##### 



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 March 31, 2007
 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
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 7600 Wisconsin Avenue, 11 th Floor, Bethesda, MD 20814
 (301) 986-9200
 þ o
  þ o 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 March 31, 2007 (unaudited) and December 31, 2006
    
    
    3Consolidated statements of operations (unaudited) for the three months ended March 31, 2007 and 2006
    
    
    4Consolidated statements of cash flows (unaudited) for the three months ended March 31, 2007 and 2006
    
    
    5Notes to consolidated financial statements (unaudited)
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosure about Market Risk
    
    
    32Item 4.
    
    Controls and Procedures
    
    
    32Part II:
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    33Item 1A.
    
    Risk Factors
    
    
    33Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 3.
    
    Defaults Upon Senior Securities
    
    
    33Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    33Item 5.
    
    Other Information
    
    
    33Item 6.
    
    Exhibits
    
    
    33Signatures
 2




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##### 



FIRST POTOMAC REALTY TRUST
 March 31, 2007
    
    
    December 31, 2006(unaudited)Assets:Rental property, net
    
    $
    931,074
    
    
    $
    884,882Cash and cash equivalents
    
    
    5,412
    
    
    
    41,367Escrows and reserves
    
    
    12,576
    
    
    
    11,139Accounts and other receivables, net of
allowance for doubtful accounts of $546
and $334, respectively
    
    
    4,013
    
    
    
    4,212Accrued straight-line rents, net of
allowance for doubtful accounts of $43
and $41, respectively
    
    
    5,450
    
    
    
    4,973Deferred costs, net
    
    
    9,527
    
    
    
    9,006Prepaid expenses and other assets
    
    
    6,771
    
    
    
    6,191Intangible assets, net
    
    
    33,527
    
    
    
    32,797Total assets
    
    $
    1,008,350
    
    
    $
    994,567Liabilities:Mortgage loans
    
    $
    389,336
    
    
    $
    391,393Exchangeable senior notes, net of discount
    
    
    122,375
    
    
    
    122,234Senior notes
    
    
    75,000
    
    
    
    75,000Unsecured revolving credit facility
    
    
    27,000
    
    
    
    Accounts payable and accrued expenses
    
    
    7,882
    
    
    
    8,898Accrued interest
    
    
    5,020
    
    
    
    2,420Rents received in advance
    
    
    3,801
    
    
    
    3,196Tenant security deposits
    
    
    5,238
    
    
    
    4,965Deferred market rent
    
    
    8,645
    
    
    
    8,883Total liabilities
    
    
    644,297
    
    
    
    616,989Minority interests
    
    
    11,028
    
    
    
    13,992Shareholders equity:Common shares, $0.001 par value, 100,000,000
shares authorized: 24,127,824 and 24,126,886
shares issued and outstanding, respectively
    
    
    24
    
    
    
    24Additional paid-in capital
    
    
    428,132
    
    
    
    430,271Dividends in excess of accumulated earnings
    
    
    (75,131
    )
    
    
    (66,709
    )Total shareholders equity
    
    
    353,025
    
    
    
    363,586Total liabilities and shareholders equity
    
    $
    1,008,350
    
    
    $
    994,567
  3




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##### 



FIRST POTOMAC REALTY TRUST
 Three Months Ended March 31,2007
    
    
    2006(unaudited)Revenues:Rental
    
    $
    24,920
    
    
    $
    20,319Tenant reimbursements and other
    
    
    5,056
    
    
    
    4,055Total revenues
    
    
    29,976
    
    
    
    24,374Operating expenses:Property operating
    
    
    6,558
    
    
    
    4,702Real estate taxes and insurance
    
    
    2,634
    
    
    
    2,172General and administrative
    
    
    2,966
    
    
    
    2,534Depreciation and amortization
    
    
    9,948
    
    
    
    7,863Total operating expenses
    
    
    22,106
    
    
    
    17,271Operating income
    
    
    7,870
    
    
    
    7,103Other expenses (income):Interest expense
    
    
    8,289
    
    
    
    6,590Interest and other income
    
    
    (194
    )
    
    
    (403
    )Total other expenses
    
    
    8,095
    
    
    
    6,187Income (loss) from continuing operations before minority interests
    
    
    (225
    )
    
    
    916Minority interests
    
    
    5
    
    
    
    (52
    )Income (loss) from continuing operations
    
    
    (220
    )
    
    
    864Discontinued operationsIncome from operations of disposed property
    
    
    
    
    
    
    259Minority interests in discontinued operations
    
    
    
    
    
    
    (15
    )Income from discontinued operations
    
    
    
    
    
    
    244Net income (loss)
    
    $
    (220
    )
    
    $
    1,108Basic and diluted earnings (loss) per share:Income (loss) from continuing operations
    
    $
    (0.01
    )
    
    $
    0.04Income from discontinued operations
    
    
    
    
    
    
    0.01Net income (loss)
    
    $
    (0.01
    )
    
    $
    0.05Weighted average common shares outstanding  basic
    
    
    24,026
    
    
    
    20,168Weighted average common shares outstanding  diluted
    
    
    24,026
    
    
    
    20,403
  4




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##### 



FIRST POTOMAC REALTY TRUST
 Three Months Ended March 31,2007
    
    
    2006(unaudited)Cash flows from operating activitiesNet income (loss)
    
    $
    (220
    )
    
    $
    1,108Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Discontinued operations:Depreciation and amortization
    
    
    
    
    
    
    3Minority interests
    
    
    
    
    
    
    15Depreciation and amortization
    
    
    10,147
    
    
    
    7,918Stock based compensation
    
    
    314
    
    
    
    460Bad debt expense (recovery)
    
    
    194
    
    
    
    (34
    )Amortization of deferred market rent
    
    
    (434
    )
    
    
    (543
    )Amortization of deferred financing costs and bond discount
    
    
    400
    
    
    
    209Amortization of rent abatement
    
    
    212
    
    
    
    45Minority interests
    
    
    (5
    )
    
    
    52Changes in assets and liabilities:Escrows and reserves
    
    
    (1,437
    )
    
    
    (834
    )Accounts and other receivables
    
    
    14
    
    
    
    (592
    )Accrued straight-line rents
    
    
    (485
    )
    
    
    (395
    )Prepaid expenses and other assets
    
    
    746
    
    
    
    79Tenant security deposits
    
    
    273
    
    
    
    205Accounts payable and accrued expenses
    
    
    (894
    )
    
    
    (396
    )Accrued interest
    
    
    2,601
    
    
    
    978Rent received in advance
    
    
    604
    
    
    
    288Deferred costs
    
    
    (915
    )
    
    
    (508
    )Total adjustments
    
    
    11,335
    
    
    
    6,950Net cash provided by operating activities
    
    
    11,115
    
    
    
    8,058Cash flows from investing activitiesPurchase deposit on future acquisitions
    
    
    (1,500
    )
    
    
    Additions to rental property
    
    
    (1,552
    )
    
    
    (724
    )Additions to construction in progress
    
    
    (3,001
    )
    
    
    (170
    )Acquisition of land parcels
    
    
    
    
    
    
    (714
    )Acquisition of rental property and associated intangible assets
    
    
    (51,967
    )
    
    
    (86,968
    )Net cash used in investing activities
    
    
    (58,020
    )
    
    
    (88,576
    )Cash flows from financing activitiesFinancing costs
    
    
    (381
    )
    
    
    (480
    )Proceeds from debt
    
    
    27,000
    
    
    
    110,500Repayments of debt
    
    
    (2,057
    )
    
    
    (21,114
    )Redemption of partnership units
    
    
    (5,170
    )
    
    
    Dividends to shareholders
    
    
    (8,201
    )
    
    
    (6,230
    )Distributions to minority interests
    
    
    (261
    )
    
    
    (432
    )Stock option exercises
    
    
    20
    
    
    
    109Net cash provided by financing activities
    
    
    10,950
    
    
    
    82,353Net increase (decrease) in cash and cash equivalents
    
    
    (35,955
    )
    
    
    1,835Cash and cash equivalents, beginning of period
    
    
    41,367
    
    
    
    3,356Cash and cash equivalents, end of period
    
    $
    5,412
    
    
    $
    5,191
  5




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##### 



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




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##### 



(e) Cash and Cash Equivalents
  (f) Escrows and Reserves
  (g) 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
    7




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##### 



Capitalization of Interest Cost
 (h) Purchase Accounting
  §
    
    value of leases 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 and market rents over the remaining
non-cancelable lease terms, ranging from one to twenty years; and§
    
    the intangible value of tenant or customer relationships.
  (i) Intangible Assets
 Business Combinations
  8




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##### 



Goodwill and Other Intangibles
 (j) Derivatives and Hedging
    (k) Income Taxes
  (l) Minority Interests
   9




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##### 



(m) Earnings Per Share
   2007
    
    
    2006Numerator for basic and diluted per share calculations:Income (loss) from continuing operations
    
    $
    (220
    )
    
    $
    864Income from discontinued operations
    
    
    
    
    
    
    244Net income (loss)
    
    $
    (220
    )
    
    $
    1,108Denominator for basic and diluted per share calculations:Weighted average shares outstanding  basic
    
    
    24,026
    
    
    
    20,168Effect of dilutive shares:Employee stock options and nonvested shares (1)
    
    
    
    
    
    
    235Weighted average shares outstanding  diluted
    
    
    24,026
    
    
    
    20,403Basic and diluted earnings (loss) per share:Continuing operations
    
    $
    (0.01
    )
    
    $
    0.04Discontinued operations
    
    
    
    
    
    
    0.01Net income (loss)
    
    $
    (0.01
    )
    
    $
    0.05
 
 (1)
    
    Employee stock options and nonvested shares totaling 246 for 2007 are not included as they are anti-dilutive. (n) Share Based Compensation
 Share Based Payment,
  Stock Options Summary
  10




---



##### 



WeightedAverageRemaining
    
    
    AggregateWeighted Average
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    Term
    
    
    ValueOutstanding, December 31, 2006
    
    
    588,283
    
    
    $
    17.73
    
    
    7.2 years
    
    $
    6,693,254Granted
    
    
    86,850
    
    
    
    29.12Exercised
    
    
    (938
    )
    
    
    21.36Forfeited
    
    
    (8,519
    )
    
    
    26.37Outstanding, March 31, 2007
    
    
    665,676
    
    
    $
    19.10
    
    
    7.3 years
    
    $
    6,347,994Exercisable, March 31, 2007
    
    
    415,693
    
    
    $
    16.57
    
    
    6.8 years
    
    $
    4,989,309Options expected to vest,
March 31, 2007
    
    
    227,471
    
    
    $
    22.98
    
    
    8.2 years
    
    $
    1,309,020
 Option Exercises
    2007Weighted average risk free interest rate
    
    
    4.70
    %Expected volatility
    
    
    21.0
    %Expected dividend yield
    
    
    4.71
    %Weighted average expected life of options
    
    5 years
 Nonvested share awards
  (o) Application of New Accounting Standards
 Accounting for Uncertainty in
Income Taxes, an Interpretation of FASB Statement No. 109
 11




---



##### 



Accounting
for Income Taxes
 The Fair Value
Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No.
115,
 (2) Rental Property
  March 31, 2007
    
    
    December 31, 2006Land
    
    $
    224,209
    
    
    $
    215,004Buildings and improvements
    
    
    725,986
    
    
    
    687,901Construction in process
    
    
    9,858
    
    
    
    6,980Tenant improvements
    
    
    30,427
    
    
    
    27,958Furniture, fixtures and equipment
    
    
    9,877
    
    
    
    9,8801,000,357
    
    
    
    947,723Less: accumulated depreciation
    
    
    (69,283
    )
    
    
    (62,841
    )$
    931,074
    
    
    $
    884,882
 Development and Construction Activity
  Acquisitions
  Acquisition
    
    Property
    
    Square
    
    
    Leased at
    
    
    AcquisitionLocation
    
    Date
    
    Type
    
    Feet
    
    
    March 31, 2007
    
    
    CostGreenbrier Circle Corporate Center
    
    Chesapeake, VA
    
    1/9/2007
    
    Flex
    
    
    229,163
    
    
    
    96
    %
    
    $
    25,538Greenbrier Technology Center I
    
    Chesapeake, VA
    
    1/9/2007
    
    Flex
    
    
    95,843
    
    
    
    83
    %
    
    
    10,670Pine Glen
    
    Richmond, VA
    
    2/20/2007
    
    Flex
    
    
    86,720
    
    
    
    100
    %
    
    
    5,382Ammendale Commerce Center 1
    
    Beltsville, MD
    
    3/28/2007
    
    Flex
    
    
    129,358
    
    
    
    41
    %
    
    
    10,377Total
    
    
    
    
    
    
    
    
    541,084
    
    
    
    81
    %
    
    $
    51,967
 
 1
    
    Includes a 75,747 square-foot vacant building, which was taken out of service
upon acquisition. The building is currently being redeveloped.  12




---



##### 



Land
    
    $
    9,204Acquired tenant improvements
    
    
    1,503Building and improvements
    
    
    37,592In-place leases intangible
    
    
    3,289Acquired leasing commissions
    
    
    449Customer relations intangible
    
    
    3Above-market leases acquired
    
    
    329Total assets acquired
    
    
    52,369Below-market leases acquired
    
    
    (402
    )Net assets acquired
    
    $
    51,967
  Three Months EndedMarch 31,2007
    
    2006Pro forma total revenues
    
    $
    30,282
    
    
    $
    30,134Pro forma net loss
    
    $
    (204
    )
    
    $
    (336
    )Pro forma basic and diluted loss per share
    
    $
    (0.01
    )
    
    $
    (0.01
    )
 (3) Discontinued Operations
   2006Revenue
    
    $
    307Income from operations of disposed property
    
    $
    244
 (4) Debt
  March 31,
    
    
    December 31,2007
    
    
    2006Mortgage debt, effective interest rates ranging from 5.13% to 8.53%
maturing at various dates through June 2021
    
    $
    389,336
    
    
    $
    391,393Exchangeable senior notes, net of discount, effective interest rate of
4.45%, matures December 2011
    
    
    122,375
    
    
    
    122,234Series A senior notes, effective interest rate of 6.41%, matures June 2013
    
    
    37,500
    
    
    
    37,500Series B senior notes, effective interest rate of 6.55%, matures June 2016
    
    
    37,500
    
    
    
    37,500Credit facility, with a variable interest rate of LIBOR + 1.20%, matures
April 2009
    
    
    27,000
    
    
    
    $
    613,711
    
    
    $
    588,627
 13




---



##### 



(a) Mortgage Debt
  Contractual
    
    
    Effective
    
    
    Earliest Maturity

    
    March 31,
    
    
    December 31,Property
    
    Interest Rate
    
    
    Interest Rate
    
    
    Date

    
    2007
    
    
    2006Herndon Corporate Center
    
    
    5.11
    %
    
    
    5.66
    %
    
    April 2008
    
    $
    8,626
    
    
    $
    8,654Norfolk Commerce Park II
    
    
    6.90
    %
    
    
    5.28
    %
    
    August 2008
    
    
    7,389
    
    
    
    7,453Suburban Maryland Portfolio
    
    
    6.71
    %
    
    
    5.54
    %
    
    September 2008
    
    
    75,279
    
    
    
    75,841Glenn Dale Business Center
    
    
    7.83
    %
    
    
    5.13
    %
    
    May 2009
    
    
    8,743
    
    
    
    8,8254200 Tech Court
    
    
    8.07
    %
    
    
    8.07
    %
    
    October 2009
    
    
    1,769
    
    
    
    1,776Park Central I
    
    
    8.00
    %
    
    
    5.66
    %
    
    November 2009
    
    
    5,160
    
    
    
    5,2164212 Tech Court
    
    
    8.53
    %
    
    
    8.53
    %
    
    June 2010
    
    
    1,725
    
    
    
    1,730Park Central II
    
    
    8.32
    %
    
    
    5.66
    %
    
    November 2010
    
    
    6,406
    
    
    
    6,474Enterprise Center
    
    
    8.03
    %
    
    
    5.20
    %
    
    December 2010
    
    
    19,250
    
    
    
    19,410Indian Creek Court
    
    
    7.80
    %
    
    
    5.90
    %
    
    January 2011
    
    
    13,468
    
    
    
    13,559403 and 405 Glenn Drive
    
    
    7.60
    %
    
    
    5.50
    %
    
    July 2011
    
    
    8,975
    
    
    
    9,0374612 Navistar Drive
    
    
    7.48
    %
    
    
    5.20
    %
    
    July 2011
    
    
    13,877
    
    
    
    13,978Campus at Metro Park North
    
    
    7.11
    %
    
    
    5.25
    %
    
    February 2012
    
    
    25,422
    
    
    
    25,5941434 Crossways Boulevard Bldg II
    
    
    7.05
    %
    
    
    5.38
    %
    
    August 2012
    
    
    10,774
    
    
    
    10,854Crossways Commerce Center
    
    
    6.70
    %
    
    
    6.70
    %
    
    October 2012
    
    
    25,636
    
    
    
    25,727Newington Business Park Center
    
    
    6.70
    %
    
    
    6.70
    %
    
    October 2012
    
    
    16,171
    
    
    
    16,229Prosperity Business Center
    
    
    6.25
    %
    
    
    5.75
    %
    
    January 2013
    
    
    3,940
    
    
    
    3,966Aquia Commerce Center I
    
    
    7.28
    %
    
    
    7.28
    %
    
    February 2013
    
    
    805
    
    
    
    8311434 Crossways Boulevard Bldg I
    
    
    6.25
    %
    
    
    5.38
    %
    
    March 2013
    
    
    9,166
    
    
    
    9,225Linden Business Center
    
    
    6.01
    %
    
    
    5.58
    %
    
    October 2013
    
    
    7,611
    
    
    
    7,645Owings Mills Business Center
    
    
    5.85
    %
    
    
    5.75
    %
    
    March 2014
    
    
    5,807
    
    
    
    5,829Plaza 500, Van Buren Business
Park, Rumsey Center, Snowden
Center, Greenbrier Technology
Center II, Norfolk Business
Center and Alexandria Corporate
Park
    
    
    5.19
    %
    
    
    5.19
    %
    
    August 2015
    
    
    100,000
    
    
    
    100,000Hanover Business Center:Building D
    
    
    8.88
    %
    
    
    6.63
    %
    
    August 2015
    
    
    1,032
    
    
    
    1,055Building B
    
    
    4.00
    %
    
    
    8.00
    %
    
    June 2016
    
    
    1,923
    
    
    
    1,941Building C
    
    
    7.88
    %
    
    
    6.63
    %
    
    December 2017
    
    
    1,430
    
    
    
    1,452Chesterfield Business Center:Buildings CDGH
    
    
    8.50
    %
    
    
    6.63
    %
    
    August 2015
    
    
    2,681
    
    
    
    2,740Buildings ABEF
    
    
    7.45
    %
    
    
    6.63
    %
    
    June 2021
    
    
    2,924
    
    
    
    2,954Gateway Centre
    
    
    7.35
    %
    
    
    5.88
    %
    
    November 2016
    
    
    1,752
    
    
    
    1,786Airpark Business Center
    
    
    7.45
    %
    
    
    6.63
    %
    
    June 2021
    
    
    1,595
    
    
    
    1,612Total Mortgage Debt
    
    
    
    
    
    
    5.51
    %1
    
    
    
    
    
    $
    389,336
    
    
    $
    391,393
 
 1
    
    Weighted average interest on total mortgage debt. (b) Credit Facility
   (5) Segment Information
   14




---



##### 



2007Maryland
    
    
    Northern Virginia
    
    
    Southern Virginia
    
    
    ConsolidatedNumber of properties
    
    
    25
    
    
    
    19
    
    
    
    25
    
    
    
    69Number of buildings
    
    
    61
    
    
    
    48
    
    
    
    51
    
    
    
    160Square feet
    
    
    3,187,158
    
    
    
    2,868,509
    
    
    
    4,797,747
    
    
    
    10,853,414Total revenues
    
    $
    9,844
    
    
    $
    10,114
    
    
    $
    10,018
    
    
    $
    29,976Property operating expense
    
    
    (2,150
    )
    
    
    (2,293
    )
    
    
    (2,115
    )
    
    
    (6,558
    )Real estate taxes and insurance
    
    
    (861
    )
    
    
    (823
    )
    
    
    (950
    )
    
    
    (2,634
    )Total property operating income
    
    $
    6,833
    
    
    $
    6,998
    
    
    $
    6,953
    
    
    
    20,784Depreciation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,948
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,289
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,966
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    199Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (220
    )Total assets
    
    $
    365,300
    
    
    $
    317,594
    
    
    $
    281,241
    
    
    $
    1,008,350
 2006Maryland
    
    
    Northern Virginia
    
    
    Southern Virginia
    
    
    ConsolidatedNumber of properties
    
    
    21
    
    
    
    18
    
    
    
    16
    
    
    
    55Number of buildings
    
    
    47
    
    
    
    47
    
    
    
    28
    
    
    
    122Square feet
    
    
    2,560,485
    
    
    
    2,816,221
    
    
    
    3,673,661
    
    
    
    9,050,367Total revenues
    
    $
    7,763
    
    
    $
    9,631
    
    
    $
    6,980
    
    
    $
    24,374Property operating expense
    
    
    (1,531
    )
    
    
    (1,868
    )
    
    
    (1,303
    )
    
    
    (4,702
    )Real estate taxes and insurance
    
    
    (668
    )
    
    
    (837
    )
    
    
    (667
    )
    
    
    (2,172
    )Total property operating income
    
    $
    5,564
    
    
    $
    6,926
    
    
    $
    5,010
    
    
    
    17,500Depreciation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,863
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,590
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,534
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    351Income from discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    244Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,108Total assets
    
    $
    278,147
    
    
    $
    301,906
    
    
    $
    169,032
    
    
    $
    814,457
 15




---



##### 



(6) Supplemental Disclosure of Cash Flow Information
  2007
    
    2006Cash paid for interest
    
    $
    6,043
    
    
    $
    6,176Non-cash investing and financing activities:Issuance of common shares to trustees
    
    
    
    
    
    
    137Conversion
of Operating Partnership units
    
    
    
    
    
    
    4,910Accrued additions to construction in progress
    
    
    1,250
    
    
    
    
   (7) Subsequent Events
    16




---



##### 



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.
   Executive Summary
  Significant First Quarter Transactions
 Acquisition Activity
  
    
    Greenbrier Circle Corporate Center, a two-building 229,163 square-foot
flex/office property in Chesapeake, Virginia, and Greenbrier Technology Center I, a
95,843 square-foot flex/office property in Chesapeake, Virginia, for a total of
$36.0 million. The acquisition was funded with proceeds from the Companys issuance
of $125 million of Exchangeable Senior Notes in December 2006;
    
    Pine Glen, an 86,720 square-foot flex/office property in Richmond, Virginia, for
$5.3 million. The acquisition was funded with $5.0 million of borrowings under the
Companys credit facility and available cash; and
    
    Ammendale Commerce Center, a three-building 129,358 square-foot flex/office
property in Beltsville, Maryland, for $10.2 million. The acquisition was funded
with $10.0 million of borrowings under the Companys credit facility and available
cash.
 17




---



##### 



Development Activity
   
    
    John Marshall Highway  a 112,000 square-foot flex warehouse building addition was
fully pre-leased to the current sole tenant of this property. The addition was
completed and placed in service on April 1, 2007. The total final cost of the building
is approximately $8.3 million. Development costs incurred include architectural
design, site and building engineering, site work and construction activities;
    
    Crossways Commerce Center I  a 30,000 square-foot office building addition is
underway. The development costs incurred include architectural design, site and
building engineering, site work and concrete operations;
    
    Snowden Center  a 4,500 square-foot new retail building is planned. Development
costs incurred through March 31, 2007 include architectural design, site and building
engineering and site planning;
    
    Sterling Park Business Center  The Company began development efforts on
approximately 25% of the total developable land at the property. Site planning for two
60,000 square-foot flex buildings is underway, although only one building is currently
under design. Development costs incurred to date include overall master and site
planning; geotechnical and wetland studies and architectural, mechanical, structural
and engineering design for one building. Additional development costs are being
incurred on several access roads required for the overall project acceptance and
completion; and
    
    1400 Cavalier Boulevard  a 96,000 square-foot warehouse building is underway with
site engineering, building design and site work development costs incurred during the
first quarter of 2007.
  Other Activity
 
    
    The Company executed new leases for 170,226 square feet, which include 68,900
square-feet at Diamond Hill Distribution Center, 17,521 square-feet at Sterling Park
Business Center and 14,164 square-feet at Chesterfield Business Center. Rent will
commence under the terms of these new leases over the next two quarters;
    
    The Company renewed leases for 274,342 square-feet, to existing tenants, which include
120,600 square-feet at Diamond Hill Distribution Center and 20,531 square-feet at
Sterling Park Business Center; and
    
    The Company purchased, from unaffiliated limited partners, 178,049 Operating
Partnership units in its Operating Partnership for $5.2 million in cash.
 Critical Accounting Policies and Estimates
  18




---



##### 



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
leases
    19




---



##### 



Purchase Accounting
  §
    
    value of leases 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 and leasing commissions;§
    
    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 and market rents over the remaining
non-cancelable lease terms, ranging from one to twenty years; and§
    
    the intangible value of tenant or customer relationships.
  Stock Compensation
  Results of Operations
 Comparison of the Three Months Ended March 31, 2007 to the Three Months Ended March 31, 2006
  2007 Acquisitions
  2006 Acquisitions
   20




---



##### 



Total Revenues
  Three Months EndedMarch 31,
    
    
    
    
    
    Percent(amounts in thousands)
    
    2007
    
    2006
    
    Increase
    
    ChangeRental revenue
    
    $
    24,920
    
    
    $
    20,319
    
    
    $
    4,601
    
    
    
    23
    %Tenant reimbursements
and other
    
    $
    5,056
    
    
    $
    4,055
    
    
    $
    1,001
    
    
    
    25
    %
 Rental Revenues
   Tenant Reimbursements and Other Revenues
  Total Expenses
 Property Operating Expenses
  Three Months EndedMarch 31,
    
    
    
    
    
    Percent(amounts in thousands)
    
    2007
    
    2006
    
    Increase
    
    ChangeProperty operating expenses
    
    $
    6,558
    
    
    $
    4,702
    
    
    $
    1,856
    
    
    
    39
    %Real estate taxes and
insurance
    
    $
    2,634
    
    
    $
    2,172
    
    
    $
    462
    
    
    
    21
    %
 21




---



##### 



Other Operating Expenses
  Three Months EndedMarch 31,
    
    
    
    
    
    Percent(amounts in thousands)
    
    2007
    
    2006
    
    Increase
    
    ChangeGeneral and administrative
    
    $
    2,966
    
    
    $
    2,534
    
    
    $
    432
    
    
    
    17
    %
   Three Months EndedMarch 31,
    
    
    
    
    
    Percent(amounts in thousands)
    
    2007
    
    2006
    
    Increase
    
    ChangeDepreciation and
amortization
    
    $
    9,948
    
    
    $
    7,863
    
    
    $
    2,085
    
    
    
    27
    %
  Other Expense
  Three Months EndedMarch 31,
    
    
    
    
    
    Percent(amounts in thousands)
    
    2007
    
    2006
    
    Increase
    
    ChangeInterest Expense
    
    $
    8,289
    
    
    $
    6,590
    
    
    $
    1,699
    
    
    
    26
    %
 22




---



##### 



Three Months EndedMarch 31,
    
    
    
    
    
    Percent(amounts in thousands)
    
    2007
    
    2006
    
    Decrease
    
    ChangeInterest and other income
    
    $
    194
    
    
    $
    403
    
    
    $
    209
    
    
    
    52
    %
  Minority Interests from Continuing Operations
  Three Months EndedMarch 31,
    
    
    
    
    
    Percent(amounts in thousands)
    
    2007
    
    2006
    
    Decrease
    
    ChangeMinority interests
    
    $
    (5
    )
    
    $
    52
    
    
    $
    57
    
    
    
    110
    %
  Income from Discontinued Operations
  Three Months Ended(amounts in thousands)
    
    March 31, 2006Revenue
    
    $
    307Income from operations of disposed property
    
    $
    244
 23




---



##### 



Liquidity and Capital Resources
      Cash Flows
  Three Months EndedMarch 31,(amounts in thousands)
    
    2007
    
    2006
    
    ChangeCash provided by operating activities
    
    $
    11,115
    
    
    $
    8,058
    
    
    $
    3,057Cash used in investing activities
    
    $
    (58,020
    )
    
    $
    (88,576
    )
    
    $
    30,556Cash provided by financing activities
    
    $
    10,950
    
    
    $
    82,353
    
    
    $
    (71,403
    )
    24




---



##### 



Same Property Net Operating Income
  25




---



##### 



Comparison of the Three Months Ended March 31, 2007 to the Three Months Ended March 31, 2006
  Three Months Ended March 31,(dollars in thousands)
    
    2007
    
    
    2006
    
    
    $ Change
    
    
    % ChangeNumber of properties (1)
    
    
    51
    
    
    
    51
    
    
    
    
    
    
    
    Same property revenueRental
    
    $
    19,357
    
    
    $
    19,228
    
    
    $
    129
    
    
    
    0.7Tenant reimbursements and other
    
    
    3,880
    
    
    
    3,881
    
    
    
    (1
    )
    
    
    Total same property revenue
    
    
    23,237
    
    
    
    23,109
    
    
    
    128
    
    
    
    0.6Same property operating expensesProperty
    
    
    5,299
    
    
    
    4,552
    
    
    
    747
    
    
    
    16.4Real estate taxes and other
    
    
    1,981
    
    
    
    2,041
    
    
    
    (60
    )
    
    
    (2.9
    )Total same property operating
expenses
    
    
    7,280
    
    
    
    6,593
    
    
    
    687
    
    
    
    10.4Same property net operating income
    
    $
    15,957
    
    
    $
    16,516
    
    
    $
    (559
    )
    
    
    (3.4
    )Reconciliation to net income (loss)Same property net operating income
    
    $
    15,957
    
    
    $
    16,516Acquisition property revenues
    
    
    6,739
    
    
    
    1,265Acquisition property operating expenses
    
    
    (1,912
    )
    
    
    (281
    )General and administrative expenses
    
    
    (2,966
    )
    
    
    (2,534
    )Depreciation and amortization
    
    
    (9,948
    )
    
    
    (7,863
    )Interest expense, net
    
    
    (8,095
    )
    
    
    (6,187
    )Minority interests
    
    
    5
    
    
    
    (52
    )Discontinued operations (2)
    
    
    
    
    
    
    244Net income (loss)
    
    $
    (220
    )
    
    $
    1,108
 Occupied at March 31,2007
    
    2006Same Properties
    
    
    88.1
    %
    
    
    89.1
    %Acquisition Properties(3)
    
    
    84.3
    %
    
    
    88.4
    %Total
    
    
    87.2
    %
    
    
    89.1
    %
 
 (1)
    
    Represents properties owned for the entirety of the periods presented.(2)
    
    Discontinued operations represent income from 6600 Business Parkway, which was sold in May 2006.(3)
    
    Acquisition Properties include: Rivers Bend Center, Northridge I & II, Crossways I, Sterling Park Business Center, 1408 Stephanie Way,
Airpark Business Center, Chesterfield Business Center, Hanover Business Center, Gateway 270 West, Davis Drive, Indian Creek Court, Gateway II,
Owings Mill Commerce Center, Park Central, Greenbrier Circle Corporate Center, Greenbrier Technology Center I, Pine Glen and Ammendale
Commerce Center.  26




---



##### 



Maryland
 Three Months Ended March 31,(dollars in thousands)
    
    2007
    
    
    2006
    
    
    $ Change
    
    
    % ChangeNumber of properties (1)
    
    
    21
    
    
    
    21
    
    
    
    
    
    
    
    Same property revenueRental
    
    $
    6,599
    
    
    $
    6,479
    
    
    $
    120
    
    
    
    1.9Tenant reimbursements and other
    
    
    1,462
    
    
    
    1,284
    
    
    
    178
    
    
    
    13.9Total same property revenue
    
    
    8,061
    
    
    
    7,763
    
    
    
    298
    
    
    
    3.8Same property operating expensesProperty
    
    
    1,850
    
    
    
    1,531
    
    
    
    319
    
    
    
    20.8Real estate taxes and other
    
    
    677
    
    
    
    668
    
    
    
    9
    
    
    
    1.3Total same property operating
expenses
    
    
    2,527
    
    
    
    2,199
    
    
    
    328
    
    
    
    14.9Same property net operating income
    
    $
    5,534
    
    
    $
    5,564
    
    
    $
    (30
    )
    
    
    (0.5
    )Reconciliation to total property
operating income:Same property net operating income
    
    $
    5,534
    
    
    $
    5,564Acquisition property revenues
    
    
    1,783
    
    
    
    Acquisition property operating expenses
    
    
    (484
    )
    
    
    Total property operating income
    
    $
    6,833
    
    
    $
    5,564
 Occupied at March 31,2007
    
    2006Same Properties
    
    
    92.6
    %
    
    
    93.1
    %Acquisition Properties(2)
    
    
    74.2
    %
    
    
    
    %Total
    
    
    89.0
    %
    
    
    93.1
    %
 
 (1)
    
    Represents properties owned for the entirety of the periods presented.(2)
    
    Acquisition Properties include: Gateway 270 West, Indian Creek Court, Owings Mills Commerce Center and Ammendale Commerce
Center.  27




---



##### 



Northern Virginia
 Three Months Ended March 31,(dollars in thousands)
    
    2007
    
    
    2006
    
    
    $ Change
    
    
    % ChangeNumber of properties (1)
    
    
    17
    
    
    
    17
    
    
    
    
    
    
    
    Same property revenueRental
    
    $
    8,169
    
    
    $
    8,054
    
    
    $
    115
    
    
    
    1.4Tenant reimbursements and other
    
    
    1,349
    
    
    
    1,462
    
    
    
    (113
    )
    
    
    (7.7
    )Total same property revenue
    
    
    9,518
    
    
    
    9,516
    
    
    
    2
    
    
    
    Same property operating expensesProperty
    
    
    2,169
    
    
    
    1,839
    
    
    
    330
    
    
    
    17.9Real estate taxes and other
    
    
    750
    
    
    
    813
    
    
    
    (63
    )
    
    
    (7.7
    )Total same property operating
expenses
    
    
    2,919
    
    
    
    2,652
    
    
    
    267
    
    
    
    10.1Same property net operating income
    
    $
    6,599
    
    
    $
    6,864
    
    
    $
    (265
    )
    
    
    (3.9
    )Reconciliation to total property
operating incomeSame property net operating income
    
    $
    6,599
    
    
    $
    6,864Acquisition property revenues
    
    
    596
    
    
    
    115Acquisition property operating expenses
    
    
    (197
    )
    
    
    (53
    )Total property operating income
    
    $
    6,998
    
    
    $
    6,926
 Occupied at March 31,2007
    
    2006Same Properties
    
    
    89.6
    %
    
    
    90.7
    %Acquisition
Properties (2)
    
    
    79.5
    %
    
    
    61.0
    %Total
    
    
    88.9
    %
    
    
    89.4
    %
 
 (1)
    
    Represents properties owned for the entirety of the periods presented.(2)
    
    Acquisition Properties include: Sterling Park Business Center and Davis Drive.  28




---



##### 



Southern Virginia
 Three Months Ended March 31,(dollars in thousands)
    
    2007
    
    
    2006
    
    
    $ Change
    
    
    % ChangeNumber of properties (1)
    
    
    13
    
    
    
    13
    
    
    
    
    
    
    
    Same property revenueRental
    
    $
    4,589
    
    
    $
    4,695
    
    
    $
    (106
    )
    
    
    (2.3
    )Tenant reimbursements and other
    
    
    1,069
    
    
    
    1,135
    
    
    
    (66
    )
    
    
    (5.8
    )Total same property revenue
    
    
    5,658
    
    
    
    5,830
    
    
    
    (172
    )
    
    
    (3.0
    )Same property operating expensesProperty
    
    
    1,280
    
    
    
    1,182
    
    
    
    98
    
    
    
    8.3Real estate taxes and other
    
    
    554
    
    
    
    560
    
    
    
    (6
    )
    
    
    (1.1
    )Total same property operating
expenses
    
    
    1,834
    
    
    
    1,742
    
    
    
    92
    
    
    
    5.3Same property net operating income
    
    $
    3,824
    
    
    $
    4,088
    
    
    $
    (264
    )
    
    
    (6.5
    )Reconciliation to total property
operating incomeSame property net operating income
    
    $
    3,824
    
    
    $
    4,088Acquisition property revenues
    
    
    4,360
    
    
    
    1,150Acquisition property operating expenses
    
    
    (1,231
    )
    
    
    (228
    )Total property operating income
    
    $
    6,953
    
    
    $
    5,010
 Occupied at March 31,2007
    
    2006Same Properties
    
    
    82.9
    %
    
    
    84.2
    %Acquisition Properties(2)
    
    
    88.1
    %
    
    
    92.9
    %Total
    
    
    85.0
    %
    
    
    86.0
    %
 
 (1)
    
    Represents properties owned for the entirety of the periods presented.(2)
    
    Acquisition Properties include: Rivers Bend Center,
Northridge I & II, Crossways I, 1408 Stephanie Way, Airpark Business
Center, Chesterfield Business Center, Hanover Business Center, Gateway II, Park Central, Greenbrier Circle Corporate Center,
Greenbrier Technology Center I and Pine Glen.  Contractual Obligations
  29




---



##### 



Dividends and Distributions
   Funds From Operations
     Three Months Ended March 31,(amounts in thousands)
    
    2007
    
    
    2006Net income (loss)
    
    $
    (220
    )
    
    $
    1,108Add: Real estate depreciation and
amortization
    
    
    9,948
    
    
    
    7,863Discontinued operations
depreciation and amortization
    
    
    
    
    
    
    3Minority interests
    
    
    (5
    )
    
    
    67FFO available to common share and unitholders
    
    $
    9,723
    
    
    $
    9,041Weighted average number of diluted common
shares and Operating Partnership units
    
    
    25,093
    
    
    
    21,675
 Forward Looking Statements
  30




---



##### 



31




---



##### 



32




---



##### 



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. 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).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).
 33




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##### 



No.
    
    Description31.1
    
    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.)
 34




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##### 



FIRST POTOMAC REALTY TRUSTDate: May 10, 2007
    
    /s/ Douglas J. Donatelli

Douglas J. DonatelliPresident and Chief Executive OfficerDate: May 10, 2007
    
    /s/ Barry H. BassBarry H. BassExecutive Vice President and Chief Financial Officer
 35




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##### 



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).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.)