    
    
    6,426General and administrative
    
    
    3,675
    
    
    
    2,917
    
    
    
    7,384
    
    
    
    5,874Acquisition costs
    
    
    1,645
    
    
    
    5
    
    
    
    1,664
    
    
    
    5Depreciation and amortization
    
    
    10,488
    
    
    
    9,909
    
    
    
    20,463
    
    
    
    19,855Contingent consideration related to
acquisition of property
    
    
    
    
    
    
    
    
    
    
    710
    
    
    
    Total operating expenses
    
    
    26,106
    
    
    
    23,846
    
    
    
    54,061
    
    
    
    48,135Operating income
    
    
    7,388
    
    
    
    8,249
    
    
    
    14,611
    
    
    
    17,123Other expenses (income):Interest expense
    
    
    8,061
    
    
    
    8,113
    
    
    
    16,921
    
    
    
    16,439Interest and other income
    
    
    (87
    )
    
    
    (117
    )
    
    
    (202
    )
    
    
    (253
    )Equity in losses of affiliates
    
    
    20
    
    
    
    47
    
    
    
    59
    
    
    
    54Gains on early retirement of debt
    
    
    (164
    )
    
    
    (1,367
    )
    
    
    (164
    )
    
    
    (5,706
    )Total other expenses
    
    
    7,830
    
    
    
    6,676
    
    
    
    16,614
    
    
    
    10,534(Loss) income from continuing operations
    
    
    (442
    )
    
    
    1,573
    
    
    
    (2,003
    )
    
    
    6,589Discontinued operations:(Loss) income from operations of disposed
properties
    
    
    (82
    )
    
    
    79
    
    
    
    (728
    )
    
    
    201Gain on sale of real estate properties
    
    
    557
    
    
    
    
    
    
    
    557
    
    
    
    Income (loss) from discontinued operations
    
    
    475
    
    
    
    79
    
    
    
    (171
    )
    
    
    201Net income (loss)
    
    
    33
    
    
    
    1,652
    
    
    
    (2,174
    )
    
    
    6,790Less: Net (income) loss attributable to
noncontrolling interests in the Operating
Partnership
    
    
    (1
    )
    
    
    (45
    )
    
    
    48
    
    
    
    (186
    )Net income (loss) attributable to common
shareholders
    
    $
    32
    
    
    $
    1,607
    
    
    $
    (2,126
    )
    
    $
    6,604Net income (loss) attributable to common
shareholders per share  basic and diluted:(Loss) income from continuing operations
    
    $
    (0.01
    )
    
    $
    0.06
    
    
    $
    (0.06
    )
    
    $
    0.23Income (loss) from discontinued operations
    
    
    0.01
    
    
    
    
    
    
    
    (0.01
    )
    
    
    0.01Net income (loss)
    
    $
    
    
    
    $
    0.06
    
    
    $
    (0.07
    )
    
    $
    0.24Weighted average common shares outstanding -
basic
    
    
    36,511
    
    
    
    27,157
    
    
    
    33,552
    
    
    
    27,079Weighted average common shares outstanding -
diluted
    
    
    36,511
    
    
    
    27,230
    
    
    
    33,552
    
    
    
    27,132
  4




---



##### 



FIRST POTOMAC REALTY TRUST
 
 
 Six Months Ended June 30,2010
    
    
    2009Cash flows from operating activities:Net (loss) income
    
    $
    (2,174
    )
    
    $
    6,790Adjustments to reconcile net (loss) income to net cash provided by operating activities:Discontinued operations:Gain on sale of real estate properties
    
    
    (557
    )
    
    
    Depreciation and amortization
    
    
    231
    
    
    
    196Impairment of real estate asset
    
    
    565
    
    
    
    Depreciation and amortization
    
    
    20,882
    
    
    
    20,286Stock based compensation
    
    
    2,056
    
    
    
    1,291Bad debt expense
    
    
    750
    
    
    
    1,406Amortization of deferred market rent
    
    
    (677
    )
    
    
    (861
    )Amortization of financing costs and fair value discounts
    
    
    348
    
    
    
    1,411Amortization of rent abatement
    
    
    1,242
    
    
    
    854Equity in losses of affiliates
    
    
    59
    
    
    
    54Distributions from investments in affiliates
    
    
    216
    
    
    
    Contingent consideration related to acquisition of property
    
    
    710
    
    
    
    Change in financing obligation
    
    
    
    
    
    
    (250
    )Gains on early retirement of debt
    
    
    (164
    )
    
    
    (5,706
    )Changes in assets and liabilities:Escrows and reserves
    
    
    (1,872
    )
    
    
    (1,891
    )Accounts and other receivables
    
    
    (874
    )
    
    
    (2,798
    )Accrued straight-line rents
    
    
    (1,128
    )
    
    
    (1,227
    )Prepaid expenses and other assets
    
    
    2,548
    
    
    
    1,582Tenant security deposits
    
    
    (176
    )
    
    
    (121
    )Accounts payable and accrued expenses
    
    
    (269
    )
    
    
    1,929Accrued interest
    
    
    119
    
    
    
    (281
    )Rents received in advance
    
    
    259
    
    
    
    1,385Deferred costs
    
    
    (4,146
    )
    
    
    (3,536
    )Total adjustments
    
    
    20,122
    
    
    
    13,723Net cash provided by operating activities
    
    
    17,948
    
    
    
    20,513Cash flows from investing activities:Purchase deposit on future acquisitions
    
    
    (2,060
    )
    
    
    Proceeds from sale of real estate assets
    
    
    11,414
    
    
    
    Acquisition of rental property and associated intangible assets
    
    
    (81,491
    )
    
    
    Additions to rental property
    
    
    (5,441
    )
    
    
    (14,218
    )Additions to construction in progress
    
    
    (724
    )
    
    
    (742
    )Cash held by joint venture at deconsolidation
    
    
    (896
    )
    
    
    Net cash used in investing activities
    
    
    (79,198
    )
    
    
    (14,960
    )Cash flows from financing activities:Financing costs
    
    
    (1,220
    )
    
    
    (1
    )Issuance of debt
    
    
    85,000
    
    
    
    25,500Issuance of stock, net
    
    
    86,977
    
    
    
    5,350Repayments of debt
    
    
    (93,543
    )
    
    
    (31,667
    )Dividends to shareholders
    
    
    (13,526
    )
    
    
    (14,791
    )Distributions to noncontrolling interests
    
    
    (293
    )
    
    
    (417
    )Stock option exercises
    
    
    16
    
    
    
    Net cash provided by (used in) financing activities
    
    
    63,411
    
    
    
    (16,026
    )Net increase (decrease) in cash and cash equivalents
    
    
    2,161
    
    
    
    (10,473
    )Cash and cash equivalents, beginning of period
    
    
    9,320
    
    
    
    16,352Cash and cash equivalents, end of period
    
    $
    11,481
    
    
    $
    5,879
  5




---



##### 



FIRST POTOMAC REALTY TRUST
  2010
    
    
    2009Cash paid for interest, net
    
    $
    16,409
    
    
    $
    16,950
   Investment in Affiliates.
 6




---



##### 



FIRST POTOMAC REALTY TRUST
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (1) Description of Business
     (2) Summary of Significant Accounting Policies
 (a) Principles of Consolidation
    7




---



##### 



(b) Use of Estimates
   (c) Revenue Recognition
   (d) Cash and Cash Equivalents
  (e) Escrows and Reserves
  (f) Deferred Costs
  (g) Rental Property
  8




---



##### 



Buildings
    
    39 yearsBuilding improvements
    
    5 to 15 yearsFurniture, fixtures and equipment
    
    5 to 15 yearsTenant improvements
    
    Shorter of the useful lives of the
assets or the terms of the related
leases
   Discontinued Operations
   (h) Purchase Accounting
  9




---



##### 




    
    the fair value of leases in-place on the date of acquisition based on the leasing
origination costs at the date of the acquisition, which approximates the fair value of the
lease origination costs had the in-place leases been originated on the date of acquisition;
the fair value of in-place leases represents absorption costs for the estimated lease-up
period in which vacancy and foregone revenue are incurred;
    
    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 twelve years; and
    
    the fair value of intangible tenant or customer relationships.
  (i) Investment in Affiliates
 .
  ( j) Sales of Real Estate
   10




---



##### 



(k) Intangible Assets
   (l) Derivatives and Hedging
   (m) Income Taxes
  11




---



##### 



(n) Noncontrolling Interests
   (o) Earnings Per Share
  12




---



##### 



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator for basic and diluted earnings (loss) per share calculations:(Loss) income from continuing operations
    
    $
    (442
    )
    
    $
    1,573
    
    
    $
    (2,003
    )
    
    $
    6,589Income (loss) from discontinued operations
    
    
    475
    
    
    
    79
    
    
    
    (171
    )
    
    
    201Net income (loss)
    
    
    33
    
    
    
    1,652
    
    
    
    (2,174
    )
    
    
    6,790Less: Net (income) loss attributable to noncontrolling interests in the
Operating Partnership
    
    
    (1
    )
    
    
    (45
    )
    
    
    48
    
    
    
    (186
    )Net income (loss) attributable to common shareholders
    
    
    32
    
    
    
    1,607
    
    
    
    (2,126
    )
    
    
    6,604Less: Allocation to participating securities
    
    
    (157
    )
    
    
    (89
    )
    
    
    (304
    )
    
    
    (209
    )(Loss) income attributable to common shareholders
    
    $
    (125
    )
    
    $
    1,518
    
    
    $
    (2,430
    )
    
    $
    6,395Denominator for basic and diluted (loss) earnings per share calculations:Weighted average shares outstanding  basic
    
    
    36,511
    
    
    
    27,157
    
    
    
    33,552
    
    
    
    27,079Effect of dilutive shares:Employee stock options and non-vested shares
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    53Weighted average shares outstanding  diluted
    
    
    36,511
    
    
    
    27,230
    
    
    
    33,552
    
    
    
    27,132Amounts attributable to common shareholders per share  basic and diluted:(Loss) income from continuing operations
    
    $
    (0.01
    )
    
    $
    0.06
    
    
    $
    (0.06
    )
    
    $
    0.23Income (loss) from discontinued operations
    
    
    0.01
    
    
    
    
    
    
    
    (0.01
    )
    
    
    0.01Net income (loss)
    
    $
    
    
    
    $
    0.06
    
    
    $
    (0.07
    )
    
    $
    0.24Amounts attributable to common shareholders:(Loss) income from continuing operations
    
    $
    (434
    )
    
    $
    1,530
    
    
    $
    (1,960
    )
    
    $
    6,408Income (loss) from discontinued operations
    
    
    466
    
    
    
    77
    
    
    
    (166
    )
    
    
    196Net income (loss)
    
    $
    32
    
    
    $
    1,607
    
    
    $
    (2,126
    )
    
    $
    6,604
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Stock option awards
    
    
    847
    
    
    
    778
    
    
    
    849
    
    
    
    781Non-vested share awards
    
    
    310
    
    
    
    244
    
    
    
    336
    
    
    
    272Conversion of Exchangeable Senior Notes
    
    
    854
    
    
    
    1,654
    
    
    
    854
    
    
    
    1,6542,011
    
    
    
    2,676
    
    
    
    2,039
    
    
    
    2,707
 (p)
    
    Share-Based Compensation Non-vested share awards
   13




---



##### 



Weighted Average GrantNon-vested Shares
    
    
    Date Fair ValueNon-vested at March 31, 2010
    
    
    846,543
    
    
    $
    11.49Granted
    
    
    20,274
    
    
    
    13.91Vested
    
    
    (112,709
    )
    
    
    11.33Non-vested at June 30, 2010
    
    
    754,108
    
    
    $
    11.61
   (q) Reclassifications
  (r) Application of New Accounting Standards
 Fair Value Measurements
 (3) Rental Property
  June 30, 2010
    
    
    December 31, 2009Land
    
    $
    247,167
    
    
    $
    237,385Buildings and improvements
    
    
    825,178
    
    
    
    795,901Construction in process
    
    
    23,700
    
    
    
    9,832Tenant improvements
    
    
    78,323
    
    
    
    75,940Furniture, fixtures and equipment
    
    
    9,894
    
    
    
    9,8981,184,262
    
    
    
    1,128,956Less: accumulated depreciation
    
    
    (155,212
    )
    
    
    (141,481
    )$
    1,029,050
    
    
    $
    987,475
 Rental Property
 14




---



##### 



(a) Development and Redevelopment Activity
   (b) Acquisitions
  Leased and
    
    
    AggregateOccupied at
    
    
    PurchaseLocation
    
    
    Acquisition Date
    
    
    Property Type
    
    
    Square Feet
    
    
    June 30, 2010
    
    
    PriceThree Flint Hill
    
    Oakton, VA
    
    
    4/28/2010
    
    
    Office
    
    
    173,762
    
    
    
    0
    %(1)
    
    $
    13,653500 First Street, NW
    
    Washington, DC
    
    
    6/30/2010
    
    
    Office
    
    
    129,035
    
    
    
    100
    %(2)
    
    
    67,838302,797
    
    
    
    
    
    
    $
    81,491
 
 (1)
    
    The property was vacant at acquisition. The Company began re-development
efforts and plans to fully renovate the building.(2)
    
    At acquisition, the property was in the final stage of a full-building renovation,
with the renovation of the remaining 14,000 square feet expected to be completed in the fourth
quarter of 2010. The Company financed a portion of the acquisition with a new $39.0 million
mortgage loan.    Land
    
    $
    22,311Acquired tenant improvements
    
    
    1,570Building and improvements
    
    
    49,461In-place leases
    
    
    6,030Acquired leasing commissions
    
    
    1,584Customer relationships intangible
    
    
    651Total assets acquired
    
    
    81,607Below-market leases assumed
    
    
    (116
    )Net assets acquired
    
    $
    81,491
 15




---



##### 



(4) Investment in Affiliates
      June 30, 2010
    
    
    December 31, 2009Assets:Rental property, net
    
    $
    38,589
    
    
    $
    25,037Cash and cash equivalents
    
    
    1,392
    
    
    
    357Other assets
    
    
    3,071
    
    
    
    1,879Total assets
    
    
    43,052
    
    
    
    27,273Liabilities:Mortgage loans
    
    
    28,000
    
    
    
    18,144Other liabilities
    
    
    2,047
    
    
    
    1,443Total liabilities
    
    
    30,047
    
    
    
    19,587Net assets
    
    $
    13,005
    
    
    $
    7,686
  The period fromSix Months
    
    
    March 17, 2009Three Months Ended June 30,
    
    
    Ended
    
    
    through June 30,2010
    
    
    2009
    
    
    June 30, 2010
    
    
    2009Total revenues
    
    $
    1,183
    
    
    $
    615
    
    
    $
    2,301
    
    
    $
    723Total operating expenses
    
    
    (299
    )
    
    
    (112
    )
    
    
    (650
    )
    
    
    (141
    )Net operating income
    
    
    884
    
    
    
    503
    
    
    
    1,651
    
    
    
    582Depreciation and amortization
    
    
    (500
    )
    
    
    (391
    )
    
    
    (954
    )
    
    
    (449
    )Interest expense, net
    
    
    (465
    )
    
    
    (301
    )
    
    
    (932
    )
    
    
    (350
    )Net loss
    
    $
    (81
    )
    
    $
    (189
    )
    
    $
    (235
    )
    
    $
    (217
    )
 16




---



##### 



(5) Discontinued Operations
     Three Months Ended June 30,
    
    Six Months Ended June 30,2010
    
    2009
    
    2010
    
    2009Revenues
    
    $
    81
    
    
    $
    423
    
    
    $
    274
    
    
    $
    888Net (loss) income
    
    
    (82
    )
    
    
    79
    
    
    
    (728
    )
    
    
    201Gain on sale of real estate properties
    
    
    557
    
    
    
    
    
    
    
    557
    
    
    
    
 (6) Debt
  June 30,
    
    
    December 31,2010
    
    
    2009Mortgage loans, effective interest rates ranging from 5.19% to 7.28%, maturing at various dates
through June 2021
    
    $
    325,879
    
    
    $
    301,463Exchangeable senior notes, net of discounts, effective interest rate of 5.84%, maturing December
2011(1)
    
    
    29,656
    
    
    
    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)(3)
    
    
    40,000
    
    
    
    40,000Secured term loan, effective interest rate of LIBOR plus 2.50%, maturing August 2011(3)(4)
    
    
    20,000
    
    
    
    20,000Unsecured revolving credit facility, effective interest rate of LIBOR plus 3.00%, maturing January
2014(3)(5)
    
    
    123,000
    
    
    
    159,900$
    613,535
    
    
    $
    645,081
 
 (1)
    
    During the second quarter of 2010, the Company retired $20.1 million of
its Exchangeable Senior Notes. The face value of the Exchangeable Senior Notes was $30.4
million at June 30, 2010 compared with $50.5 million at December 31, 2009.(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.
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)
    
    The Company has entered into two separate swap agreements that fix
LIBOR at 2.71% on $50.0 million of its outstanding variable rate debt and fix LIBOR at 3.33%
on $35.0 million of its outstanding variable rate debt. Both swap agreements expire
in August 2010.(4)
    
    During the second quarter of 2010, the Company gave notice of its intent
to exercise its one year extension option on its $20 million secured term loan, which was
scheduled to mature in August 2010.(5)
    
    The unsecured revolving credit facility matures in January 2013 with a
one-year extension at the Companys option, which it intends to exercise. During the second
quarter of 2010, the Company expanded its unsecured revolving credit facility from $175
million to $225 million. 17




---



##### 



(a)
    
    Mortgage Loans  Contractual
    
    
    Effective
    
    
    Maturity
    
    
    June 30,
    
    
    December 31,Encumbered Property
    
    Interest Rate
    
    
    Interest Rate
    
    
    Date
    
    
    2010
    
    
    20094212 Tech Court(1)
    
    
    8.53
    %
    
    
    8.53
    %
    
    June 2010
    
    $
    
    
    
    $
    1,665Park Central II
    
    
    8.32
    %
    
    
    5.66
    %
    
    November 2010
    
    
    5,428
    
    
    
    5,591Enterprise Center (2)
    
    
    8.03
    %
    
    
    5.20
    %
    
    December 2010
    
    
    17,025
    
    
    
    17,393Indian Creek Court (2)
    
    
    7.80
    %
    
    
    5.90
    %
    
    January 2011
    
    
    12,200
    
    
    
    12,413403/405 Glenn Drive
    
    
    7.60
    %
    
    
    5.50
    %
    
    July 2011
    
    
    8,108
    
    
    
    8,2524612 Navistar Drive (2)
    
    
    7.48
    %
    
    
    5.20
    %
    
    July 2011
    
    
    12,436
    
    
    
    12,672RiversPark I (3)
    
    LIBOR+2.50%
    
    
    5.97
    %
    
    September 2011
    
    
    
    
    
    
    9,856Campus at Metro Park (2)
    
    
    7.11
    %
    
    
    5.25
    %
    
    February 2012
    
    
    22,976
    
    
    
    23,3761434 Crossways Blvd Building II
    
    
    7.05
    %
    
    
    5.38
    %
    
    August 2012
    
    
    9,668
    
    
    
    9,852Crossways Commerce Center
    
    
    6.70
    %
    
    
    6.70
    %
    
    October 2012
    
    
    24,394
    
    
    
    24,607Newington Business Park Center
    
    
    6.70
    %
    
    
    6.70
    %
    
    October 2012
    
    
    15,388
    
    
    
    15,522Prosperity Business Center
    
    
    6.25
    %
    
    
    5.75
    %
    
    January 2013
    
    
    3,574
    
    
    
    3,627Aquia Commerce Center I
    
    
    7.28
    %
    
    
    7.28
    %
    
    February 2013
    
    
    420
    
    
    
    4861434 Crossways Blvd Building I
    
    
    6.25
    %
    
    
    5.38
    %
    
    March 2013
    
    
    8,358
    
    
    
    8,493Linden Business Center
    
    
    6.01
    %
    
    
    5.58
    %
    
    October 2013
    
    
    7,157
    
    
    
    7,224Owings Mills Business Center
    
    
    5.85
    %
    
    
    5.75
    %
    
    March 2014
    
    
    5,501
    
    
    
    5,552Annapolis Commerce Park East
    
    
    5.74
    %
    
    
    6.25
    %
    
    June 2014
    
    
    8,552
    
    
    
    8,613Cloverleaf Center
    
    
    6.75
    %
    
    
    6.75
    %
    
    October 2014
    
    
    17,343
    
    
    
    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
    
    
    99,625
    
    
    
    99,625Hanover Business Center:Building D
    
    
    8.88
    %
    
    
    6.63
    %
    
    August 2015
    
    
    700
    
    
    
    756Building C
    
    
    7.88
    %
    
    
    6.63
    %
    
    December 2017
    
    
    1,099
    
    
    
    1,154Chesterfield Business Center:Buildings C,D,G and H
    
    
    8.50
    %
    
    
    6.63
    %
    
    August 2015
    
    
    1,829
    
    
    
    1,972Buildings A,B,E and F
    
    
    7.45
    %
    
    
    6.63
    %
    
    June 2021
    
    
    2,476
    
    
    
    2,540Gateway Centre Building I
    
    
    7.35
    %
    
    
    5.88
    %
    
    November 2016
    
    
    1,271
    
    
    
    1,340500 First Street, NW
    
    
    5.72
    %
    
    
    5.79
    %
    
    August 2020
    
    
    39,000
    
    
    
    Airpark Business Center
    
    
    7.45
    %
    
    
    6.63
    %
    
    June 2021
    
    
    1,351
    
    
    
    1,392Total Mortgage Debt
    
    
    
    
    
    
    5.67
    %(4)
    
    
    
    
    
    $
    325,879
    
    
    $
    301,463
 
 (1)
    
    The loan was repaid on June 1, 2010 with available cash.(2)
    
    The maturity date on 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.(3)
    
    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 condensed
consolidated financial statements. For more information see footnote 4, Investment in
Affiliates.(4)
    
    Weighted average interest rate on total mortgage debt.  (b) Exchangeable Senior Notes
  18




---



##### 



(c) Unsecured Revolving Credit Facility
   Non-Financial Covenants in Mortgage Loan Documents
  (7) Derivative Instruments and Comprehensive Income (Loss)
  
    
    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.
 19




---



##### 



Interest RateContractual
    
    
    Fixed EffectiveTransaction Date
    
    Maturity Date
    
    
    Amount
    
    
    Component
    
    
    Interest RateJanuary 2008
    
    August 2010
    
    $
    50,000
    
    
    LIBOR
    
    
    2.71
    %August 2008
    
    August 2010
    
    
    35,000
    
    
    LIBOR
    
    
    3.33
    %$
    85,000
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income (loss)
    
    $
    33
    
    
    $
    1,652
    
    
    $
    (2,174
    )
    
    $
    6,790Unrealized gain on derivative instruments
    
    
    595
    
    
    
    12
    
    
    
    1,123
    
    
    
    631Total comprehensive income (loss)
    
    
    628
    
    
    
    1,664
    
    
    
    (1,051
    )
    
    
    7,421Comprehensive (income) loss attributable
to noncontrolling interests in the Operating
Partnership
    
    
    (12
    )
    
    
    (45
    )
    
    
    24
    
    
    
    (203
    )Comprehensive income (loss) attributable to
common shareholders
    
    $
    616
    
    
    $
    1,619
    
    
    $
    (1,027
    )
    
    $
    7,218
  (8) Fair Value Measurements
     20




---



##### 



Balance atJune 30, 2010
    
    Level 1
    
    Level 2
    
    Level 3Recurring Measurements:Derivative instrument-swap agreements
    
    $
    256
    
    
    $
    
    
    
    $
    256
    
    
    $
    Contingent consideration related to
acquisition of property
    
    
    1,398
    
    
    
    
    
    
    
    
    
    
    
    1,398
  Interest Rate Derivatives
  Contingent Consideration
   Balance at December 31, 2009
    
    $
    688Contingent consideration charge recognized in earnings
    
    
    710Balance at June 30, 2010
    
    $
    1,398
   21




---



##### 



June 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    ValueMortgage debt
    
    $
    325,879
    
    
    $
    328,611
    
    
    $
    301,463
    
    
    $
    289,679Exchangeable senior notes(1)
    
    
    29,656
    
    
    
    29,917
    
    
    
    48,718
    
    
    
    48,164Series A senior notes
    
    
    37,500
    
    
    
    38,318
    
    
    
    37,500
    
    
    
    37,118Series B senior notes
    
    
    37,500
    
    
    
    38,097
    
    
    
    37,500
    
    
    
    36,146Secured term loans
    
    
    60,000
    
    
    
    56,618
    
    
    
    60,000
    
    
    
    54,390Unsecured revolving credit facility
    
    
    123,000
    
    
    
    121,349
    
    
    
    159,900
    
    
    
    143,953Total
    
    $
    613,535
    
    
    $
    612,910
    
    
    $
    645,081
    
    
    $
    609,450
 
 (1)
 (9) Shareholders Equity
     RedeemableFirst Potomac
    
    
    noncontrollingRealty Trust
    
    
    interestsBalance, December 31, 2009
    
    $
    377,759
    
    
    $
    9,585Net loss
    
    
    (2,126
    )
    
    
    (48
    )Changes in ownership
    
    
    99,630
    
    
    
    1,257Distributions
    
    
    (13,526
    )
    
    
    (293
    )Other comprehensive income
    
    
    1,099
    
    
    
    24Balance, June 30, 2010
    
    $
    462,836
    
    
    $
    10,525
 (10) Segment Information
   22




---



##### 



Three Months Ended June 30, 2010Maryland
    
    
    Northern Virginia(1)
    
    
    Southern Virginia
    
    
    ConsolidatedNumber of buildings
    
    
    68
    
    
    
    52
    
    
    
    54
    
    
    
    174Square feet (unaudited)
    
    
    3,415,221
    
    
    
    3,318,889
    
    
    
    5,263,813
    
    
    
    11,997,923Total revenues
    
    $
    11,305
    
    
    $
    10,250
    
    
    $
    11,938
    
    
    $
    33,494Property operating expense
    
    
    (2,317
    )
    
    
    (2,030
    )
    
    
    (2,711
    )
    
    
    (7,058
    )Real estate taxes and insurance
    
    
    (1,089
    )
    
    
    (1,116
    )
    
    
    (1,035
    )
    
    
    (3,240
    )Total property operating income
    
    $
    7,899
    
    
    $
    7,104
    
    
    $
    8,192
    
    
    
    23,196Depreciation and amortization expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,488
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,675
    )Other expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,830
    )Acquisition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,645
    )Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    475Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    33Capital expenditures(3)
    
    $
    598
    
    
    $
    768
    
    
    $
    1,848
    
    
    $
    3,312
 Three Months Ended June 30, 2009Maryland(4)
    
    
    Northern Virginia
    
    
    Southern Virginia
    
    
    ConsolidatedNumber of buildings
    
    
    72
    
    
    
    47
    
    
    
    54
    
    
    
    173Square feet (unaudited)
    
    
    3,608,755
    
    
    
    2,818,676
    
    
    
    5,258,232
    
    
    
    11,685,663Total revenues
    
    $
    10,414
    
    
    $
    9,731
    
    
    $
    11,950
    
    
    $
    32,095Property operating expense
    
    
    (2,734
    )
    
    
    (2,122
    )
    
    
    (2,991
    )
    
    
    (7,847
    )Real estate taxes and insurance
    
    
    (1,025
    )
    
    
    (1,111
    )
    
    
    (1,032
    )
    
    
    (3,168
    )Total property operating income
    
    $
    6,655
    
    
    $
    6,498
    
    
    $
    7,927
    
    
    
    21,080Depreciation and amortization expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,909
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,917
    )Acquisition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )Other expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,676
    )Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,652Capital expenditures(3)
    
    $
    1,827
    
    
    $
    3,926
    
    
    $
    3,080
    
    
    $
    8,961
 23




---



##### 



Six Months Ended June 30, 2010Maryland
    
    
    Northern Virginia(1)
    
    
    Southern Virginia
    
    
    ConsolidatedTotal revenues
    
    $
    22,949
    
    
    $
    21,340
    
    
    $
    24,383
    
    
    $
    68,672Property operating expense
    
    
    (5,973
    )
    
    
    (5,262
    )
    
    
    (5,993
    )
    
    
    (17,228
    )Real estate taxes and insurance
    
    
    (2,229
    )
    
    
    (2,289
    )
    
    
    (2,094
    )
    
    
    (6,612
    )Total property operating income
    
    $
    14,747
    
    
    $
    13,789
    
    
    $
    16,296
    
    
    
    44,832Depreciation and amortization expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,463
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,384
    )Acquisition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,664
    )Contingent consideration related to
acquisition of property
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (710
    )Other expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,614
    )Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (171
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (2,174
    )Total assets(2)
    
    $
    377,224
    
    
    $
    396,943
    
    
    $
    325,936
    
    
    $
    1,125,626Capital expenditures(3)
    
    $
    923
    
    
    $
    1,695
    
    
    $
    3,396
    
    
    $
    6,165
 Six Months Ended June 30, 2009Maryland(4)
    
    
    Northern Virginia
    
    
    Southern Virginia
    
    
    ConsolidatedTotal revenues
    
    $
    21,709
    
    
    $
    19,626
    
    
    $
    23,923
    
    
    $
    65,258Property operating expense
    
    
    (5,710
    )
    
    
    (4,540
    )
    
    
    (5,725
    )
    
    
    (15,975
    )Real estate taxes and insurance
    
    
    (2,077
    )
    
    
    (2,233
    )
    
    
    (2,116
    )
    
    
    (6,426
    )Total property operating income
    
    $
    13,922
    
    
    $
    12,853
    
    
    $
    16,082
    
    
    
    42,857Depreciation and amortization expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,855
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,874
    )Acquisition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )Other expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,534
    )Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    201Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,790Total assets(2)
    
    $
    394,561
    
    
    $
    293,106
    
    
    $
    316,685
    
    
    $
    1,039,458Capital expenditures(3)
    
    $
    3,677
    
    
    $
    5,532
    
    
    $
    5,587
    
    
    $
    14,960
 
 (1)
    
    Includes 500 First Street, NW, a nine-story office building located in
Washington, DC that was acquired on June 30, 2010.(2)
    
    Corporate assets not allocated to any of our reportable segments totaled $25,523 and
$35,106 at June 30, 2010 and 2009, respectively.(3)
    
    Capital expenditures for corporate assets not allocated to any of the Companys
reportable segments totaled $98 and $128 for the three months ended June 30, 2010 and 2009
respectively, and $151 and $164 for the six months ended June 30, 2010 and 2009, respectively.(4)
    
    Includes the results of a three-building, 160,470 square foot property that is
owned through a joint venture that was consolidated prior to January 1, 2010. 24




---



##### 



The following discussion and analysis of the Companys financial condition and results of
operations should be read in conjunction with the condensed consolidated financial statements and
notes thereto appearing elsewhere in this Form 10-Q . The discussion and analysis is derived from
the consolidated operating results and activities of First Potomac Realty Trust.
      
    
    maintain and increase occupancy rates and/or increase rental rates at its
properties;
    
    sell assets to third parties at favorable prices or contribute properties to
joint ventures; and
    
    continue to grow its portfolio through acquisition of new properties, potentially
through joint ventures.
 Executive Summary
    25




---



##### 



Significant Second Quarter Transactions
 
    
    Executed 394,000 square feet of leases;
    
    Expanded its unsecured revolving credit facility from $175 million to $225 million;
    
    Retired $20.1 million of Exchangeable Senior Notes at a discount, resulting in a gain
of $0.2 million;
    
    Acquired 500 First Street, NW, a 129,000 square foot office building in Washington,
D.C. for a contractual price of $67.8 million;
    
    Acquired Three Flint Hill, a 174,000 square foot office building in Fairfax County,
Virginia for a contractual price of $13.7 million; and
    
    Sold two properties in the Companys Maryland reporting segment for net proceeds of
$11.4 million, resulting in a gain of $0.6 million.
 Development and Redevelopment Activity
   Development
 
    
    Greenbrier Technology Center III  a 48,000 square foot, three-story office building has
been designed, all permits have been processed and construction is set to commence upon
completion of land use documents. Costs to date include civil, architectural, mechanical,
electrical and plumbing design, as well as permit fees; and
    
    Sterling Park Business Center  a 57,000 square foot office building, of which a
portion has been pre-leased, has been designed, all permits have been processed and
construction commenced in late June 2010. Costs to date include civil site preparation
work, architectural, mechanical, electrical and plumbing design as well as permit fees.
 Redevelopment
 
    
    Enterprise Parkway  a 71,000 square foot multi-tenanted office building. Costs
incurred to date include building, lobby and common corridor renovations; design documents
and permit fees as well as schematic architectural and engineering design for future tenant
layouts; and
    
    Three Flint Hill  a 174,000 square foot eight-story office building. Costs incurred
to date include architectural and engineering design.
  26




---



##### 



Critical Accounting Policies and Estimates
   Revenue Recognition
    Investments in Real Estate and Real Estate Entities
   Buildings
    
    39 yearsBuilding improvements
    
    5 to 15 yearsFurniture, fixtures and equipment
    
    5 to 15 yearsTenant improvements
    
    Shorter of the useful lives of
the assets or the terms of the
related leasesLease related intangible assets
    
    Term of related lease
  27




---



##### 



Purchase Accounting
  
    
    the fair value of leases in-place on the date of acquisition based on the leasing
origination costs at the date of the acquisition, which approximates the fair value of the
lease origination costs had the in-place leases been originated on the date of acquisition;
the fair value of in-place leases represents absorption costs for the estimated lease-up
period in which vacancy and foregone revenue are incurred;
    
    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 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 twelve years; and
    
    the intangible fair value of tenant or customer relationships.
  Derivative Instruments
 28




---



##### 



Share-Based Compensation
  Results of Operations
 Comparison of the Three and Six Months Ended June 30, 2010 with the Three and Six Months Ended June
30, 2009
   Total Revenues
  Three Months
    
    
    Six MonthsThree Months Ended June 30,
    
    
    Six Months Ended June 30,
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent(amounts in thousands)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    Increase
    
    
    Change
    
    
    Increase
    
    
    ChangeRental
    
    $
    27,413
    
    
    $
    26,344
    
    
    $
    54,740
    
    
    $
    52,988
    
    
    $
    1,069
    
    
    
    4
    %
    
    $
    1,752
    
    
    
    3
    %Tenant reimbursements & other
    
    $
    6,081
    
    
    $
    5,751
    
    
    $
    13,932
    
    
    $
    12,270
    
    
    $
    330
    
    
    
    6
    %
    
    $
    1,662
    
    
    
    14
    %
 29




---



##### 



Rental Revenue
   Tenant Reimbursements and Other Revenues
    Total Expenses
 Property Operating Expenses
  Three Months
    
    
    Six MonthsThree Months Ended June 30,
    
    
    Six Months Ended June 30,
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent(amounts in thousands)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    Change
    
    
    Change
    
    
    Increase
    
    
    ChangeProperty operating
    
    $
    7,058
    
    
    $
    7,847
    
    
    $
    17,228
    
    
    $
    15,975
    
    
    $
    (789
    )
    
    
    10
    %
    
    $
    1,253
    
    
    
    8
    %Real estate taxes and
insurance
    
    $
    3,240
    
    
    $
    3,168
    
    
    $
    6,612
    
    
    $
    6,426
    
    
    $
    72
    
    
    
    2
    %
    
    $
    186
    
    
    
    3
    %
 30




---



##### 



Other Operating Expenses
  Three Months
    
    Six MonthsThree Months Ended June 30,
    
    Six Months Ended June 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2010
    
    2009
    
    2010
    
    2009
    
    Increase
    
    Change
    
    Increase
    
    Change$
    3,675
    
    
    $
    2,917
    
    
    $
    7,384
    
    
    $
    5,874
    
    
    $
    758
    
    
    
    26
    %
    
    $
    1,510
    
    
    
    26
    %
   Three Months
    
    Six MonthsThree Months Ended June 30,
    
    Six Months Ended June 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2010
    
    2009
    
    2010
    
    2009
    
    Increase
    
    Change
    
    Increase
    
    Change$
    1,645
    
    
    $
    5
    
    
    $
    1,664
    
    
    $
    5
    
    
    $
    1,640
    
    
    
    
    $
    1,659
    
    
    
  31




---



##### 



Three Months
    
    Six MonthsThree Months Ended June 30,
    
    Six Months Ended June 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2010
    
    2009
    
    2010
    
    2009
    
    Increase
    
    Change
    
    Increase
    
    Change$
    10,488
    
    
    $
    9,909
    
    
    $
    20,463
    
    
    $
    19,855
    
    
    $
    579
    
    
    
    6
    %
    
    $
    608
    
    
    
    3
    %
   Three Months
    
    Six MonthsThree Months Ended June 30,
    
    Six Months Ended June 30,
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2010
    
    2009
    
    2010
    
    2009
    
    Change
    
    Change
    
    Increase
    
    Change$
    
    $
    
    $
    710
    
    
    $
    
    $
    
    
    
    $
    710
    
    
    
  Other Expenses (Income)
  Three Months
    
    Six MonthsThree Months Ended June 30,
    
    Six Months Ended June 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2010
    
    2009
    
    2010
    
    2009
    
    Decrease
    
    Change
    
    Increase
    
    Change$
    8,061
    
    
    $
    8,113
    
    
    $
    16,921
    
    
    $
    16,439
    
    
    $
    52
    
    
    
    1
    %
    
    $
    482
    
    
    
    3
    %
   32




---



##### 



Three Months
    
    Six MonthsThree Months Ended June 30,
    
    Six Months Ended June 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2010
    
    2009
    
    2010
    
    2009
    
    Decrease
    
    Change
    
    Decrease
    
    Change$
    87
    
    
    $
    117
    
    
    $
    202
    
    
    $
    253
    
    
    $
    30
    
    
    
    26
    %
    
    $
    51
    
    
    
    20
    %
   Three Months
    
    Six MonthsThree Months Ended June 30,
    
    Six Months Ended June 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2010
    
    2009
    
    2010
    
    2009
    
    Decrease
    
    Change
    
    Increase
    
    Change$
    20
    
    
    $
    47
    
    
    $
    59
    
    
    $
    54
    
    
    $
    27
    
    
    
    57
    %
    
    $
    5
    
    
    
    9
    %
  33




---



##### 



Three Months
    
    Six MonthsThree Months Ended June 30,
    
    Six Months Ended June 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2010
    
    2009
    
    2010
    
    2009
    
    Decrease
    
    Change
    
    Decrease
    
    Change$
    164
    
    
    $
    1,367
    
    
    $
    164
    
    
    $
    5,706
    
    
    $
    1,203
    
    
    
    88
    %
    
    $
    5,542
    
    
    
    97
    %
   Discontinued Operations
  Three Months
    
    Six MonthsThree Months Ended June 30,
    
    Six Months Ended June 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2010
    
    2009
    
    2010
    
    2009
    
    Increase
    
    Change
    
    Decrease
    
    Change$
    475
    
    
    $
    79
    
    
    $
    (171
    )
    
    $
    201
    
    
    $
    396
    
    
    
    501
    %
    
    $
    372
    
    
    
    185
    %
  Net (income) loss attributable to noncontrolling interests in the Operating Partnership
  Three Months
    
    Six MonthsThree Months Ended June 30,
    
    Six Months Ended June 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2010
    
    2009
    
    2010
    
    2009
    
    Decrease
    
    Change
    
    Decrease
    
    Change$
    (1
    )
    
    $
    (45
    )
    
    $
    48
    
    
    $
    (186
    )
    
    $
    44
    
    
    
    98
    %
    
    $
    234
    
    
    
    126
    %
  34




---



##### 



Same Property Net Operating Income
  Comparison of the Three and Six Months Ended June 30, 2010 with the Three and Six Months Ended June
30, 2009
  Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30,
    
    
    
    
    
    
    
    
    
    
    June 30,(dollars in thousands)
    
    2010
    
    
    2009
    
    
    $ Change
    
    
    % Change
    
    
    2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeNumber of buildings (1)
    
    
    168
    
    
    
    168
    
    
    
    
    
    
    
    
    
    
    
    168
    
    
    
    168
    
    
    
    
    
    
    
    Same property revenueRental
    
    $
    26,010
    
    
    $
    26,004
    
    
    $
    6
    
    
    
    
    
    
    $
    52,091
    
    
    $
    51,868
    
    
    $
    223
    
    
    
    0.4Tenant reimbursements
    
    
    5,196
    
    
    
    5,661
    
    
    
    (465
    )
    
    
    (8.2
    )
    
    
    12,276
    
    
    
    11,729
    
    
    
    547
    
    
    
    4.7Total same property revenue
    
    
    31,206
    
    
    
    31,665
    
    
    
    (459
    )
    
    
    (1.4
    )
    
    
    64,367
    
    
    
    63,597
    
    
    
    770
    
    
    
    1.2Same property operating expensesProperty
    
    
    6,304
    
    
    
    7,406
    
    
    
    (1,102
    )
    
    
    (14.9
    )
    
    
    15,762
    
    
    
    14,944
    
    
    
    818
    
    
    
    5.5Real estate taxes and insurance
    
    
    3,083
    
    
    
    3,129
    
    
    
    (46
    )
    
    
    (1.5
    )
    
    
    6,280
    
    
    
    6,319
    
    
    
    (39
    )
    
    
    (0.6
    )Total same property operating
expenses
    
    
    9,387
    
    
    
    10,535
    
    
    
    (1,148
    )
    
    
    (10.9
    )
    
    
    22,042
    
    
    
    21,263
    
    
    
    779
    
    
    
    3.7Same property net operating income
    
    $
    21,819
    
    
    $
    21,130
    
    
    $
    689
    
    
    
    3.3
    
    
    $
    42,325
    
    
    $
    42,334
    
    
    $
    (9
    )
    
    
    Reconciliation
to net income (loss)Same property net operating income
    
    $
    21,819
    
    
    $
    21,130
    
    
    
    
    
    
    
    
    
    
    $
    42,325
    
    
    $
    42,334Non-comparable net operating income
(loss) (2) (3)
    
    
    1,377
    
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    2,507
    
    
    
    523General and administrative expenses
    
    
    (3,675
    )
    
    
    (2,917
    )
    
    
    
    
    
    
    
    
    
    
    (7,384
    )
    
    
    (5,874
    )Acquisition costs
    
    
    (1,645
    )
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (1,664
    )
    
    
    (5
    )Depreciation and amortization
    
    
    (10,488
    )
    
    
    (9,909
    )
    
    
    
    
    
    
    
    
    
    
    (20,463
    )
    
    
    (19,855
    )Contingent consideration related to
acquisition of property
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (710
    )
    
    
    Other expenses, net
    
    
    (7,830
    )
    
    
    (6,676
    )
    
    
    
    
    
    
    
    
    
    
    (16,614
    )
    
    
    (10,534
    )Discontinued operations (4)
    
    
    475
    
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    (171
    )
    
    
    201Net income
(loss)
    
    $
    33
    
    
    $
    1,652
    
    
    
    
    
    
    
    
    
    
    $
    (2,174
    )
    
    $
    6,790
 35




---



##### 



Weighted Average
    
    
    Weighted AverageOccupancy at June 30,
    
    
    Occupancy at June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Same Properties
    
    
    84.0
    %
    
    
    86.7
    %
    
    
    84.7
    %
    
    
    86.8
    %Total
    
    
    84.1
    %
    
    
    86.5
    %
    
    
    84.5
    %
    
    
    86.6
    %
 
 (1)
    
    Represents properties owned for the entirety of the periods presented.(2)
    
    Non-comparable Properties include: Rivers Park I and II, Cloverleaf Center, Ashburn Center, Three Flint Hill and 500 First Street, NW.(3)
    
    Non-comparable net operating income has been adjusted to reflect a normalized management fee percentage in lieu of an
administrative overhead allocation for comparative purposes.(4)
    
    Discontinued operations represent the results of operations and subsequent dispositions of Deer Park and 7561 Lindbergh Drive, which were sold in the second quarter of 2010.  Maryland
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30,
    
    
    
    
    
    
    
    
    
    
    June 30,(dollars in thousands)
    
    2010
    
    
    2009
    
    
    $ Change
    
    
    % Change
    
    
    2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeNumber of buildings (1)
    
    
    64
    
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    64
    
    
    
    64
    
    
    
    
    
    
    
    Same property revenueRental
    
    $
    8,167
    
    
    $
    8,348
    
    
    $
    (181
    )
    
    
    (2.2
    )
    
    $
    16,364
    
    
    $
    16,714
    
    
    $
    (350
    )
    
    
    (2.1
    )Tenant reimbursements
    
    
    1,490
    
    
    
    1,598
    
    
    
    (108
    )
    
    
    (6.8
    )
    
    
    3,711
    
    
    
    3,494
    
    
    
    217
    
    
    
    6.2Total same property revenue
    
    
    9,657
    
    
    
    9,946
    
    
    
    (289
    )
    
    
    (2.9
    )
    
    
    20,075
    
    
    
    20,208
    
    
    
    (133
    )
    
    
    (0.7
    )Same property operating expensesProperty
    
    
    1,984
    
    
    
    2,513
    
    
    
    (529
    )
    
    
    (21.1
    )
    
    
    5,235
    
    
    
    5,096
    
    
    
    139
    
    
    
    2.7Real estate taxes and insurance
    
    
    999
    
    
    
    994
    
    
    
    5
    
    
    
    0.5
    
    
    
    2,047
    
    
    
    1,978
    
    
    
    69
    
    
    
    3.5Total same property operating expenses
    
    
    2,983
    
    
    
    3,507
    
    
    
    (524
    )
    
    
    (14.9
    )
    
    
    7,282
    
    
    
    7,074
    
    
    
    208
    
    
    
    2.9Same property net operating income
    
    $
    6,674
    
    
    $
    6,439
    
    
    $
    235
    
    
    
    3.6
    
    
    $
    12,793
    
    
    $
    13,134
    
    
    $
    (341
    )
    
    
    (2.6
    )Reconciliation to total property operating income:Same property net operating income
    
    $
    6,674
    
    
    $
    6,439
    
    
    
    
    
    
    
    
    
    
    $
    12,793
    
    
    $
    13,134Non-comparable net operating income(2) (3)
    
    
    1,225
    
    
    
    216
    
    
    
    
    
    
    
    
    
    
    
    1,954
    
    
    
    788Total property operating income
    
    $
    7,899
    
    
    $
    6,655
    
    
    
    
    
    
    
    
    
    
    $
    14,747
    
    
    $
    13,922
 36




---



##### 



Weighted Average
    
    
    Weighted AverageOccupancy at June 30,
    
    
    Occupancy at June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Same Properties
    
    
    82.3
    %
    
    
    84.4
    %
    
    
    82.0
    %
    
    
    85.0
    %Total
    
    
    83.1
    %
    
    
    84.0
    %
    
    
    82.8
    %
    
    
    85.0
    %
 
 (1)
    
    Represents properties owned for the entirety of the periods presented.(2)
    
    Non-comparable Properties include: Cloverleaf Center and Rivers Park I and II.(3)
    
    Non-comparable net operating income has been adjusted to reflect a normalized management fee percentage in lieu of an administrative
overhead allocation for comparative purposes.  Northern Virginia
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30,
    
    
    
    
    
    
    
    
    
    
    June 30,(dollars in thousands)
    
    2010
    
    
    2009
    
    
    $ Change
    
    
    % Change
    
    
    2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeNumber of buildings (1)
    
    
    48
    
    
    
    48
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    48
    
    
    
    
    
    
    
    Same property revenueRental
    
    $
    8,056
    
    
    $
    7,930
    
    
    $
    126
    
    
    
    1.6
    
    
    $
    16,219
    
    
    $
    15,848
    
    
    $
    371
    
    
    
    2.3Tenant reimbursements
    
    
    1,610
    
    
    
    1,800
    
    
    
    (190
    )
    
    
    (10.6
    )
    
    
    4,063
    
    
    
    3,779
    
    
    
    284
    
    
    
    7.5Total same property revenue
    
    
    9,666
    
    
    
    9,730
    
    
    
    (64
    )
    
    
    (0.7
    )
    
    
    20,282
    
    
    
    19,627
    
    
    
    655
    
    
    
    3.3Same property operating expensesProperty
    
    
    1,785
    
    
    
    2,055
    
    
    
    (270
    )
    
    
    (13.1
    )
    
    
    4,839
    
    
    
    4,402
    
    
    
    437
    
    
    
    9.9Real estate taxes and insurance
    
    
    1,053
    
    
    
    1,110
    
    
    
    (57
    )
    
    
    (5.1
    )
    
    
    2,146
    
    
    
    2,234
    
    
    
    (88
    )
    
    
    (3.9
    )Total same property operating
expenses
    
    
    2,838
    
    
    
    3,165
    
    
    
    (327
    )
    
    
    (10.3
    )
    
    
    6,985
    
    
    
    6,636
    
    
    
    349
    
    
    
    5.3Same property net operating income
    
    $
    6,828
    
    
    $
    6,565
    
    
    $
    263
    
    
    
    4.0
    
    
    $
    13,297
    
    
    $
    12,991
    
    
    $
    306
    
    
    
    2.4Reconciliation to total property operating incomeSame property net operating income
    
    $
    6,828
    
    
    $
    6,565
    
    
    
    
    
    
    
    
    
    
    $
    13,297
    
    
    $
    12,991Non-comparable net operating
income (loss)(2) (3)
    
    
    276
    
    
    
    (67
    )
    
    
    
    
    
    
    
    
    
    
    492
    
    
    
    (138
    )Total property operating income
    
    $
    7,104
    
    
    $
    6,498
    
    
    
    
    
    
    
    
    
    
    $
    13,789
    
    
    $
    12,853
 Weighted Average
    
    
    Weighted AverageOccupancy at June 30,
    
    
    Occupancy at June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Same Properties
    
    
    85.4
    %
    
    
    88.9
    %
    
    
    85.8
    %
    
    
    89.4
    %Total
    
    
    84.8
    %
    
    
    88.9
    %
    
    
    84.5
    %
    
    
    89.4
    %
 
 (1)
    
    Represents properties owned for the entirety of the periods presented. 37




---



##### 



Southern Virginia
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30,
    
    
    
    
    
    
    
    
    
    
    June 30,(dollars in thousands)
    
    2010
    
    
    2009
    
    
    $ Change
    
    
    % Change
    
    
    2010
    
    
    2009
    
    
    $  Change
    
    
    % ChangeNumber of buildings (1)
    
    
    54
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    54
    
    
    
    
    
    
    
    Same property revenueRental
    
    $
    9,787
    
    
    $
    9,726
    
    
    $
    61
    
    
    
    0.6
    
    
    $
    19,508
    
    
    $
    19,306
    
    
    $
    202
    
    
    
    1.0Tenant reimbursements
    
    
    2,096
    
    
    
    2,263
    
    
    
    (167
    )
    
    
    (7.4
    )
    
    
    4,502
    
    
    
    4,456
    
    
    
    46
    
    
    
    1.0Total same property revenue
    
    
    11,883
    
    
    
    11,989
    
    
    
    (106
    )
    
    
    (0.9
    )
    
    
    24,010
    
    
    
    23,762
    
    
    
    248
    
    
    
    1.0Same property operating expensesProperty
    
    
    2,535
    
    
    
    2,838
    
    
    
    (303
    )
    
    
    (10.7
    )
    
    
    5,688
    
    
    
    5,446
    
    
    
    242
    
    
    
    4.4Real estate taxes and insurance
    
    
    1,031
    
    
    
    1,025
    
    
    
    6
    
    
    
    0.6
    
    
    
    2,087
    
    
    
    2,107
    
    
    
    (20
    )
    
    
    (0.9
    )Total same property operating
expenses
    
    
    3,566
    
    
    
    3,863
    
    
    
    (297
    )
    
    
    (7.7
    )
    
    
    7,775
    
    
    
    7,553
    
    
    
    222
    
    
    
    2.9Same property net operating income
    
    $
    8,317
    
    
    $
    8,126
    
    
    $
    191
    
    
    
    2.4
    
    
    $
    16,235
    
    
    $
    16,209
    
    
    $
    26
    
    
    
    0.2Reconciliation to total property
operating incomeSame property net operating income
    
    $
    8,317
    
    
    $
    8,126
    
    
    
    
    
    
    
    
    
    
    $
    16,235
    
    
    $
    16,209Non-comparable net operating
(loss) income (2)
    
    
    (125
    )
    
    
    (199
    )
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    (127
    )Total property operating income
    
    $
    8,192
    
    
    $
    7,927
    
    
    
    
    
    
    
    
    
    
    $
    16,296
    
    
    $
    16,082
 Weighted Average
    
    
    Weighted AverageOccupancy at June 30,
    
    
    Occupancy at June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Same Properties
    
    
    84.4
    %
    
    
    86.9
    %
    
    
    85.8
    %
    
    
    86.2
    %Total
    
    
    84.4
    %
    
    
    86.9
    %
    
    
    85.8
    %
    
    
    86.2
    %
 
 (1)
    
    Represents properties owned for the entirety of the periods presented.(2)
    
    Non-comparable net operating income has been adjusted to reflect a normalized
management fee percentage in lieu of an administrative overhead allocation for comparative
purposes.  38




---



##### 



Liquidity and Capital Resources
 Overview
     Financial Covenants
  39




---



##### 



Unsecured Revolving Credit Facility and Secured Term Loans
 Unsecured RevolvingCredit Facility and2007 Secured Term
    
    
    
    
    
    
    2008 Secured TermLoan
    
    
    Covenant
    
    
    Loan
    
    
    CovenantUnencumbered Pool Leverage(1)
    
    
    47.3
    %
    
    
    £ 65
    %
    
    
    
    
    
    
    Unencumbered Pool Debt Service Coverage Ratio(1)
    
    
    2.9x
    
    
    
    3 1.75x
    
    
    
    
    
    
    
    Maximum Consolidated Total Indebtedness
    
    
    51.3
    %
    
    
    £ 65
    %
    
    
    48.6
    %
    
    
    £ 60
    %Minimum Tangible Net Worth
    
    $
    613,312
    
    
    
    3 $459,596
    
    
    $
    684,090
    
    
    
    3 $459,596Fixed Charge Coverage Ratio
    
    
    1.92x
    
    
    
    3 1.50x
    
    
    
    1.92x
    
    
    
    3 1.50xMaximum Dividend Payout Ratio(1)
    
    
    71.2
    %
    
    
    £ 95
    %
    
    
    71.2
    %
    
    
    £ 95
    %
 
 (1)
 Senior Notes
 Senior Notes
    
    CovenantUnencumbered Pool Leverage
    
    
    45.9
    %
    
    £ 65%Maximum Consolidated Total Indebtedness
    
    
    49.9
    %
    
    £ 65%Minimum Tangible Net Worth
    
    $
    647,629
    
    
    3 $459,596Fixed Charge Coverage Ratio
    
    
    1.92x
    
    
    3 1.50xMaximum Dividend Payout Ratio
    
    
    71.2
    %
    
    £ 95%Maximum Secured Debt
    
    
    30.4
    %
    
    £ 40%
 Non-Financial Covenants in Mortgage Loan Documents
  Cash Flows
  Six Months EndedJune 30,(amounts in thousands)
    
    2010
    
    
    2009
    
    
    ChangeCash provided by operating activities
    
    $
    17,948
    
    
    $
    20,513
    
    
    $
    (2,565
    )Cash used in investing activities
    
    
    (79,198
    )
    
    
    (14,960
    )
    
    
    (64,238
    )Cash provided by (used in) financing activities
    
    
    63,411
    
    
    
    (16,026
    )
    
    
    79,437
 40




---



##### 



Contractual Obligations
    41




---



##### 



Distributions
  Dividends
  Funds From Operations
    42




---



##### 



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income (loss) attributable to common shareholders
    
    $
    32
    
    
    $
    1,607
    
    
    $
    (2,126
    )
    
    $
    6,604Add: Depreciation and amortization:Real estate assets
    
    
    10,488
    
    
    
    9,909
    
    
    
    20,463
    
    
    
    19,855Discontinued operations
    
    
    69
    
    
    
    96
    
    
    
    231
    
    
    
    196Unconsolidated joint ventures
    
    
    125
    
    
    
    96
    
    
    
    238
    
    
    
    111Consolidated joint ventures
    
    
    
    
    
    
    (129
    )
    
    
    
    
    
    
    (503
    )Gain on sale of real estate properties
    
    
    (557
    )
    
    
    
    
    
    
    (557
    )
    
    
    Net income (loss) attributable to noncontrolling
interests in the Operating Partnership
    
    
    1
    
    
    
    45
    
    
    
    (48
    )
    
    
    186FFO available to common shareholders and unitholders
    
    $
    10,158
    
    
    $
    11,624
    
    
    $
    18,201
    
    
    $
    26,449Weighted average common shares and Operating
Partnership units outstanding  diluted
    
    
    37,430
    
    
    
    28,002
    
    
    
    34,473
    
    
    
    27,904
 Off-Balance Sheet Arrangements
 Investment in Affiliates.
 Forward Looking Statements
  
   43




---



##### 



Fair Value Measurements
 
    
 PART II: OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Removed and Reserved
 
 Item 5. Other Information
  
 Item 6. Exhibits
 No.
    
    Description3.1
    
    Amended and Restated Declaration of Trust of the Registrant (incorporated by reference to Exhibit
3.1 to the Registrants Registration Statement on Form S-11 (Registration No. 333-107172), as filed
with the SEC on October 1, 2003).
 44




---



##### 



No.
    
    Description3.2
    
    Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the
Registrants Registration Statement on Form S-11 (Registration No. 333-107172), as filed with the
SEC on October 1, 2003).4.1
    
    Amended and Restated Agreement of Limited Partnership of First Potomac Realty Investment, L.P. dated
September 15, 2003 (incorporated by reference to Exhibit 3.3 to the Registrants Registration
Statement on Form S-11 (Registration No. 333-107172), as filed with the SEC on October 1, 2003).4.2
    
    Form of First Potomac Realty Investment Limited Partnership 6.41% Senior Notes, Series A, due 2013
(incorporated by reference to Exhibit 4.1 to the Registrants Current Report on Form 8-K as filed
with the SEC
on June 23, 2006).4.3
    
    Form of First Potomac Realty Investment Limited Partnership 6.55% Senior Notes, Series B, due 2016
(incorporated by reference to Exhibit 4.2 to the Registrants Current Report on Form 8-K as filed
with the SEC
on June 23, 2006).4.4
    
    Note Purchase Agreement by and among the Registrant, First Potomac Realty Investment Limited
Partnership and the several Purchasers listed on the signature pages thereto, dated as of June 22,
2006 (incorporated by reference to Exhibit 4.3 to the Registrants Current Report on Form 8-K filed
on June 23, 2006).4.5
    
    Trust Guaranty, entered into by the Registrant, dated as of June 22, 2006 (incorporated by reference
to Exhibit 4.4 to the Registrants Current Report on Form 8-K filed on June 23, 2006).4.6
    
    Subsidiary Guaranty, dated as of June 22, 2006 (incorporated by reference to Exhibit 4.5 to the
Registrants Current Report on Form 8-K filed on June 23, 2006).4.7
    
    Indenture, dated as of December 11, 2006, by and among First Potomac Realty Investment Limited
Partnership, the Registrant, as Guarantor, and Wells Fargo Bank, National Association, as Trustee
(incorporated by reference to Exhibit 4.1 to the Registrants Current Report on Form 8-K filed on
December 12, 2006).4.8
    
    Form of First Potomac Realty Investment Limited Partnership 4.0% Exchangeable Senior Note due 2011
(incorporated by reference to Exhibit 4.2 to the Registrants Current Report on Form 8-K filed on
December 12, 2006).10.1
    
    Amendment No. 1 to the Second Amended and Restated Revolving Credit Agreement, dated May 14, 2010,
between First Potomac Realty Investment Limited Partnership, KeyBank N.A., Wells Fargo N.A.,
Wachovia Bank, N.A., Bank of Montreal, PNC Bank N.A., and Chevy Chase Bank (incorporated by
reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed on May 19, 2010).10.2
    
    Amendment No. 1 to the Registrants 2009 Equity Compensation Plan (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on Form 8-K filed on May 21, 2010).10.3
    
    Form of 2010 Restricted Common Share Award Agreement for Trustees (incorporated by reference to
Exhibit 10.2 to the Registrants Current Report on Form 8-K filed on May 21, 2010).10.4
    
    Commitment Increase Agreement, dated June 1, 2010, among First Potomac Realty Investment Limited
Partnership and certain of its subsidiaries, KeyBank N.A. (as administrative agent) and USBank
National Association and TD Bank, N.A., each as additional lenders (incorporated by reference to
Exhibit 10.2 to the Registrants Current Report on Form 8-K filed on June 7, 2010).31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (This exhibit shall not be deemed filed for purposes
of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the
liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference
into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended.)32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (This exhibit shall not be deemed filed for purposes
of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the
liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference
into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended.)
 45




---



##### 



FIRST POTOMAC REALTY TRUSTDate: August 6, 2010
    /s/ Douglas J. DonatelliDouglas J. DonatelliChairman of the Board and Chief Executive OfficerDate: August 6, 2010
    /s/ Barry H. BassBarry H. BassExecutive Vice President and Chief Financial Officer 46




---



##### 



EXHIBIT INDEX
 No.
    
    Description3.1
    
    Amended and Restated Declaration of Trust of the Registrant (incorporated by reference to Exhibit
3.1 to the Registrants Registration Statement on Form S-11 (Registration No. 333-107172), as filed
with the SEC on October 1, 2003).3.2
    
    Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the
Registrants Registration Statement on Form S-11 (Registration No. 333-107172), as filed with the
SEC on October 1, 2003).4.1
    
    Amended and Restated Agreement of Limited Partnership of First Potomac Realty Investment, L.P. dated
September 15, 2003 (incorporated by reference to Exhibit 3.3 to the Registrants Registration
Statement on Form S-11 (Registration No. 333-107172), as filed with the SEC on October 1, 2003).4.2
    
    Form of First Potomac Realty Investment Limited Partnership 6.41% Senior Notes, Series A, due 2013
(incorporated by reference to Exhibit 4.1 to the Registrants Current Report on Form 8-K as filed
with the SEC
on June 23, 2006).4.3
    
    Form of First Potomac Realty Investment Limited Partnership 6.55% Senior Notes, Series B, due 2016
(incorporated by reference to Exhibit 4.2 to the Registrants Current Report on Form 8-K as filed
with the SEC
on June 23, 2006).4.4
    
    Note Purchase Agreement by and among the Registrant, First Potomac Realty Investment Limited
Partnership and the several Purchasers listed on the signature pages thereto, dated as of June 22,
2006 (incorporated by reference to Exhibit 4.3 to the Registrants Current Report on Form 8-K filed
on June 23, 2006).4.5
    
    Trust Guaranty, entered into by the Registrant, dated as of June 22, 2006 (incorporated by reference
to Exhibit 4.4 to the Registrants Current Report on Form 8-K filed on June 23, 2006).4.6
    
    Subsidiary Guaranty, dated as of June 22, 2006 (incorporated by reference to Exhibit 4.5 to the
Registrants Current Report on Form 8-K filed on June 23, 2006).4.7
    
    Indenture, dated as of December 11, 2006, by and among First Potomac Realty Investment Limited
Partnership, the Registrant, as Guarantor, and Wells Fargo Bank, National Association, as Trustee
(incorporated by reference to Exhibit 4.1 to the Registrants Current Report on Form 8-K filed on
December 12, 2006).4.8
    
    Form of First Potomac Realty Investment Limited Partnership 4.0% Exchangeable Senior Note due 2011
(incorporated by reference to Exhibit 4.2 to the Registrants Current Report on Form 8-K filed on
December 12, 2006).10.1
    
    Amendment No. 1 to the Second Amended and Restated Revolving Credit Agreement, dated May 14, 2010,
between First Potomac Realty Investment Limited Partnership, KeyBank N.A., Wells Fargo N.A.,
Wachovia Bank, N.A., Bank of Montreal, PNC Bank N.A., and Chevy Chase Bank (incorporated by
reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed on May 19, 2010).10.2
    
    Amendment No. 1 to the Registrants 2009 Equity Compensation Plan (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on Form 8-K filed on May 21, 2010).10.3
    
    Form of 2010 Restricted Common Share Award Agreement for Trustees (incorporated by reference to
Exhibit 10.2 to the Registrants Current Report on Form 8-K filed on May 21, 2010).10.4
    
    Commitment Increase Agreement, dated June 1, 2010, among First Potomac Realty Investment Limited
Partnership and certain of its subsidiaries, KeyBank N.A. (as administrative agent) and USBank
National Association and TD Bank, N.A., each as additional lenders (incorporated by reference to
Exhibit 10.2 to the Registrants Current Report on Form 8-K filed on June 7, 2010).31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (This exhibit shall not be deemed filed for purposes
of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the
liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference
into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended.)32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (This exhibit shall not be deemed filed for purposes
of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the
liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference
into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended.)