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 September 30, 2008.
 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
(State or other jurisdiction of 
incorporation or organization)
    
    37-1470730
(I.R.S. Employer
Identification No.)
 7600
Wisconsin Avenue, 11 th Floor, Bethesda, MD 20814
 (301) 986-9200
 þ o
  Large accelerated filer
o
    
    Accelerated filer
þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
  o þ




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##### 



FIRST POTOMAC REALTY TRUST
FORM 10-Q
 INDEX
 PagePart I: Financial InformationItem 1. Financial StatementsConsolidated balance sheets as of September 30, 2008 (unaudited) and December 31, 2007
    
    
    3Consolidated statements of operations (unaudited) for the three and nine months ended September 30, 2008 and 2007
    
    
    4Consolidated statements of cash flows (unaudited) for the nine months ended September 30, 2008 and 2007
    
    
    5Notes to consolidated financial statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    38Item 4. Controls and Procedures
    
    
    38Part II: Other InformationItem 1. Legal Proceedings
    
    
    39Item 1A. Risk Factors
    
    
    39Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39Item 3. Defaults Upon Senior Securities
    
    
    39Item 4. Submission of Matters to a Vote of Security Holders
    
    
    39Item 5. Other Information
    
    
    39Item 6. Exhibits
    
    
    39Signatures
    
    
    41
  2




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##### 



FIRST POTOMAC REALTY TRUST
 
   September 30, 2008
    
    
    December 31, 2007(unaudited)Assets:Rental property, net
    
    $
    993,997
    
    
    $
    977,106Cash and cash equivalents
    
    
    7,699
    
    
    
    5,198Escrows and reserves
    
    
    8,703
    
    
    
    13,360Accounts and other receivables, net of
allowance for doubtful accounts of $671
and $700, respectively
    
    
    4,378
    
    
    
    4,365Accrued straight-line rents, net of
allowance for doubtful accounts of $79
and $43, respectively
    
    
    7,800
    
    
    
    6,638Deferred costs, net
    
    
    16,585
    
    
    
    12,377Prepaid expenses and other assets
    
    
    7,837
    
    
    
    6,525Intangible assets, net
    
    
    22,973
    
    
    
    26,730Total assets
    
    $
    1,069,972
    
    
    $
    1,052,299Liabilities:Mortgage loans
    
    $
    324,383
    
    
    $
    390,072Exchangeable senior notes, net of discount
    
    
    89,703
    
    
    
    122,797Senior notes
    
    
    75,000
    
    
    
    75,000Secured term loans
    
    
    85,000
    
    
    
    50,000Unsecured revolving credit facility
    
    
    80,800
    
    
    
    38,600Accounts payable and other liabilities
    
    
    13,892
    
    
    
    11,450Accrued interest
    
    
    4,531
    
    
    
    2,776Rents received in advance
    
    
    5,260
    
    
    
    4,709Tenant security deposits
    
    
    5,398
    
    
    
    5,422Deferred market rent
    
    
    8,166
    
    
    
    9,117Total liabilities
    
    
    692,133
    
    
    
    709,943Minority interests (redemption value $13,346
and $13,957, respectively)
    
    
    10,984
    
    
    
    11,545Shareholders equity:Common shares, $0.001 par value, 100,000
shares authorized; 26,978 and 24,251 shares
issued and outstanding, respectively
    
    
    27
    
    
    
    24Additional paid-in capital
    
    
    469,873
    
    
    
    429,870Accumulated other comprehensive income
    
    
    393
    
    
    
    Dividends in excess of accumulated earnings
    
    
    (103,438
    )
    
    
    (99,083
    )Total shareholders equity
    
    
    366,855
    
    
    
    330,811Total liabilities and shareholders equity
    
    $
    1,069,972
    
    
    $
    1,052,299
  3




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##### 



FIRST POTOMAC REALTY TRUST
 
    Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Rental
    
    $
    25,491
    
    
    $
    25,029
    
    
    $
    75,316
    
    
    $
    73,537Tenant reimbursements and other
    
    
    5,577
    
    
    
    5,033
    
    
    
    16,304
    
    
    
    15,010Total revenues
    
    
    31,068
    
    
    
    30,062
    
    
    
    91,620
    
    
    
    88,547Operating expenses:Property operating
    
    
    7,160
    
    
    
    6,576
    
    
    
    20,091
    
    
    
    18,987Real estate taxes and insurance
    
    
    3,173
    
    
    
    2,845
    
    
    
    9,122
    
    
    
    8,102General and administrative
    
    
    2,797
    
    
    
    2,362
    
    
    
    8,336
    
    
    
    7,949Depreciation and amortization
    
    
    9,113
    
    
    
    9,640
    
    
    
    27,373
    
    
    
    29,432Total operating expenses
    
    
    22,243
    
    
    
    21,423
    
    
    
    64,922
    
    
    
    64,470Operating income
    
    
    8,825
    
    
    
    8,639
    
    
    
    26,698
    
    
    
    24,077Other expenses (income):Interest expense
    
    
    8,318
    
    
    
    9,137
    
    
    
    26,226
    
    
    
    26,261Interest and other income
    
    
    (142
    )
    
    
    (123
    )
    
    
    (377
    )
    
    
    (489
    )Gain on early retirement of debt
    
    
    
    
    
    
    
    
    
    
    (4,732
    )
    
    
    Total other expenses
    
    
    8,176
    
    
    
    9,014
    
    
    
    21,117
    
    
    
    25,772Income (loss) from continuing operations before
minority interests
    
    
    649
    
    
    
    (375
    )
    
    
    5,581
    
    
    
    (1,695
    )Minority interests
    
    
    (20
    )
    
    
    12
    
    
    
    (172
    )
    
    
    52Income (loss) from continuing operations
    
    
    629
    
    
    
    (363
    )
    
    
    5,409
    
    
    
    (1,643
    )Discontinued operations:Income from operations of disposed property
    
    
    
    
    
    
    607
    
    
    
    1,335
    
    
    
    1,718Gain on sale of disposed property
    
    
    
    
    
    
    
    
    
    
    14,274
    
    
    
    Minority interests in discontinued operations
    
    
    
    
    
    
    (19
    )
    
    
    (481
    )
    
    
    (55
    )Income from discontinued operations
    
    
    
    
    
    
    588
    
    
    
    15,128
    
    
    
    1,663Net income
    
    $
    629
    
    
    $
    225
    
    
    $
    20,537
    
    
    $
    20Net income
per share  basic and diluted:Income (loss) from continuing operations
    
    $
    0.03
    
    
    $
    (0.01
    )
    
    $
    0.22
    
    
    $
    (0.07
    )Income from discontinued operations
    
    
    
    
    
    
    0.02
    
    
    
    0.63
    
    
    
    0.07Net income
    
    $
    0.03
    
    
    $
    0.01
    
    
    $
    0.85
    
    
    $
    Weighted
average common shares outstanding 
basic
    
    
    24,150
    
    
    
    24,068
    
    
    
    24,121
    
    
    
    24,045Weighted average common shares
outstanding 
diluted
    
    
    24,204
    
    
    
    24,068
    
    
    
    24,172
    
    
    
    24,045
  4




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##### 



FIRST POTOMAC REALTY TRUST
 
    Nine Months Ended September 30,2008
    
    
    2007Cash flows from operating activitiesNet income
    
    $
    20,537
    
    
    $
    20Adjustments to reconcile net income to net cash provided by
operating activities:Discontinued operations:Gain on sale of disposed property
    
    
    (14,274
    )
    
    
    Depreciation and amortization
    
    
    479
    
    
    
    823Minority interests
    
    
    481
    
    
    
    55Depreciation and amortization
    
    
    28,025
    
    
    
    30,001Bad debt expense
    
    
    216
    
    
    
    397Stock based compensation
    
    
    1,459
    
    
    
    1,123Amortization of deferred market rent
    
    
    (1,364
    )
    
    
    (1,299
    )Amortization of deferred financing costs and bond discount
    
    
    1,331
    
    
    
    1,237Amortization of rent abatement
    
    
    1,120
    
    
    
    850Minority interests
    
    
    172
    
    
    
    (52
    )Gain on early retirement of debt
    
    
    (4,732
    )
    
    
    Changes in assets and liabilities:Escrows and reserves
    
    
    4,657
    
    
    
    (1,007
    )Accounts and other receivables
    
    
    (157
    )
    
    
    (46
    )Accrued straight-line rents
    
    
    (1,635
    )
    
    
    (1,316
    )Prepaid expenses and other assets
    
    
    (1,537
    )
    
    
    (2,016
    )Tenant security deposits
    
    
    (24
    )
    
    
    442Accounts payable and other liabilities
    
    
    1,096
    
    
    
    1,771Accrued interest
    
    
    1,755
    
    
    
    2,975Rents received in advance
    
    
    591
    
    
    
    115Deferred costs
    
    
    (6,290
    )
    
    
    (3,316
    )Total adjustments
    
    
    11,369
    
    
    
    30,737Net cash provided by operating activities
    
    
    31,906
    
    
    
    30,757Cash flows from investing activitiesProceeds from sale of real estate assets
    
    
    50,573
    
    
    
    Additions to rental property
    
    
    (18,090
    )
    
    
    (15,523
    )Additions to construction in process
    
    
    (9,533
    )
    
    
    (8,704
    )Acquisition of land parcels
    
    
    
    
    
    
    (5,436
    )Acquisition of rental property and associated intangible assets
    
    
    (46,573
    )
    
    
    (72,592
    )Net cash used in investing activities
    
    
    (23,623
    )
    
    
    (102,255
    )Cash flows from financing activitiesFinancing costs
    
    
    (1,090
    )
    
    
    (2,307
    )Proceeds from debt
    
    
    192,300
    
    
    
    124,500Proceeds from issuance of stock, net
    
    
    38,165
    
    
    
    Repayments of debt
    
    
    (209,428
    )
    
    
    (57,455
    )Dividends to shareholders
    
    
    (24,892
    )
    
    
    (24,665
    )Distributions to minority interests
    
    
    (795
    )
    
    
    (799
    )Redemption of partnership units
    
    
    (80
    )
    
    
    (5,229
    )Stock option exercises
    
    
    38
    
    
    
    296Net cash (used in) provided by financing activities
    
    
    (5,782
    )
    
    
    34,341Net increase (decrease) in cash and cash equivalents
    
    
    2,501
    
    
    
    (37,157
    )Cash and cash equivalents, beginning of period
    
    
    5,198
    
    
    
    41,367Cash and cash equivalents, end of period
    
    $
    7,699
    
    
    $
    4,210
  5




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##### 



FIRST POTOMAC REALTY TRUST
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (1) Description of Business
    (2) Summary of Significant Accounting Policies
 (a) Principles of Consolidation
    (b) Use of Estimates
  (c) Revenue Recognition
 Accounting for Leases
 6




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##### 



(d) Cash and Cash Equivalents
  (e) Escrows and Reserves
  (f) Rental Property
  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
    Capitalization of Interest Cost
 7




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##### 



(g) Purchase Accounting
  §
    
    the 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 market value of the lease
origination costs had the in-place leases been originated on the date of acquisition; the
value of in-place leases represents absorption costs for the estimated lease-up period in
which vacancy and foregone revenue are incurred;§
    
    the 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 fair market lease rates for the corresponding spaces over the remaining
non-cancelable terms of the related leases, which range from one to nineteen years; and§
    
    the value of intangible tenant or customer relationships.
  (h) Intangible Assets
 Business Combinations
  8




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##### 



Goodwill and Other Intangibles
 (i) Derivatives and Hedging
    Transaction Date
    
    Instrument
    
    Amount
    
    Contractual Interest Rate
    
    Effective Interest RateJanuary 2008
    
    Term Loan
    
    $
    50,000
    
    
    LIBOR, plus a variable spread(1)
    
    2.71%, plus a variable spread(1)August 2008
    
    Term Loan
    
    
    35,000
    
    
    LIBOR, plus 225 basis points
    
    5.58%September 2008
    
    Mortgage Loan
    
    
    28,000
    
    
    LIBOR, plus 250 basis points
    
    5.97%
 
 (1)
    
    At September 30, 2008, the contractual interest rate on the Companys $50 million
term loan was LIBOR, plus 1.10% and the effective interest rate was 3.81%.   9




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##### 



(j) Income Taxes
  (k) Minority Interests
 Implementation Issues Related to
the Treatment of Minority Interests in Certain Real Estate Investment Trusts.
  (l) Earnings Per Share
  10




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##### 



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Numerator for basic and diluted earnings per
share calculations:Income (loss) from continuing operations
    
    $
    629
    
    
    $
    (363
    )
    
    $
    5,409
    
    
    $
    (1,643
    )Income from discontinued operations
    
    
    
    
    
    
    588
    
    
    
    15,128
    
    
    
    1,663Net income
    
    $
    629
    
    
    $
    225
    
    
    $
    20,537
    
    
    $
    20Denominator for basic and diluted earnings per
share calculations:Weighted average shares outstanding  basic
    
    
    24,150
    
    
    
    24,068
    
    
    
    24,121
    
    
    
    24,045Effect of dilutive shares:Employee stock options and non-vested shares
    
    
    54
    
    
    
    
    
    
    
    51
    
    
    
    Weighted average shares outstanding  diluted
    
    
    24,204
    
    
    
    24,068
    
    
    
    24,172
    
    
    
    24,045Net income per share  basic and diluted:Income (loss) from continuing operations
    
    $
    0.03
    
    
    $
    (0.01
    )
    
    $
    0.22
    
    
    $
    (0.07
    )Income from discontinued operations
    
    
    
    
    
    
    0.02
    
    
    
    0.63
    
    
    
    0.07Net income
    
    $
    0.03
    
    
    $
    0.01
    
    
    $
    0.85
    
    
    $
    
 Earnings Per Share
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Stock option awards
    
    
    667
    
    
    
    645
    
    
    
    684
    
    
    
    657Non-vested share awards
    
    
    77
    
    
    
    104
    
    
    
    89
    
    
    
    106744
    
    
    
    749
    
    
    
    773
    
    
    
    763
  (m) Share-Based Compensation
 Stock Options Summary
  Non-vested share awards
  11




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##### 



(n) Reclassifications
  (o) Application of New Accounting Standards
 Fair Value Measurements, Effective Date of FASB Statement No. 157 Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active
 Business
Combinations
 Noncontrolling
Interests in Consolidated Financial Statements, an Amendment of ARB No. 51
 Disclosures about
Derivative Instruments and Hedging Activities an Amendment of FASB Statement No. 133 Accounting for
Derivative Instruments and Hedging Activities
 12




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##### 



Determination of the Useful Life of
Intangible Assets
 Accounting for Convertible Debt
Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)
 Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities Earnings Per Share
 (3) Rental Property
  September 30, 2008
    
    
    December 31, 2007Land
    
    $
    236,220
    
    
    $
    236,636Buildings and improvements
    
    
    777,557
    
    
    
    764,664Tenant improvements
    
    
    54,611
    
    
    
    39,786Furniture, fixtures and equipment
    
    
    9,898
    
    
    
    9,900Construction in process
    
    
    20,123
    
    
    
    14,1951,098,409
    
    
    
    1,065,181Less: accumulated depreciation
    
    
    (104,412
    )
    
    
    (88,075
    )$
    993,997
    
    
    $
    977,106
 (a) Development and Redevelopment Activity
   13




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##### 



(b) Acquisitions
  Leased andOccupied at
    
    
    AggregateSeptember 30,
    
    
    PurchaseLocation
    
    
    Acquisition Date
    
    
    Property Type
    
    
    Square Feet
    
    
    2008
    
    
    PriceTriangle Business Center
    
    Baltimore, MD
    
    
    8/22/2008
    
    
    Business Park
    
    
    73,456
    
    
    
    68
    %(1)
    
    $
    4,550Rivers Park I & II
    
    Columbia, MD
    
    
    9/29/2008
    
    
    Business Park
    
    
    306,356
    
    
    
    100
    %(2)
    
    
    42,023379,812
    
    
    
    
    
    
    $
    46,573
 
 (1)
    
    Includes 7,584 square feet leased back by the seller at closing, which is considered
contingent consideration. All cash received under these leases
will be treated as a reduction of the basis of the property.(2)
    
    Includes 66,481 square feet leased back by the seller at closing through four
separate leases and is considered contingent consideration. On October 1, 2008, the Company terminated two of these leases, totaling 41,972 square feet, and
received a termination fee of $1.3 million in cash, which was recognized as a reduction in
the basis of the property. The seller has also agreed, in the event a certain tenant vacates
its space, to lease the space for up to 18 months. All cash received under leases with the
seller will be treated as a reduction of the basis of the property.   Land
    
    $
    9,621Acquired tenant improvements
    
    
    3,033Building and improvements
    
    
    31,070In-place leases intangible
    
    
    2,965Acquired leasing commissions
    
    
    510Customer relationships intangible
    
    
    Above-market leases acquired
    
    
    202Total assets acquired
    
    
    47,401Below-market leases acquired
    
    
    (828
    )Net assets acquired
    
    $
    46,573
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,
    
    September 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Pro forma total revenues
    
    $
    31,708
    
    
    $
    30,774
    
    
    $
    93,669
    
    
    $
    92,865Pro forma income from
continuing
operations
    
    
    502
    
    
    
    571
    
    
    
    6,591
    
    
    
    136Pro forma basic and
diluted
income per share from
continuing operations
    
    $
    0.02
    
    
    $
    0.02
    
    
    $
    0.25
    
    
    $
    0.01
 14




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##### 



(4) Discontinued Operations
   Three Months Ended September 30,
    
    Nine Months Ended September 30,2008
    
    2007
    
    2008
    
    2007Revenue
    
    $
    
    
    
    $
    1,207
    
    
    $
    2,473
    
    
    $
    3,701Income from operations of
disposed property
    
    
    
    
    
    
    607
    
    
    
    1,335
    
    
    
    1,718Gain on sale of disposed property
    
    
    
    
    
    
    
    
    
    
    14,274
    
    
    
    
 (5) Debt
  September 30,
    
    
    December 31,2008
    
    
    2007Mortgage debt, effective interest rates ranging from 5.13% to 8.53%, maturing at
various dates through June 2021(1)
    
    $
    324,383
    
    
    $
    390,072Exchangeable senior notes, net of discount, effective interest rate of 4.45%, maturing
December 2011
    
    
    89,703
    
    
    
    122,797Series 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 3.81%, maturing August 2011(2)
    
    
    50,000
    
    
    
    50,000Secured term loan, effective interest rate of 5.58%, maturing August 2011(3)
    
    
    35,000
    
    
    
    Unsecured revolving credit facility, effective interest rate of LIBOR, plus 1.20%,
maturing April 2011(4)
    
    
    80,800
    
    
    
    38,600$
    654,886
    
    
    $
    676,469
 
 (1)
    
    Mortgage debt includes a variable interest rate mortgage of $28.0 million for
Rivers Park I & II, which has an interest rate of LIBOR, plus 2.50%. In September 2008,
the Company entered into an interest rate swap agreement that fixed the underlying interest
rate on the loan at 5.97%.(2)
    
    The term loan has a contractual interest rate of LIBOR, plus 1.10%. In January
2008, the Company entered into an interest rate swap agreement that fixed the underlying
interest rate on the loan at 2.71%, plus a spread of 70 to 125 basis points. The loan
matures in August 2010 with a one-year extension at the Companys option, which it intends
to exercise.(3)
    
    The term loan has a contractual interest rate of LIBOR, plus 2.25%. In August
2008, the Company entered into an interest rate swap agreement that fixed the underlying interest rate on the loan at 5.58%. The loan
matures in August 2010 with a one-year extension at the Companys option, which it intends to
exercise.(4)
    
    The unsecured revolving credit facility has a contractual interest rate of
LIBOR, plus a spread of 80 to 135 basis points. The loan matures in April 2010 with a
one-year extension at the Companys option, which it intends to exercise. 15




---



##### 



(a) Mortgage Debt
  Contractual
    
    
    EffectiveInterest
    
    
    Interest
    
    
    Maturity
    
    September 30,
    
    
    December 31,Property
    
    Rate
    
    
    Rate
    
    
    Date
    
    2008
    
    
    2007Herndon Corporate Center(1)
    
    
    5.11
    %
    
    
    5.66
    %
    
    
    
    $
    
    
    
    $
    8,538Norfolk Commerce Park II (2)
    
    
    6.90
    %
    
    
    5.28
    %
    
    
    
    
    
    
    
    
    7,192Suburban Maryland Portfolio(3)
    
    
    6.71
    %
    
    
    5.54
    %
    
    
    
    
    
    
    
    
    73,546Glenn Dale Business Center
    
    
    7.83
    %
    
    
    5.13
    %
    
    May 2009
    
    
    8,241
    
    
    
    8,4964200 Tech Court
    
    
    8.07
    %
    
    
    8.07
    %
    
    October 2009
    
    
    1,733
    
    
    
    1,752Park Central I
    
    
    8.00
    %
    
    
    5.66
    %
    
    November 2009
    
    
    4,814
    
    
    
    4,9914212 Tech Court
    
    
    8.53
    %
    
    
    8.53
    %
    
    June 2010
    
    
    1,694
    
    
    
    1,710Park Central II
    
    
    8.32
    %
    
    
    5.66
    %
    
    November 2010
    
    
    5,977
    
    
    
    6,196Enterprise Center(4)
    
    
    8.03
    %
    
    
    5.20
    %
    
    December 2010
    
    
    18,275
    
    
    
    18,772Indian Creek Court(4)
    
    
    7.80
    %
    
    
    5.90
    %
    
    January 2011
    
    
    12,917
    
    
    
    13,199403 and 405 Glenn Drive
    
    
    7.60
    %
    
    
    5.50
    %
    
    July 2011
    
    
    8,597
    
    
    
    8,7904612 Navistar Drive(4)
    
    
    7.48
    %
    
    
    5.20
    %
    
    July 2011
    
    
    13,244
    
    
    
    13,565Rivers Park I & II
    
    LIBOR+2.50%
    
    
    5.97
    %
    
    September 2011
    
    
    28,000
    
    
    
    Campus at Metro Park(4)
    
    
    7.11
    %
    
    
    5.25
    %
    
    February 2012
    
    
    24,347
    
    
    
    24,8931434 Crossways Blvd Building II
    
    
    7.05
    %
    
    
    5.38
    %
    
    August 2012
    
    
    10,286
    
    
    
    10,535Crossways Commerce Center
    
    
    6.70
    %
    
    
    6.70
    %
    
    October 2012
    
    
    25,105
    
    
    
    25,377Newington Business Park Center
    
    
    6.70
    %
    
    
    6.70
    %
    
    October 2012
    
    
    15,836
    
    
    
    16,008Prosperity Business Center
    
    
    6.25
    %
    
    
    5.75
    %
    
    January 2013
    
    
    3,780
    
    
    
    3,862Aquia Commerce Center I
    
    
    7.28
    %
    
    
    7.28
    %
    
    February 2013
    
    
    639
    
    
    
    7251434 Crossways Blvd Building I
    
    
    6.25
    %
    
    
    5.38
    %
    
    March 2013
    
    
    8,810
    
    
    
    8,992Linden Business Center
    
    
    6.01
    %
    
    
    5.58
    %
    
    October 2013
    
    
    7,414
    
    
    
    7,515Owings Mills Business Center
    
    
    5.85
    %
    
    
    5.75
    %
    
    March 2014
    
    
    5,674
    
    
    
    5,742Annapolis Commerce Park East
    
    
    5.74
    %
    
    
    6.25
    %
    
    June 2014
    
    
    8,756
    
    
    
    8,834Plaza 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)
    
    
    5.19
    %
    
    
    5.19
    %
    
    August 2015
    
    
    100,000
    
    
    
    100,000Hanover Business Center:Building D
    
    
    8.88
    %
    
    
    6.63
    %
    
    August 2015
    
    
    887
    
    
    
    961Building C
    
    
    7.88
    %
    
    
    6.63
    %
    
    December 2017
    
    
    1,286
    
    
    
    1,359Chesterfield Business Center:Buildings C,D,G and H
    
    
    8.50
    %
    
    
    6.63
    %
    
    August 2015
    
    
    2,311
    
    
    
    2,501Buildings A,B,E and F
    
    
    7.45
    %
    
    
    6.63
    %
    
    June 2021
    
    
    2,729
    
    
    
    2,829Gateway Centre Building I
    
    
    7.35
    %
    
    
    5.88
    %
    
    November 2016
    
    
    1,542
    
    
    
    1,649Airpark Business Center
    
    
    7.45
    %
    
    
    6.63
    %
    
    June 2021
    
    
    1,489
    
    
    
    1,543Total Mortgage Debt
    
    
    
    
    
    
    5.62
    %(6)
    
    
    
    $
    324,383
    
    
    $
    390,072
 
 (1)
    
    The loan was prepaid in February 2008.(2)
    
    The loan was prepaid in July 2008.(3)
    
    The loan was prepaid in August 2008.(4)
    
    The maturity date on these loans represents the anticipated repayment date of the
loans, after which date the interest rates on the loans increase.(5)
    
    On June 5, 2008, the Company sold its Alexandria Corporate Park property and
replaced it in the collateral base with two properties, Northridge I &
II and 15395 John Marshall Highway.(6)
    
    Weighted average interest rate on total mortgage debt.    16




---



##### 



(b) Term Loan
  (c) Unsecured Revolving Credit Facility
  (6) Comprehensive Income
  Transaction Date
    
    Instrument
    
    Amount
    
    Contractual Interest Rate
    
    Effective Interest RateJanuary 2008
    
    Term Loan
    
    $
    50,000
    
    
    LIBOR, plus  variable spread(1)
    
    2.71%, plus a variable spread(1)August 2008
    
    Term Loan
    
    
    35,000
    
    
    LIBOR, plus 225 basis points
    
    5.58%September 2008
    
    Mortgage Loan
    
    
    28,000
    
    
    LIBOR, plus 250 basis points
    
    5.97%
 
 (1)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    629
    
    
    $
    225
    
    
    $
    20,537
    
    
    $
    20Unrealized gain (loss) on
derivative instruments
    
    
    (289
    )
    
    
    
    
    
    
    393
    
    
    
    Total comprehensive income
    
    $
    340
    
    
    $
    225
    
    
    $
    20,930
    
    
    $
    20
 (7) Fair Value Measurements
 The Fair Value Option for Financial Assets and Financial Liabilities
- Including an Amendment of FASB Statement No. 115
 17




---



##### 



Balance atSeptember 30,2008
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Assets:Derivative instrument-swap agreements
    
    $
    393
    
    
    $
    
    
    
    $
    393
    
    
    $
    
  (8) Shareholders Equity
  (9) Segment Information
   18




---



##### 



Three Months Ended September 30, 2008Maryland
    
    
    Northern Virginia
    
    
    Southern Virginia
    
    
    ConsolidatedNumber of buildings
    
    
    74
    
    
    
    47
    
    
    
    54
    
    
    
    175Square feet
    
    
    3,749,989
    
    
    
    2,816,409
    
    
    
    5,254,201
    
    
    
    11,820,599Total revenues
    
    $
    10,263
    
    
    $
    9,335
    
    
    $
    11,470
    
    
    $
    31,068Property operating expense
    
    
    (2,137
    )
    
    
    (2,041
    )
    
    
    (2,982
    )
    
    
    (7,160
    )Real estate taxes and insurance
    
    
    (1,040
    )
    
    
    (1,090
    )
    
    
    (1,043
    )
    
    
    (3,173
    )Total property operating income
    
    $
    7,086
    
    
    $
    6,204
    
    
    $
    7,445
    
    
    
    20,735Depreciation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,113
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,318
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,797
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    629Total assets(1)
    
    $
    431,507
    
    
    $
    281,872
    
    
    $
    308,236
    
    
    $
    1,069,972Capital expenditures(2)
    
    $
    8,178
    
    
    $
    9,647
    
    
    $
    9,582
    
    
    $
    27,623
 Three Months Ended September 30, 2007Maryland
    
    
    Northern Virginia
    
    
    Southern Virginia
    
    
    ConsolidatedNumber of buildings
    
    
    63
    
    
    
    48
    
    
    
    53
    
    
    
    164Square feet
    
    
    3,363,914
    
    
    
    2,978,479
    
    
    
    5,060,182
    
    
    
    11,402,575Total revenues
    
    $
    10,289
    
    
    $
    9,110
    
    
    $
    10,663
    
    
    $
    30,062Property operating expense
    
    
    (1,894
    )
    
    
    (1,821
    )
    
    
    (2,861
    )
    
    
    (6,576
    )Real estate taxes and insurance
    
    
    (951
    )
    
    
    (916
    )
    
    
    (978
    )
    
    
    (2,845
    )Total property operating income
    
    $
    7,444
    
    
    $
    6,373
    
    
    $
    6,824
    
    
    
    20,641Depreciation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,640
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,137
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,362
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    135Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    588Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    225Total assets(1)
    
    $
    382,264
    
    
    $
    327,173
    
    
    $
    305,629
    
    
    $
    1,052,048Capital expenditures(2)
    
    $
    4,967
    
    
    $
    6,625
    
    
    $
    11,843
    
    
    $
    24,227
 Nine Months Ended September 30, 2008Maryland
    
    
    Northern Virginia
    
    
    Southern Virginia
    
    
    ConsolidatedTotal revenues
    
    $
    30,928
    
    
    $
    27,203
    
    
    $
    33,489
    
    
    $
    91,620Property operating expense
    
    
    (6,314
    )
    
    
    (5,830
    )
    
    
    (7,947
    )
    
    
    (20,091
    )Real estate taxes and insurance
    
    
    (2,926
    )
    
    
    (3,093
    )
    
    
    (3,103
    )
    
    
    (9,122
    )Total property operating income
    
    $
    21,688
    
    
    $
    18,280
    
    
    $
    22,439
    
    
    
    62,407Depreciation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,373
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,226
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,336
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,937Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,128Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    20,537
 Nine Months Ended September 30, 2007Maryland
    
    
    Northern Virginia
    
    
    Southern Virginia
    
    
    ConsolidatedTotal revenues
    
    $
    30,040
    
    
    $
    27,204
    
    
    $
    31,303
    
    
    $
    88,547Property operating expense
    
    
    (5,866
    )
    
    
    (5,694
    )
    
    
    (7,427
    )
    
    
    (18,987
    )Real estate taxes and insurance
    
    
    (2,698
    )
    
    
    (2,483
    )
    
    
    (2,921
    )
    
    
    (8,102
    )Total property operating income
    
    $
    21,476
    
    
    $
    19,027
    
    
    $
    20,955
    
    
    
    61,458Depreciation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,432
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,261
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,949
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    541Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,663Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    20
 
 (1)
    
    Corporate assets not allocated to any of the Companys reportable segments
totaled $48,357 and $36,982 at September 30, 2008 and 2007, respectively.(2)
    
    Capital expenditures for corporate assets not allocated to any of the Companys
reportable segments totaled $216 and $792 at September 30, 2008 and 2007, respectively. 19




---



##### 



(10) Supplemental Disclosure of Cash Flow Information
  2008
    
    2007Cash paid for interest, net
    
    $
    24,389
    
    
    $
    24,360Non-cash investing and financing activities:Debt assumed in connection with
acquisitions of real estate
    
    
    
    
    
    
    8,883Issuance of Operating Partnership units in
exchange for limited partnership interests
    
    
    
    
    
    
    1,701Conversion of Operating Partnership units
into common shares
    
    
    358
    
    
    
    362
    
 20




---



##### 



The following discussion and analysis of the Companys financial condition and results of
operations should be read in conjunction with the 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 or contribute properties to joint ventures; and
    
    continue to grow its portfolio through acquisition of new properties, potentially
through joint ventures.
  Executive Summary
    21




---



##### 



Significant Third Quarter Transactions
 
    
    During the third quarter of 2008, the Company executed 307,000 square feet of new
leases, including 75,000 square feet at Diamond Hill Distribution Center, 47,000 square
feet at Cavalier Industrial Park and 46,000 square feet at Rivers Bend Center. Rent is
expected to commence for all new leases by the end of the first quarter of 2009;
    
    During the third quarter of 2008, the Company executed 246,000 square feet of renewal
leases, including 120,000 square feet at Frederick Industrial Park and 69,000 square feet
at Sterling Park Business Center;
    
    On August 11, 2008, the Company refinanced a $72.1 million mortgage loan on its
Suburban Maryland Portfolio. The mortgage was prepaid through the issuance of a $35.0
million secured term loan with KeyBank, N.A. and a $37.5 million draw on the Companys
unsecured revolving credit facility. The term loan, which matures in August 2010, has a
one-year extension, at the Companys option, with the payment of a 25 basis point
extension fee. Borrowings on the loan bear interest at a rate of LIBOR plus 225 basis
points. In August 2008, the Company entered into an interest rate swap agreement that
fixed the interest rate on the term loan at 5.58%. The refinancing allows certain assets
formerly encumbered by the Suburban Maryland Portfolio loan to be included in the
Companys unencumbered borrowing base, allowing the Company to make full use of its
unsecured revolving credit facility, while also facilitating the possible sale of those
assets;
    
    The Company acquired Triangle Business Center, a four-building, 73,456 square foot
business park in Baltimore, Maryland, for $4.4 million in cash;
    
    The Company acquired Rivers Park I & II, a six-building, 306,356 square foot business
park in Columbia, Maryland, for $42.3 million. The acquisition was financed with a $28.0
million mortgage loan from U.S. Bank N.A., a draw of $13.0 million on the Companys
unsecured revolving credit facility and available cash. Borrowings on the loan bear
interest at a rate of LIBOR plus 250 basis points. On September 29, 2008, the Company
entered into an interest rate swap agreement that fixed the underlying interest rate on
the loan at 5.97% for its initial three year term; and
    
    In September 2008, the Company completed a follow-on public offering of 2,500,000
common shares at a public offering price of $16.00 per share with an option for the
underwriters to purchase an additional 375,000 common shares to cover any
over-allotments. On October 2, 2008, the underwriters exercised their option to purchase
the additional 375,000 common shares at the offering price of $16.00 per share. In total,
the Company sold 2,875,000 common shares, which generated net proceeds of approximately
$43.9 million. The Company used the proceeds to pay down a portion of the outstanding
balance on its unsecured revolving credit facility.
 Development and Redevelopment Activity
   Development
 
    
    Greenbrier Technology Center III  a 48,000 square foot three-story office building is
currently in the design phase.  Civil site plans have been completed and submitted for
permit and the other construction documents are 70% complete; and
    
    Sterling Park Business Center, Lot 7  a 57,000 square foot office building, adjacent to
the recently completed building, is in design development. Costs to date are for civil
site preparation work as well as construction documents.
 22




---



##### 



Redevelopment
 
    
    Ammendale Business Park  a 76,000 square foot business park redevelopment. Design costs
incurred to date include construction documents and permits. Construction costs include
gutting of the entire interior (floors, walls, doors, ceiling, mechanical and electrical),
completion of roofing and roof top unit demolition and concrete, metal framing, drywall,
plumbing, mechanical and electrical rough-in work. The entire space has been fully
pre-leased to a tenant that is expected to take possession in the fourth quarter of 2008
upon completion of tenant improvements;
    
    Enterprise Parkway  a 71,000 square foot multi-tenanted office redevelopment. Costs
incurred to date include building, lobby and common corridor renovation as well as
schematic architectural and engineering design for future tenant layouts;
    
    Gateway 270  a 55,000 square foot business park redevelopment. Costs incurred to date
include architectural and engineering design and permitting; demolition, metal framing,
plumbing, mechanical and electrical rough-in work, and
    
    Interstate Plaza  a 56,000 square foot multi-tenanted office and warehouse
redevelopment. Costs incurred to date include schematic architectural design for
multi-tenant layouts and exterior renovation work.
  Critical Accounting Policies and Estimates
   Revenue Recognition
   23




---



##### 



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
   Purchase Accounting
  §
    
    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 market value of the lease
origination costs had the in-place leases been originated on the date of acquisition; the
value of in-place leases represents absorption costs for the estimated lease-up period in
which vacancy and foregone revenue are incurred;§

    
    the value of above and below market in-place leases based on the present values (using a
discount rate that reflects the risks associated with the leases acquired) of the
difference between the contractual rent amounts to be paid under the lease and the
estimated fair market lease rates for the corresponding spaces over the remaining
non-cancelable terms of the related leases, which range from one to nineteen years; and§

    
    the intangible value of tenant or customer relationships.
  24




---



##### 



Share-Based Compensation
 Share-Based
Payment
 Results of Operations
 Comparison of the Three and Nine Months Ended September 30, 2008 to the Three and Nine Months Ended
September 30, 2007
 Acquisitions
    Total Revenues
  Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(dollars in thousands)
    
    2008
    
    2007
    
    2008
    
    2007
    
    Increase
    
    Change
    
    Increase
    
    ChangeRental
    
    $
    25,491
    
    
    $
    25,029
    
    
    $
    75,316
    
    
    $
    73,537
    
    
    $
    462
    
    
    
    2
    %
    
    $
    1,779
    
    
    
    2
    %Tenant reimbursements & other
    
    
    5,577
    
    
    
    5,033
    
    
    
    16,304
    
    
    
    15,010
    
    
    
    544
    
    
    
    11
    %
    
    
    1,294
    
    
    
    9
    %
 Rental Revenue
   25




---



##### 



Tenant Reimbursements and Other Revenues
   Total Expenses
 Property Operating Expenses
  Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2008
    
    2007
    
    2008
    
    2007
    
    Increase
    
    Change
    
    Increase
    
    ChangeProperty operating
    
    $
    7,160
    
    
    $
    6,576
    
    
    $
    20,091
    
    
    $
    18,987
    
    
    $
    584
    
    
    
    9
    %
    
    $
    1,104
    
    
    
    6
    %Real estate taxes & insurance
    
    
    3,173
    
    
    
    2,845
    
    
    
    9,122
    
    
    
    8,102
    
    
    
    328
    
    
    
    12
    %
    
    
    1,020
    
    
    
    13
    %
    26




---



##### 



Other Operating Expenses
  Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2008
    
    2007
    
    2008
    
    2007
    
    Increase
    
    Change
    
    Increase
    
    ChangeGeneral and
administrative
    
    $
    2,797
    
    
    $
    2,362
    
    
    $
    8,336
    
    
    $
    7,949
    
    
    $
    435
    
    
    
    18
    %
    
    $
    387
    
    
    
    5
    %
   Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2008
    
    2007
    
    2008
    
    2007
    
    Decrease
    
    Change
    
    Decrease
    
    ChangeDepreciation and amortization
    
    $
    9,113
    
    
    $
    9,640
    
    
    $
    27,373
    
    
    $
    29,432
    
    
    $
    527
    
    
    
    5
    %
    
    $
    2,059
    
    
    
    7
    %
  Other Expense
  Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2008
    
    2007
    
    2008
    
    2007
    
    Decrease
    
    Change
    
    Decrease
    
    ChangeInterest expense
    
    $
    8,318
    
    
    $
    9,137
    
    
    $
    26,226
    
    
    $
    26,261
    
    
    $
    819
    
    
    
    9
    %
    
    $
    35
    
    
    
    
   27




---



##### 



Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2008
    
    2007
    
    2008
    
    2007
    
    Increase
    
    Change
    
    Decrease
    
    ChangeInterest and other
income
    
    $
    142
    
    
    $
    123
    
    
    $
    377
    
    
    $
    489
    
    
    $
    19
    
    
    
    15
    %
    
    $
    112
    
    
    
    23
    %
   Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2008
    
    2007
    
    2008
    
    2007
    
    Change
    
    Change
    
    Increase
    
    ChangeGain on early
retirement of debt
    
    $
    
    
    
    $
    
    
    
    $
    4,732
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    4,732
    
    
    
    
  28




---



##### 



Minority Interests from Continuing Operations
  Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2008
    
    2007
    
    2008
    
    2007
    
    Increase
    
    Change
    
    Increase
    
    ChangeMinority interests
    
    $
    20
    
    
    $
    (12
    )
    
    $
    172
    
    
    $
    (52
    )
    
    $
    32
    
    
    
    267
    %
    
    $
    224
    
    
    
    431
    %
  Income from Discontinued Operations
  Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2008
    
    2007
    
    2008
    
    2007
    
    Decrease
    
    Change
    
    Increase
    
    ChangeIncome from
discontinued
operations
    
    $
    
    
    
    $
    588
    
    
    $
    15,128
    
    
    $
    1,663
    
    
    $
    588
    
    
    
    100
    %
    
    $
    13,465
    
    
    
    810
    %
  Liquidity and Capital Resources
    29




---



##### 



Cash Flows
  Nine Months EndedSeptember 30,(amounts in thousands)
    
    2008
    
    
    2007
    
    
    ChangeCash provided by operating activities
    
    $
    31,906
    
    
    $
    30,757
    
    
    $
    1,149Cash used in investing activities
    
    
    (23,623
    )
    
    
    (102,255
    )
    
    
    78,632Cash (used in) provided by financing activities
    
    
    (5,782
    )
    
    
    34,341
    
    
    
    (40,123
    )
    30




---



##### 



Same Property Net Operating Income
  31




---



##### 



Comparison of the Three and Nine Months Ended September 30, 2008 to the Three and Nine Months Ended
September 30, 2007
  Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    $
    
    
    %
    
    
    September 30,
    
    
    $
    
    
    %(dollars in thousands)
    
    2008
    
    
    2007
    
    
    Change
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    Change
    
    
    ChangeNumber of buildings (1)
    
    
    164
    
    
    
    164
    
    
    
    
    
    
    
    
    
    
    
    154
    
    
    
    154
    
    
    
    
    
    
    
    Same property revenueRental
    
    $
    25,355
    
    
    $
    24,710
    
    
    $
    645
    
    
    
    2.6
    
    
    $
    68,271
    
    
    $
    67,636
    
    
    $
    635
    
    
    
    0.9Tenant reimbursements
    
    
    5,465
    
    
    
    4,932
    
    
    
    533
    
    
    
    10.8
    
    
    
    14,603
    
    
    
    14,054
    
    
    
    549
    
    
    
    3.9Total same property revenue
    
    
    30,820
    
    
    
    29,642
    
    
    
    1,178
    
    
    
    4.0
    
    
    
    82,874
    
    
    
    81,690
    
    
    
    1,184
    
    
    
    1.4Same property operating expensesProperty
    
    
    6,896
    
    
    
    6,485
    
    
    
    411
    
    
    
    6.3
    
    
    
    17,650
    
    
    
    17,726
    
    
    
    (76
    )
    
    
    (0.4
    )Real estate taxes and insurance
    
    
    3,135
    
    
    
    2,812
    
    
    
    323
    
    
    
    11.5
    
    
    
    8,289
    
    
    
    7,528
    
    
    
    761
    
    
    
    10.1Total same property operating expenses
    
    
    10,031
    
    
    
    9,297
    
    
    
    734
    
    
    
    7.9
    
    
    
    25,939
    
    
    
    25,254
    
    
    
    685
    
    
    
    2.7Same property net operating income
    
    $
    20,789
    
    
    $
    20,345
    
    
    $
    444
    
    
    
    2.2
    
    
    $
    56,935
    
    
    $
    56,436
    
    
    $
    499
    
    
    
    0.9Reconciliation to net incomeSame property net operating income
    
    $
    20,789
    
    
    $
    20,345
    
    
    
    
    
    
    
    
    
    
    $
    56,935
    
    
    $
    56,436Non-comparable net operating
income(2)(3)(4)
    
    
    (54
    )
    
    
    296
    
    
    
    
    
    
    
    
    
    
    
    5,472
    
    
    
    5,022General and administrative expenses
    
    
    (2,797
    )
    
    
    (2,362
    )
    
    
    
    
    
    
    
    
    
    
    (8,336
    )
    
    
    (7,949
    )Depreciation and amortization
    
    
    (9,113
    )
    
    
    (9,640
    )
    
    
    
    
    
    
    
    
    
    
    (27,373
    )
    
    
    (29,432
    )Other expenses, net
    
    
    (8,176
    )
    
    
    (9,014
    )
    
    
    
    
    
    
    
    
    
    
    (21,117
    )
    
    
    (25,772
    )Minority interests
    
    
    (20
    )
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    (172
    )
    
    
    52Discontinued operations (5)
    
    
    
    
    
    
    588
    
    
    
    
    
    
    
    
    
    
    
    15,128
    
    
    
    1,663Net income
    
    $
    629
    
    
    $
    225
    
    
    
    
    
    
    
    
    
    
    $
    20,537
    
    
    $
    20
 Weighted Average
    
    Weighted AverageOccupancy
    
    Occupancy2008
    
    2007
    
    2008
    
    2007Same Properties
    
    
    86.9
    %
    
    
    87.7
    %
    
    
    86.2
    %
    
    
    87.1
    %Non-comparable Properties(3) (4)
    
    
    68.3
    %
    
    
    85.8
    %
    
    
    86.3
    %
    
    
    91.1
    %Total
    
    
    86.4
    %
    
    
    87.6
    %
    
    
    86.2
    %
    
    
    87.5
    %
 
 (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.(3)
    
    Non-comparable properties include: Alexandria Corporate Park, Crossways Commerce Center (expansion), Triangle Business Center and Rivers Park I & II. Also, same property results for the nine months ended
September 30, 2008 and 2007 exclude Ammendale Commerce Center, Annapolis Commerce Park East, John Marshall Highway (Building II), Greenbrier Circle Corporate Center, Greenbrier Technology Center I, Pine Glen
and Rivers Bend Center II.(4)
    
    Excludes Interstate Plaza, which was fully vacant as of January 1, 2008.(5)
    
    Discontinued operations represent income and the gain on sale related to Alexandria Corporate Park, which was sold in June 2008.  32




---



##### 



Maryland
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    $
    
    
    %
    
    
    September 30,
    
    
    $
    
    
    %(dollars in thousands)
    
    2008
    
    
    2007
    
    
    Change
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    Change
    
    
    ChangeNumber of buildings (1)
    
    
    64
    
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    60
    
    
    
    
    
    
    
    Same property revenueRental
    
    $
    8,423
    
    
    $
    8,407
    
    
    $
    16
    
    
    
    0.2
    
    
    $
    23,837
    
    
    $
    23,699
    
    
    $
    138
    
    
    
    0.6Tenant reimbursements
    
    
    1,767
    
    
    
    1,813
    
    
    
    (46
    )
    
    
    (2.5
    )
    
    
    4,908
    
    
    
    5,183
    
    
    
    (275
    )
    
    
    (5.3
    )Total same property revenue
    
    
    10,190
    
    
    
    10,220
    
    
    
    (30
    )
    
    
    (0.3
    )
    
    
    28,745
    
    
    
    28,882
    
    
    
    (137
    )
    
    
    (0.5
    )Same property operating expensesProperty
    
    
    2,077
    
    
    
    1,874
    
    
    
    203
    
    
    
    10.8
    
    
    
    5,756
    
    
    
    5,803
    
    
    
    (47
    )
    
    
    (0.8
    )Real estate taxes and insurance
    
    
    1,027
    
    
    
    951
    
    
    
    76
    
    
    
    8.0
    
    
    
    2,754
    
    
    
    2,616
    
    
    
    138
    
    
    
    5.3Total same property operating expenses
    
    
    3,104
    
    
    
    2,825
    
    
    
    279
    
    
    
    9.9
    
    
    
    8,510
    
    
    
    8,419
    
    
    
    91
    
    
    
    1.1Same property net operating income
    
    $
    7,086
    
    
    $
    7,395
    
    
    $
    (309
    )
    
    
    (4.2
    )
    
    $
    20,235
    
    
    $
    20,463
    
    
    $
    (228
    )
    
    
    (1.1
    )Reconciliation to total property operating income:Same property net operating income
    
    $
    7,086
    
    
    $
    7,395
    
    
    
    
    
    
    
    
    
    
    $
    20,235
    
    
    $
    20,463Non-comparable net operating income (2)(3)
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    1,453
    
    
    
    1,013Total property operating income
    
    $
    7,086
    
    
    $
    7,444
    
    
    
    
    
    
    
    
    
    
    $
    21,688
    
    
    $
    21,476
 Weighted Average
    
    Weighted AverageOccupancy
    
    Occupancy2008
    
    2007
    
    2008
    
    2007Same Properties
    
    
    88.7
    %
    
    
    88.9
    %
    
    
    88.5
    %
    
    
    88.8
    %Non-comparable Properties(3)
    
    
    93.8
    %
    
    
    
    
    
    
    97.1
    %
    
    
    99.3
    %Total
    
    
    89.0
    %
    
    
    88.9
    %
    
    
    89.1
    %
    
    
    89.1
    %
 
 (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.(3)
    
    Non-comparable properties include: Triangle Business Center and Rivers Park I & II. In addition, non-comparable properties for the nine months ended September 30, 2008 also include:
Ammendale Commerce Center and Annapolis Commerce Park East.  33




---



##### 



Northern Virginia
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    $
    
    
    %
    
    
    September 30,
    
    
    $
    
    
    %(dollars in thousands)
    
    2008
    
    
    2007
    
    
    Change
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    Change
    
    
    ChangeNumber of buildings (1)
    
    
    46
    
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    46
    
    
    
    46
    
    
    
    
    
    
    
    Same property revenueRental
    
    $
    7,641
    
    
    $
    7,392
    
    
    $
    249
    
    
    
    3.4
    
    
    $
    21,628
    
    
    $
    21,516
    
    
    $
    112
    
    
    
    0.5Tenant reimbursements
    
    
    1,695
    
    
    
    1,375
    
    
    
    320
    
    
    
    23.3
    
    
    
    4,634
    
    
    
    4,058
    
    
    
    576
    
    
    
    14.2Total same property revenue
    
    
    9,336
    
    
    
    8,767
    
    
    
    569
    
    
    
    6.5
    
    
    
    26,262
    
    
    
    25,574
    
    
    
    688
    
    
    
    2.7Same property operating expensesProperty
    
    
    1,977
    
    
    
    1,785
    
    
    
    192
    
    
    
    10.8
    
    
    
    5,485
    
    
    
    5,517
    
    
    
    (32
    )
    
    
    (0.6
    )Real estate taxes and insurance
    
    
    1,076
    
    
    
    883
    
    
    
    193
    
    
    
    21.9
    
    
    
    2,917
    
    
    
    2,377
    
    
    
    540
    
    
    
    22.7Total same property operating
expenses
    
    
    3,053
    
    
    
    2,668
    
    
    
    385
    
    
    
    14.4
    
    
    
    8,402
    
    
    
    7,894
    
    
    
    508
    
    
    
    6.4Same property net operating income
    
    $
    6,283
    
    
    $
    6,099
    
    
    $
    184
    
    
    
    3.0
    
    
    $
    17,860
    
    
    $
    17,680
    
    
    $
    180
    
    
    
    1.0Reconciliation to total property operating incomeSame property net operating income
    
    $
    6,283
    
    
    $
    6,099
    
    
    
    
    
    
    
    
    
    
    $
    17,860
    
    
    $
    17,680Non-comparable net operating income(2)(3)
(4)
    
    
    (79
    )
    
    
    274
    
    
    
    
    
    
    
    
    
    
    
    420
    
    
    
    1,347Total property operating income
    
    $
    6,204
    
    
    $
    6,373
    
    
    
    
    
    
    
    
    
    
    $
    18,280
    
    
    $
    19,027
 Weighted Average
    
    Weighted AverageOccupancy
    
    Occupancy2008
    
    2007
    
    2008
    
    2007Same Properties
    
    
    90.5
    %
    
    
    90.7
    %
    
    
    89.1
    %
    
    
    89.6
    %Non-comparable Properties(3)
    
    
    0.0
    %
    
    
    85.8
    %
    
    
    69.6
    %
    
    
    88.5
    %Total
    
    
    87.8
    %
    
    
    90.0
    %
    
    
    86.7
    %
    
    
    89.4
    %
 
 (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.(3)
    
    Non-comparable properties include: Alexandria Corporate Park. In addition, non-comparable properties for the nine months ended
September 30, 2008 also include: John Marshall Highway (Building II).(4)
    
    Excludes Interstate Plaza, which was fully vacant as of January 1, 2008.  34




---



##### 



Southern Virginia
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    $
    
    
    %
    
    
    September 30,
    
    
    $
    
    
    %(dollars in thousands)
    
    2008
    
    
    2007
    
    
    Change
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    Change
    
    
    ChangeNumber of buildings (1)
    
    
    54
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    48
    
    
    
    
    
    
    
    Same property revenueRental
    
    $
    9,291
    
    
    $
    8,911
    
    
    $
    380
    
    
    
    4.3
    
    
    $
    22,806
    
    
    $
    22,421
    
    
    $
    385
    
    
    
    1.7Tenant reimbursements
    
    
    2,003
    
    
    
    1,744
    
    
    
    259
    
    
    
    14.9
    
    
    
    5,061
    
    
    
    4,813
    
    
    
    248
    
    
    
    5.2Total same property revenue
    
    
    11,294
    
    
    
    10,655
    
    
    
    639
    
    
    
    6.0
    
    
    
    27,867
    
    
    
    27,234
    
    
    
    633
    
    
    
    2.3Same property operating expensesProperty
    
    
    2,842
    
    
    
    2,826
    
    
    
    16
    
    
    
    0.6
    
    
    
    6,409
    
    
    
    6,406
    
    
    
    3
    
    
    
    Real estate taxes and insurance
    
    
    1,032
    
    
    
    978
    
    
    
    54
    
    
    
    5.5
    
    
    
    2,618
    
    
    
    2,535
    
    
    
    83
    
    
    
    3.3Total same property operating
expenses
    
    
    3,874
    
    
    
    3,804
    
    
    
    70
    
    
    
    1.8
    
    
    
    9,027
    
    
    
    8,941
    
    
    
    86
    
    
    
    1.0Same property net operating income
    
    $
    7,420
    
    
    $
    6,851
    
    
    $
    569
    
    
    
    8.3
    
    
    $
    18,840
    
    
    $
    18,293
    
    
    $
    547
    
    
    
    3.0Reconciliation to total
property operating incomeSame property net operating income
    
    $
    7,420
    
    
    $
    6,851
    
    
    
    
    
    
    
    
    
    
    $
    18,840
    
    
    $
    18,293Non-comparable net operating
income(2)(3)
    
    
    25
    
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    3,599
    
    
    
    2,662Total property operating income
    
    $
    7,445
    
    
    $
    6,824
    
    
    
    
    
    
    
    
    
    
    $
    22,439
    
    
    $
    20,955
 Weighted Average
    
    Weighted AverageOccupancy
    
    Occupancy2008
    
    2007
    
    2008
    
    2007Same Properties
    
    
    84.0
    %
    
    
    85.4
    %
    
    
    82.9
    %
    
    
    84.6
    %Non-comparable Properties(3)
    
    
    100.0
    %
    
    
    
    
    
    
    90.4
    %
    
    
    92.0
    %Total
    
    
    84.0
    %
    
    
    85.4
    %
    
    
    84.0
    %
    
    
    84.6
    %
 
 (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.(3)
    
    Non-comparable properties include: Crossways Commerce Center (expansion). In addition, non-comparable properties for the nine months ended
September 30, 2008 also include: Greenbrier Circle Corporate Center, Greenbrier Technology Center I, Pine Glen and Rivers Bend Center II.  35




---



##### 



Contractual Obligations
  Dividends and Distributions
   Funds From Operations
     Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    629
    
    
    $
    225
    
    
    $
    20,537
    
    
    $
    20Add: Depreciation and amortization of real
estate assets
    
    
    9,113
    
    
    
    9,640
    
    
    
    27,373
    
    
    
    29,432Discontinued operations depreciation
and amortization
    
    
    
    
    
    
    275
    
    
    
    479
    
    
    
    823Minority interests
    
    
    20
    
    
    
    7
    
    
    
    653
    
    
    
    3Less: Gain on sale of disposed property
    
    
    
    
    
    
    
    
    
    
    (14,274
    )
    
    
    FFO available to common shareholders and
unitholders
    
    $
    9,762
    
    
    $
    10,147
    
    
    $
    34,768
    
    
    $
    30,278Weighted average common shares and Operating
Partnership units outstanding  diluted
    
    
    24,980
    
    
    
    25,004
    
    
    
    24,952
    
    
    
    25,037
 36




---



##### 



Forward Looking Statements
  37




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##### 



38




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##### 



PART II:  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Recent disruptions in the financial markets could affect our ability to obtain financing on
reasonable terms and have other adverse effects on us and the market price of our common shares.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 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, 2003.3.2
    
    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).
 39




---



##### 



No.
    
    Description4.3
    
    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
    
    Secured Term Loan Agreement, dated
August 11, 2008 (incorporated by
reference to Exhibit 10.1 to the
Registrants Current Report on Form
8-K filed on August 12, 2008).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.)
 40




---



##### 



FIRST POTOMAC REALTY TRUSTDate: November 10, 2008
    /s/ Douglas J. DonatelliDouglas J. DonatelliChairman of the Board and Chief Executive OfficerDate: November 10, 2008
    /s/ Barry H. BassBarry H. BassExecutive Vice President and Chief Financial
Officer 41




---



##### 



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
    
    Secured Term Loan Agreement, dated
August 11, 2008 (incorporated by
reference to Exhibit 10.1 to the
Registrants Current Report on Form
8-K filed on August 12, 2008).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.)