##### 



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, 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
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 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, 2008 (unaudited) and December 31, 2007
    
    
    3Consolidated statements of operations (unaudited) for the three months ended March 31, 2008 and 2007
    
    
    4Consolidated statements of cash flows (unaudited) for the three months ended March 31, 2008 and 2007
    
    
    5Notes to consolidated financial statements (unaudited)
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 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
    
    
    35
 2




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##### 



FIRST POTOMAC REALTY TRUST
 March 31, 2008
    
    
    December 31, 2007(unaudited)Assets:Rental property, net
    
    $
    979,129
    
    
    $
    977,106Cash and cash equivalents
    
    
    4,363
    
    
    
    5,198Escrows and reserves
    
    
    13,862
    
    
    
    13,360Accounts and other receivables, net of
allowance for doubtful accounts of $744
and $700, respectively
    
    
    4,411
    
    
    
    4,365Accrued straight-line rents, net of
allowance for doubtful accounts of $51
and $43, respectively
    
    
    7,211
    
    
    
    6,638Deferred costs, net
    
    
    12,679
    
    
    
    12,377Prepaid expenses and other assets
    
    
    6,443
    
    
    
    6,525Intangible assets, net
    
    
    24,371
    
    
    
    26,730Total assets
    
    $
    1,052,469
    
    
    $
    1,052,299Liabilities:Mortgage loans
    
    $
    379,406
    
    
    $
    390,072Exchangeable senior notes, net of discount
    
    
    109,414
    
    
    
    122,797Senior notes
    
    
    75,000
    
    
    
    75,000Secured term loan
    
    
    50,000
    
    
    
    50,000Unsecured revolving credit facility
    
    
    66,100
    
    
    
    38,600Accounts payable and accrued expenses
    
    
    13,088
    
    
    
    11,450Accrued interest
    
    
    5,088
    
    
    
    2,776Rents received in advance
    
    
    4,349
    
    
    
    4,709Tenant security deposits
    
    
    5,227
    
    
    
    5,422Deferred market rent
    
    
    8,504
    
    
    
    9,117Total liabilities
    
    
    716,176
    
    
    
    709,943Minority interests (redemption value $11,995
and $13,957, respectively)
    
    
    10,986
    
    
    
    11,545Shareholders equity:Common shares, $0.001 par value, 100,000
shares authorized; 24,458 and 24,251 shares
issued and outstanding, respectively
    
    
    24
    
    
    
    24Additional paid-in capital
    
    
    430,611
    
    
    
    429,870Accumulated other comprehensive loss
    
    
    (296
    )
    
    
    Dividends in excess of accumulated earnings
    
    
    (105,032
    )
    
    
    (99,083
    )Total shareholders equity
    
    
    325,307
    
    
    
    330,811Total liabilities and shareholders equity
    
    $
    1,052,469
    
    
    $
    1,052,299
  3




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##### 



FIRST POTOMAC REALTY TRUST
 Three Months Ended March 31,2008
    
    
    2007Revenues:Rental
    
    $
    25,860
    
    
    $
    24,920Tenant reimbursements and other
    
    
    5,725
    
    
    
    5,250Total revenues
    
    
    31,585
    
    
    
    30,170Operating expenses:Property operating
    
    
    7,073
    
    
    
    6,752Real estate taxes and insurance
    
    
    3,027
    
    
    
    2,634General and administrative
    
    
    2,701
    
    
    
    2,966Depreciation and amortization
    
    
    9,520
    
    
    
    9,948Total operating expenses
    
    
    22,321
    
    
    
    22,300Operating income
    
    
    9,264
    
    
    
    7,870Other expenses (income):Interest expense
    
    
    9,131
    
    
    
    8,289Interest and other income
    
    
    (131
    )
    
    
    (194
    )Gain on early retirement of debt
    
    
    (2,112
    )
    
    
    Total other expenses
    
    
    6,888
    
    
    
    8,095Income (loss) before minority interests
    
    
    2,376
    
    
    
    (225
    )Minority interests
    
    
    (74
    )
    
    
    5Net income (loss)
    
    $
    2,302
    
    
    $
    (220
    )Net income (loss) per share  basic and diluted:
    
    $
    0.10
    
    
    $
    (0.01
    )Weighted average common shares outstanding  basic
    
    
    24,097
    
    
    
    24,026Weighted average common shares outstanding  dilutive
    
    
    24,135
    
    
    
    24,026
  4




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##### 



FIRST POTOMAC REALTY TRUST
 Three Months Ended March 31,2008
    
    
    2007Cash flows from operating activitiesNet income (loss)
    
    $
    2,302
    
    
    $
    (220
    )Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    10,014
    
    
    
    10,147Bad debt expense
    
    
    107
    
    
    
    194Stock based compensation
    
    
    385
    
    
    
    314Amortization of deferred market rent
    
    
    (450
    )
    
    
    (434
    )Amortization of deferred financing costs and bond discount
    
    
    453
    
    
    
    400Amortization of rent abatement
    
    
    359
    
    
    
    212Minority interests
    
    
    74
    
    
    
    (5
    )Gain on early retirement of debt
    
    
    (2,112
    )
    
    
    Changes in assets and liabilities:Escrows and reserves
    
    
    (502
    )
    
    
    (1,437
    )Accounts and other receivables
    
    
    (133
    )
    
    
    14Accrued straight-line rents
    
    
    (593
    )
    
    
    (485
    )Prepaid expenses and other assets
    
    
    (388
    )
    
    
    746Tenant security deposits
    
    
    (195
    )
    
    
    273Accounts payable and accrued expenses
    
    
    (1,324
    )
    
    
    468Accrued interest
    
    
    2,312
    
    
    
    2,601Rents received in advance
    
    
    (360
    )
    
    
    604Deferred costs
    
    
    (1,254
    )
    
    
    (915
    )Total adjustments
    
    
    6,393
    
    
    
    12,697Net cash provided by operating activities
    
    
    8,695
    
    
    
    12,477Cash flows from investing activitiesPurchase deposit on future acquisitions
    
    
    
    
    
    
    (1,500
    )Additions to rental property
    
    
    (3,780
    )
    
    
    (2,913
    )Additions to construction in process
    
    
    (2,632
    )
    
    
    (3,001
    )Acquisition of rental property and associated intangible assets
    
    
    
    
    
    
    (51,968
    )Net cash used in investing activities
    
    
    (6,412
    )
    
    
    (59,382
    )Cash flows from financing activitiesFinancing costs
    
    
    (48
    )
    
    
    (381
    )Proceeds from debt
    
    
    27,500
    
    
    
    27,000Repayments of debt
    
    
    (22,043
    )
    
    
    (2,057
    )Dividends to shareholders
    
    
    (8,250
    )
    
    
    (8,201
    )Distributions to minority interests
    
    
    (265
    )
    
    
    (261
    )Redemption of partnership units
    
    
    (12
    )
    
    
    (5,170
    )Stock option exercises
    
    
    
    
    
    
    20Net cash (used in) provided by financing activities
    
    
    (3,118
    )
    
    
    10,950Net decrease in cash and cash equivalents
    
    
    (835
    )
    
    
    (35,955
    )Cash and cash equivalents, beginning of period
    
    
    5,198
    
    
    
    41,367Cash and cash equivalents, end of period
    
    $
    4,363
    
    
    $
    5,412
  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 twenty years; and
    
    the intangible value of tenant or customer relationships.
  (h) Intangible Assets
 Business Combinations
  Goodwill and Other Intangibles
 8




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##### 



(i) Derivatives and Hedging
      (j) Income Taxes
  (k) Minority Interests
 Implementation Issues Related to
the Treatment of Minority Interests in Certain Real Estate Investment Trusts.
 9




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##### 



(l) Earnings Per Share
   Three Months Ended March 31,2008
    
    
    2007Numerator for basic and diluted earnings (loss)
per share calculations:
    
    $
    2,302
    
    
    $
    (220
    )Denominator for basic and diluted earnings (loss)
per share calculations:Weighted average shares outstanding  basic
    
    
    24,097
    
    
    
    24,026Effect of dilutive shares:Employee stock options and non-vested shares
    
    
    38
    
    
    
    Weighted average shares outstanding  diluted
    
    
    24,135
    
    
    
    24,026Net income (loss) per share   basic and diluted:
    
    $
    0.10
    
    
    $
    (0.01
    )
 Implementation Issues Related to the Treatment of Minority Interests in Certain
Real Estate Trusts.
 Earnings Per Share
 Three Months Ended March 31,2008
    
    2007Stock option awards
    
    
    702
    
    
    
    664Non-vested share awards
    
    
    88
    
    
    
    66790
    
    
    
    730
  (m) Share-Based Compensation
 Share-Based
Payment, ( )
 10




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##### 



Stock Options Summary
   Weighted
    
    AggregateWeighted Average
    
    Average Remaining
    
    IntrinsicShares
    
    Exercise Price
    
    Contractual Term
    
    ValueOutstanding, December 31, 2007
    
    
    632,783
    
    
    $
    19.04
    
    
    6.5 years
    
    $
    815,455Granted
    
    
    99,500
    
    
    
    17.24Forfeited
    
    
    (17,314
    )
    
    
    21.49Outstanding, March 31, 2008
    
    
    714,969
    
    
    $
    18.74
    
    
    6.7 years
    
    $
    130,784Exercisable, March 31, 2008
    
    
    517,807
    
    
    $
    17.41
    
    
    5.9 years
    
    $
    130,784Options expected to vest,
March 31, 2008
    
    
    172,851
    
    
    $
    22.30
    
    
    8.8 years
    
    $
    
    2008Risk-free interest rate
    
    
    3.45
    %Expected volatility
    
    
    24.6
    %Expected dividend yield
    
    
    4.04
    %Weighted average expected life of options
    
    5 years
 11




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##### 



Non-vested share awards
   WeightedNon-vested
    
    Average GrantShares
    
    Date Fair ValueNon-vested at December 31, 2007
    
    
    175,091
    
    
    $
    23.26Granted
    
    
    180,867
    
    
    
    8.73Non-vested at March 31, 2008
    
    
    355,958
    
    
    $
    15.88
   2008Risk-free interest rate
    
    
    3.2
    %Volatility
    
    
    26.0
    %
 (n) Reclassifications
  (o) Application of New Accounting Standards
 Fair Value Measurements, Effective Date of FASB Statement No. 157
 Business
Combinations
 Noncontrolling
Interests in Consolidated Financial Statements, an Amendment of ARB No. 51
 12




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##### 



Disclosures about
Derivative Instruments and Hedging Activities an Amendment of FASB Statement No. 133 Accounting for
Derivative Instruments and Hedging Activities
 (3) Rental Property
  March 31, 2008
    
    
    December 31, 2007Land
    
    $
    236,636
    
    
    $
    236,636Buildings and improvements
    
    
    767,386
    
    
    
    764,664Construction in process
    
    
    19,412
    
    
    
    16,866Tenant improvements
    
    
    40,377
    
    
    
    37,115Furniture, fixtures and equipment
    
    
    9,900
    
    
    
    9,9001,073,711
    
    
    
    1,065,181Less: accumulated depreciation
    
    
    (94,582
    )
    
    
    (88,075
    )$
    979,129
    
    
    $
    977,106
 (a) Development and Redevelopment Activity
   (b) Acquisitions
   Three Months EndedMarch 31,2008
    
    2007Pro forma total revenues
    
    $
    31,585
    
    
    $
    31,766Pro forma net income (loss)
    
    $
    421
    
    
    $
    (72
    )Pro forma net income (loss) per share  basic
and diluted
    
    $
    0.02
    
    
    $
    
 13




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##### 



(4) Debt
  March 31,
    
    
    December 31,2008
    
    
    2007Mortgage debt, effective interest rates ranging from 5.13% to 8.53%,
maturing at various dates through June 2021
    
    $
    379,406
    
    
    $
    390,072Exchangeable senior notes, net of discount, effective interest rate of
4.45%, maturing December 2011
    
    
    109,414
    
    
    
    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, with a variable interest rate of LIBOR + 1.10%,
maturing August 2010(1)
    
    
    50,000
    
    
    
    50,000Unsecured revolving credit facility, with a variable interest rate of
LIBOR + 1.20%, maturing April 2010
    
    
    66,100
    
    
    
    38,600$
    679,920
    
    
    $
    676,469
 
 (1)
    
    In January 2008, the Company entered into a $50 million interest rate swap
agreement through August 2010 to fix the Companys underlying interest rate on the term loan at
2.71%, plus a spread of 0.70% to 1.25%. (a) Mortgage Debt
  Contractual
    
    
    EffectiveInterest
    
    
    Interest
    
    
    Maturity
    
    
    March 31,
    
    
    December 31,Property
    
    Rate
    
    
    Rate
    
    
    Date
    
    
    2008
    
    
    2007Herndon Corporate Center(1)
    
    
    5.11
    %
    
    
    5.66
    %
    
    
    
    
    
    $
    
    
    
    $
    8,538Norfolk Commerce Park II
    
    
    6.90
    %
    
    
    5.28
    %
    
    August 2008
    
    
    7,125
    
    
    
    7,192Suburban Maryland Portfolio(2,3)
    
    
    6.71
    %
    
    
    5.54
    %
    
    September 2008
    
    
    72,953
    
    
    
    73,546Glenn Dale Business Center
    
    
    7.83
    %
    
    
    5.13
    %
    
    May 2009
    
    
    8,411
    
    
    
    8,4964200 Tech Court
    
    
    8.07
    %
    
    
    8.07
    %
    
    October 2009
    
    
    1,745
    
    
    
    1,752Park Central I
    
    
    8.00
    %
    
    
    5.66
    %
    
    November 2009
    
    
    4,933
    
    
    
    4,9914212 Tech Court
    
    
    8.53
    %
    
    
    8.53
    %
    
    June 2010
    
    
    1,705
    
    
    
    1,710Park Central II
    
    
    8.32
    %
    
    
    5.66
    %
    
    November 2010
    
    
    6,124
    
    
    
    6,196Enterprise Center(2)
    
    
    8.03
    %
    
    
    5.20
    %
    
    December 2010
    
    
    18,606
    
    
    
    18,772Indian Creek Court(2)
    
    
    7.80
    %
    
    
    5.90
    %
    
    January 2011
    
    
    13,105
    
    
    
    13,199403 and 405 Glenn Drive
    
    
    7.60
    %
    
    
    5.50
    %
    
    July 2011
    
    
    8,725
    
    
    
    8,7904612 Navistar Drive(2)
    
    
    7.48
    %
    
    
    5.20
    %
    
    July 2011
    
    
    13,459
    
    
    
    13,565Campus at Metro Park(2)
    
    
    7.11
    %
    
    
    5.25
    %
    
    February 2012
    
    
    24,712
    
    
    
    24,8931434 Crossways Blvd Building II
    
    
    7.05
    %
    
    
    5.38
    %
    
    August 2012
    
    
    10,452
    
    
    
    10,535Crossways Commerce Center
    
    
    6.70
    %
    
    
    6.70
    %
    
    October 2012
    
    
    25,285
    
    
    
    25,377Newington Business Park Center
    
    
    6.70
    %
    
    
    6.70
    %
    
    October 2012
    
    
    15,950
    
    
    
    16,008Prosperity Business Center
    
    
    6.25
    %
    
    
    5.75
    %
    
    January 2013
    
    
    3,835
    
    
    
    3,862Aquia Commerce Center I
    
    
    7.28
    %
    
    
    7.28
    %
    
    February 2013
    
    
    697
    
    
    
    7251434 Crossways Blvd Building I
    
    
    6.25
    %
    
    
    5.38
    %
    
    March 2013
    
    
    8,931
    
    
    
    8,992Linden Business Center
    
    
    6.01
    %
    
    
    5.58
    %
    
    October 2013
    
    
    7,481
    
    
    
    7,515Owings Mills Business Center
    
    
    5.85
    %
    
    
    5.75
    %
    
    March 2014
    
    
    5,719
    
    
    
    5,742Annapolis Commerce Park East
    
    
    5.74
    %
    
    
    6.25
    %
    
    June 2014
    
    
    8,808
    
    
    
    8,834Plaza 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
    
    
    937
    
    
    
    961Building C
    
    
    7.88
    %
    
    
    6.63
    %
    
    December 2017
    
    
    1,335
    
    
    
    1,359Chesterfield Business Center:Buildings C,D,G and H
    
    
    8.50
    %
    
    
    6.63
    %
    
    August 2015
    
    
    2,438
    
    
    
    2,501Buildings A,B,E and F
    
    
    7.45
    %
    
    
    6.63
    %
    
    June 2021
    
    
    2,796
    
    
    
    2,829Gateway Centre Building I
    
    
    7.35
    %
    
    
    5.88
    %
    
    November 2016
    
    
    1,614
    
    
    
    1,649Airpark Business Center
    
    
    7.45
    %
    
    
    6.63
    %
    
    June 2021
    
    
    1,525
    
    
    
    1,543Total Mortgage Debt
    
    
    
    
    
    
    5.60
    %(4)
    
    
    
    
    
    $
    379,406
    
    
    $
    390,072
 
 (1)
    
    The loan was prepaid in February 2008.(2)
    
    The maturity date on these loans represents the anticipated repayment date of the
loans, after which date the interest rates on the loans increase.(3)
    
    The Suburban Maryland Portfolio consists of the following properties: Deer Park
Center, 6900 English Muffin Way, Gateway Center, Gateway West, 4451 Georgia Pacific, 20270
Goldenrod Lane, 15 Wormans Mill Court, Girard Business Center, Girard Place, Old Courthouse
Square, Patrick Center, 7561 Lindbergh Drive, West Park and Woodlands Business Center.(4)
    
    Weighted average interest rate on total mortgage debt. 14




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##### 



(b) Exchangeable Senior Notes
   (c) Secured Term Loan
  (d) Unsecured Revolving Credit Facility
  15




---



##### 



(5) Comprehensive Income
  Three Months EndedMarch 31,2008
    
    
    2007Net income (loss)
    
    $
    2,302
    
    
    $
    (220
    )Unrealized loss on derivative, net of
minority interests
    
    
    (296
    )
    
    
    Total comprehensive income (loss)
    
    $
    2,006
    
    
    $
    (220
    )
 (6) Fair Value Measurements
 The Fair Value Option for Financial Assets and Financial
Liabilities  Including an Amendment of FASB Statement No. 115
     16




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##### 



Balance atMarch 31,2008
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Liabilities:Derivative instrument-swap agreement
    
    $
    296
    
    
    $
    
    
    
    $
    296
    
    
    $
    
  (7) Segment Information
    Three Months Ended March 31, 2008Northern
    
    
    SouthernMaryland
    
    
    Virginia
    
    
    Virginia
    
    
    ConsolidatedNumber of buildings
    
    
    63
    
    
    
    48
    
    
    
    53
    
    
    
    164Square feet
    
    
    3,365,297
    
    
    
    2,973,671
    
    
    
    5,086,503
    
    
    
    11,425,471Total revenues
    
    $
    10,291
    
    
    $
    10,201
    
    
    $
    11,093
    
    
    $
    31,585Property operating expense
    
    
    (2,290
    )
    
    
    (2,298
    )
    
    
    (2,485
    )
    
    
    (7,073
    )Real estate taxes and insurance
    
    
    (963
    )
    
    
    (1,039
    )
    
    
    (1,025
    )
    
    
    (3,027
    )Total property operating income
    
    $
    7,038
    
    
    $
    6,864
    
    
    $
    7,583
    
    
    
    21,485Depreciation and amortization
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,520
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,131
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,701
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,169Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,302Total assets(1)
    
    $
    384,120
    
    
    $
    325,638
    
    
    $
    309,007
    
    
    $
    1,052,469Capital expenditures(2)
    
    $
    2,460
    
    
    $
    2,506
    
    
    $
    1,421
    
    
    $
    6,412
 17




---



##### 



Three Months Ended March 31, 2007Northern
    
    
    SouthernMaryland
    
    
    Virginia
    
    
    Virginia
    
    
    ConsolidatedNumber of buildings
    
    
    61
    
    
    
    48
    
    
    
    51
    
    
    
    160Square feet
    
    
    3,187,158
    
    
    
    2,868,509
    
    
    
    4,797,747
    
    
    
    10,853,414Total revenues
    
    $
    9,898
    
    
    $
    10,238
    
    
    $
    10,034
    
    
    $
    30,170Property operating expense
    
    
    (2,204
    )
    
    
    (2,417
    )
    
    
    (2,131
    )
    
    
    (6,752
    )Real estate taxes and insurance
    
    
    (861
    )
    
    
    (823
    )
    
    
    (950
    )
    
    
    (2,634
    )Total property operating income
    
    $
    6,833
    
    
    $
    6,998
    
    
    $
    6,953
    
    
    
    20,784Depreciation and amortization
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,948
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,289
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,966
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    199Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (220
    )Total assets (1)
    
    $
    360,964
    
    
    $
    322,062
    
    
    $
    281,699
    
    
    $
    1,008,350Capital expenditures(2)
    
    $
    607
    
    
    $
    3,295
    
    
    $
    1,837
    
    
    $
    5,914
 
 (1)
    
    Corporate assets not allocated to any of the Companys reportable segments
totaled $33,704 and $43,625 at March 31, 2008 and 2007, respectively.(2)
    
    Capital expenditures for corporate assets not allocated to any of the Companys
reportable segments totaled $25 and $175 for the three months ended March 31, 2008 and 2007,
respectively. (8) Supplemental Disclosure of Cash Flow Information
  2008
    
    2007Cash paid for interest, net
    
    $
    7,151
    
    
    $
    6,043Non-cash investing and financing activities:Conversion of Operating Partnership units into
common shares
    
    
    358
    
    
    
    
   18




---



##### 



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 a joint venture; and
    
    continue to grow its portfolio through acquisition of new properties, potentially
through a joint venture.
  Executive Summary
   Significant First Quarter Transactions
 (a) Development and Redevelopment Activity
  19




---



##### 




    
    Sterling Park Business Center  a 58,000 square foot business park building is under
construction. The Company began development efforts on approximately 25% of the total
developable land at the site. Civil site planning and storm water management for two
buildings has been completed, and development costs incurred to date include overall
master and site planning, geotechnical and wetland studies, civil, storm water
management, architectural, structural, mechanical, electrical and plumbing engineering
design. Construction costs include site concrete work, steel, concrete panels, glass, and
roofing for one building. Additional development costs are being incurred on several
access roads required for the commitments made in connection with project acceptance and
completion;
    
    Ammendale Business Park  a 76,000 square foot business park property redevelopment.
Costs incurred to date include architectural and engineering schematic and design
development drawings as well as construction costs that include roofing and mechanical
demolition;
    
    Enterprise Parkway  a 71,000 square foot multi-tenanted office space redevelopment.
Costs incurred to date include building, lobby and common corridor renovation as well as
schematic architectural and engineering design; and
    
    Gateway 270  a 55,000 square foot business park redevelopment. Costs incurred to
date include architectural and engineering design.
  (b) Other Activity
 
    
    During the first quarter of 2008, the Company executed 339,426 square feet of new
leases, including 60,000 square feet at Crossways Commerce Center, 54,275 square feet at
Diamond Hill Distribution Center and 30,443 square feet at Greenbrier Circle Corporate
Center. Rent is expected to commence for all new leases by the end of the third quarter;
    
    During the first quarter of 2008, the Company executed 600,079 square feet of renewal
leases, to existing tenants, which include 239,316 square feet at Crossways Commerce
Center and 120,000 square feet at 1000 Lucas Way;
    
    In January 2008, the Company entered into a $50 million interest rate swap agreement
to fix the Companys underlying interest rate on the Companys $50 million term loan at
2.71%, plus a spread of 0.70% to 1.25%. The interest rate swap agreement expires in
August 2010, concurrent with the maturity of the term loan;
    
    On February 29, 2008, the Company prepaid the $8.5 million remaining principal balance
and the related accrued interest on the mortgage loan that encumbered Herndon Corporate
Center. The loan, which was to mature on April 1, 2008, had a contractual interest rate
of 5.11% and an effective interest rate of 5.66%. The prepayment was funded with
borrowings on the Companys unsecured revolving credit facility and available cash; and
    
    In March 2008, the Company repurchased $13.75 million of its Exchangeable Senior
Notes, which resulted in a gain of $2.1 million, net of deferred financing costs and
original issue discount write-offs. The repurchase was funded with borrowings on the
Companys unsecured revolving credit facility and available cash. In May 2008, the
Company repurchased $15.25 million of its Exchangeable Senior Notes resulting in a gain of
approximately $2.0 million. Also, in May 2008, the Company agreed to terms to repurchase
an additional $5.0 million of its Exchangeable Senior Notes, with settlement anticipated
to occur in mid-May 2008. All gains associated with the May Exchangeable Senior Notes
repurchases will be recognized in the second quarter of 2008.
 20




---



##### 



Critical Accounting Policies and Estimates
   Revenue Recognition
   Investments in Real Estate and Real Estate Entities
   Buildings
    
    39 yearsBuilding improvements
    
    5 to 15 yearsFurniture, fixtures and equipment
    
    5 to 15 yearsTenant improvements
    
    Shorter of the useful lives of
the assets or the terms of the
related leasesLease related intangible assets
    
    Term of related lease
   21




---



##### 



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 twenty years; and
    
    the intangible value of tenant or customer relationships.
  Share-Based Compensation
 Share-Based
Payment
 Results of Operations
 Comparison of the Three Months Ended March 31, 2008 to the Three Months Ended March 31, 2007
  2007 Acquisitions
   22




---



##### 



Total Revenues
  Three Months Ended March 31,
    
    
    
    
    
    Percent(amounts in thousands)
    
    2008
    
    2007
    
    Increase
    
    ChangeRental
    
    $
    25,860
    
    
    $
    24,920
    
    
    $
    940
    
    
    
    4
    %Tenant reimbursements and other
    
    $
    5,725
    
    
    $
    5,250
    
    
    $
    475
    
    
    
    9
    %
 Rental Revenue
   Tenant Reimbursements and Other Revenues
  Total Expenses
 Property Operating Expenses
  Three Months Ended March 31,
    
    
    
    
    
    Percent(amounts in thousands)
    
    2008
    
    2007
    
    Increase
    
    ChangeProperty operating
    
    $
    7,073
    
    
    $
    6,752
    
    
    $
    321
    
    
    
    5
    %Real estate taxes and insurance
    
    $
    3,027
    
    
    $
    2,634
    
    
    $
    393
    
    
    
    15
    %
 23




---



##### 



Other Operating Expenses
  Three Months Ended March 31,
    
    
    
    
    
    Percent(amounts in thousands)
    
    2008
    
    2007
    
    Decrease
    
    ChangeGeneral and administrative
    
    $
    2,701
    
    
    $
    2,966
    
    
    $
    265
    
    
    
    9
    %
   Three Months Ended March 31,
    
    
    
    
    
    Percent(amounts in thousands)
    
    2008
    
    2007
    
    Decrease
    
    ChangeDepreciation and amortization
    
    $
    9,520
    
    
    $
    9,948
    
    
    $
    428
    
    
    
    4
    %
  Other Expense
  Three Months Ended March 31,
    
    
    
    
    
    Percent(amounts in thousands)
    
    2008
    
    2007
    
    Increase
    
    ChangeInterest expense
    
    $
    9,131
    
    
    $
    8,289
    
    
    $
    842
    
    
    
    10
    %
 24




---



##### 



Three Months Ended March 31,
    
    
    
    
    
    Percent(amounts in thousands)
    
    2008
    
    2007
    
    Decrease
    
    ChangeInterest and other income
    
    $
    131
    
    
    $
    194
    
    
    $
    63
    
    
    
    32
    %
   Three Months Ended March 31,
    
    
    
    
    
    Percent(amounts in thousands)
    
    2008
    
    2007
    
    Increase
    
    ChangeGain on early
retirement of debt
    
    $
    2,112
    
    
    $
    
    
    
    $
    2,112
    
    
    
    
  Minority Interests
  Three Months Ended March 31,
    
    
    
    
    
    Percent(amounts in thousands)
    
    2008
    
    2007
    
    Increase
    
    ChangeMinority interests
    
    $
    74
    
    
    $
    (5
    )
    
    $
    79
    
    
    
    1,580
    %
  Liquidity and Capital Resources
  25




---



##### 



Cash Flows
  Three Months EndedMarch 31,(amounts in thousands)
    
    2008
    
    2007
    
    ChangeCash provided by operating activities
    
    $
    8,695
    
    
    $
    12,477
    
    
    $
    (3,782
    )Cash used in investing activities
    
    $
    (6,412
    )
    
    $
    (59,382
    )
    
    $
    52,970Cash (used in) provided by financing
activities
    
    $
    (3,118
    )
    
    $
    10,950
    
    
    $
    (14,068
    )
    Same Property Net Operating Income
  26




---



##### 



Comparison of the Three Months Ended March 31, 2008 to the Three Months Ended March 31, 2007
  Three Months Ended March 31,(dollars in thousands)
    
    2008
    
    
    2007
    
    
    $ Change
    
    
    % ChangeNumber of buildings (1)
    
    
    154
    
    
    
    154
    
    
    
    
    
    
    
    Same property revenuesRental
    
    $
    23,629
    
    
    $
    23,994
    
    
    $
    (365
    )
    
    
    (1.5
    )Tenant reimbursements and other
    
    
    4,864
    
    
    
    5,027
    
    
    
    (163
    )
    
    
    (3.2
    )Total same property revenues
    
    
    28,493
    
    
    
    29,021
    
    
    
    (528
    )
    
    
    (1.8
    )Same property operating expensesProperty
    
    
    6,034
    
    
    
    6,400
    
    
    
    (366
    )
    
    
    5.7Real estate taxes and insurance
    
    
    2,805
    
    
    
    2,546
    
    
    
    259
    
    
    
    10.2Total same property operating expenses
    
    
    8,839
    
    
    
    8,946
    
    
    
    (107
    )
    
    
    (1.2
    )Same property net operating income
    
    $
    19,654
    
    
    $
    20,075
    
    
    $
    (421
    )
    
    
    (2.1
    )Reconciliation to net income:Same property net operating income
    
    $
    19,654
    
    
    $
    20,075Non-comparable operating income
    
    
    1,831
    
    
    
    709General and administrative expenses
    
    
    (2,701
    )
    
    
    (2,966
    )Depreciation and amortization
    
    
    (9,520
    )
    
    
    (9,948
    )Other expenses, net
    
    
    (6,888
    )
    
    
    (8,095
    )Minority interests
    
    
    (74
    )
    
    
    5Net income (loss)
    
    $
    2,302
    
    
    $
    (220
    )Weighted Average Occupancyat March 31,2008
    
    2007Same Properties
    
    
    85.2
    %
    
    
    87.2
    %Non-comparable Properties(2)
    
    
    93.2
    %
    
    
    94.3
    %Total
    
    
    86.0
    %
    
    
    87.3
    %
 
 (1)
    
    Represents properties owned for the entirety of the periods presented.(2)
    
    Non-comparable Properties include: Crossways Commerce Center I (Expansion), John Marshall
Highway (Building II) Greenbrier Circle Corporate Center, Greenbrier Technology Center I, Pine Glen,
Ammendale Commerce Center, Rivers Bend Center II and Annapolis Commerce Park East. 27




---



##### 



Maryland
 Three Months Ended March 31,(dollars in thousands)
    
    2008
    
    
    2007
    
    
    $ Change
    
    
    % ChangeNumber of buildings (1)
    
    
    59
    
    
    
    59
    
    
    
    
    
    
    
    Same property revenuesRental
    
    $
    7,962
    
    
    $
    7,933
    
    
    $
    29
    
    
    
    0.4Tenant reimbursements and other
    
    
    1,674
    
    
    
    1,861
    
    
    
    (187
    )
    
    
    (10.0
    )Total same property revenues
    
    
    9,636
    
    
    
    9,794
    
    
    
    (158
    )
    
    
    (1.6
    )Same property operating expensesProperty
    
    
    2,026
    
    
    
    2,190
    
    
    
    (164
    )
    
    
    (7.5
    )Real estate taxes and insurance
    
    
    911
    
    
    
    860
    
    
    
    51
    
    
    
    5.9Total same property operating expenses
    
    
    2,937
    
    
    
    3,050
    
    
    
    (113
    )
    
    
    (3.7
    )Same property net operating income
    
    $
    6,699
    
    
    $
    6,744
    
    
    $
    (45
    )
    
    
    (0.7
    )Reconciliation to total property
operating income:Same property net operating income
    
    $
    6,699
    
    
    $
    6,744Non-comparable net operating income
    
    
    339
    
    
    
    89Total property operating income
    
    $
    7,038
    
    
    $
    6,833Weighted Average Occupancyat March 31,2008
    
    2007Same Properties
    
    
    88.8
    %
    
    
    89.2
    %Non-comparable Properties (2)
    
    
    99.2
    %
    
    
    100.0
    %Total
    
    
    89.3
    %
    
    
    89.3
    %
 
 (1)
    
    Represents properties owned for the entirety of the periods presented.(2)
    
    Non-comparable Properties include: Ammendale Commerce Center and Annapolis Commerce Park East. 28




---



##### 



Northern Virginia
 (dollars in thousands)
    
    Three Months Ended March 31,2008
    
    
    2007
    
    
    $ Change
    
    
    % ChangeNumber of buildings (1)
    
    
    48
    
    
    
    48
    
    
    
    
    
    
    
    Same property revenuesRental
    
    $
    8,219
    
    
    $
    8,608
    
    
    $
    (389
    )
    
    
    (4.5
    )Tenant reimbursements and other
    
    
    1,655
    
    
    
    1,597
    
    
    
    58
    
    
    
    3.6Total same property revenues
    
    
    9,874
    
    
    
    10,205
    
    
    
    (331
    )
    
    
    (3.2
    )Same property operating expensesProperty
    
    
    2,109
    
    
    
    2,344
    
    
    
    (235
    )
    
    
    (10.0
    )Real estate taxes and insurance
    
    
    1,016
    
    
    
    823
    
    
    
    193
    
    
    
    23.5Total same property operating expenses
    
    
    3,125
    
    
    
    3,167
    
    
    
    (42
    )
    
    
    (1.3
    )Same property net operating income
    
    $
    6,749
    
    
    $
    7,038
    
    
    $
    (289
    )
    
    
    (4.1
    )Reconciliation to total property operating
incomeSame property net operating income
    
    $
    6,749
    
    
    $
    7,038Non-comparable net operating income (loss)
    
    
    115
    
    
    
    (40
    )Total property operating income
    
    $
    6,864
    
    
    $
    6,998Weighted Average Occupancyat March 31,2008
    
    
    2007Same Properties
    
    
    85.2
    %
    
    
    88.8
    %Non-comparable Properties(2)
    
    
    100.0
    %
    
    
    
    %Total
    
    
    85.7
    %
    
    
    88.8
    %
 
 (1)
    
    Represents properties owned for the entirety of the periods presented.(2)
    
    Non-comparable Properties include: John Marshall Highway (Building II).  29




---



##### 



Southern Virginia
 (dollars in thousands)
    
    Three Months Ended March 31,2008
    
    
    2007
    
    
    $ Change
    
    
    % ChangeNumber of buildings (1)
    
    
    47
    
    
    
    47
    
    
    
    
    
    
    
    Same property revenuesRental
    
    $
    7,448
    
    
    $
    7,453
    
    
    $
    (5
    )
    
    
    (0.1
    )Tenant reimbursements and other
    
    
    1,535
    
    
    
    1,569
    
    
    
    (34
    )
    
    
    (2.2
    )Total same property revenues
    
    
    8,983
    
    
    
    9,022
    
    
    
    (39
    )
    
    
    (0.4
    )Same property operating expensesProperty
    
    
    1,899
    
    
    
    1,866
    
    
    
    33
    
    
    
    1.8Real estate taxes and insurance
    
    
    878
    
    
    
    863
    
    
    
    15
    
    
    
    1.7Total same property operating expenses
    
    
    2,777
    
    
    
    2,729
    
    
    
    48
    
    
    
    1.8Same property net operating income
    
    $
    6,206
    
    
    $
    6,293
    
    
    $
    (87
    )
    
    
    (1.4
    )Reconciliation to total property operating
incomeSame property net operating income
    
    $
    6,206
    
    
    $
    6,293Non-comparable net operating income
    
    
    1,377
    
    
    
    660Total property operating income
    
    $
    7,583
    
    
    $
    6,953Weighted Average Occupancyat March 31,2008
    
    
    2007Same Properties
    
    
    82.8
    %
    
    
    84.7
    %Non-comparable Properties(2)
    
    
    90.9
    %
    
    
    93.5
    %Total
    
    
    83.9
    %
    
    
    85.1
    %
 
 (1)
    
    Represents properties owned for the entirety of the periods resented.(2)
    
    Non-comparable Properties include: Crossways Commerce Center I (Expansion), Greenbrier Circle
Corporate Center, Greenbrier Technology Center I, Pine Glen and Rivers Bend Center II.  Contractual Obligations
  30




---



##### 



Dividends and Distributions
   Funds From Operations
     Three Months Ended March 31,2008
    
    
    2007Net income (loss)
    
    $
    2,302
    
    
    $
    (220
    )Add: Depreciation and amortization of real estate
assets
    
    
    9,520
    
    
    
    9,948Add: Minority interests
    
    
    74
    
    
    
    (5
    )FFO available to common shareholders and unitholders
    
    $
    11,896
    
    
    $
    9,723Weighted average number of diluted common shares and
Operating Partnership units outstanding
    
    
    24,920
    
    
    
    25,093
 31




---



##### 



Forward Looking Statements
          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).
 33




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##### 



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.)
 34




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##### 



FIRST POTOMAC REALTY TRUSTDate: May 9, 2008
    /s/ Douglas J. DonatelliDouglas J. DonatelliChairman of the Board and Chief Executive OfficerDate: May 9, 2008
    /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.)