UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2009.
 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
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o(Do not check if a smaller reporting
company)
    
    Smaller reporting company o
 o þ




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FIRST POTOMAC REALTY TRUST
 FORM 10-Q
 INDEX
 PagePart I: Financial InformationItem 1. Financial StatementsConsolidated balance sheets as of September 30, 2009 (unaudited) and December 31,
2008 (as adjusted  see footnote 2 (q))
    
    
    3Consolidated statements of operations (unaudited) for the three and nine months
ended September 30, 2009 and 2008 (as adjusted  see footnote 2 (q))
    
    
    4Consolidated statements of cash flows (unaudited) for the nine months ended
September 30, 2009 and 2008 (as adjusted  see footnote 2 (q))
    
    
    5Notes to consolidated financial statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    41Item 4. Controls and Procedures
    
    
    42Part II: Other InformationItem 1. Legal Proceedings
    
    
    43Item 1A. Risk Factors
    
    
    43Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    43Item 3. Defaults Upon Senior Securities
    
    
    43Item 4. Submission of Matters to a Vote of Security Holders
    
    
    43Item 5. Other Information
    
    
    43Item 6. Exhibits
    
    
    43Signatures
 2




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##### 



FIRST POTOMAC REALTY TRUST
 September 30, 2009
    
    
    December 31, 2008(unaudited)
    
    
    (as adjusted  seefootnote 2 (q))Assets:Rental property, net
    
    $
    961,340
    
    
    $
    994,913Cash and cash equivalents
    
    
    11,968
    
    
    
    16,352Escrows and reserves
    
    
    9,141
    
    
    
    8,808Accounts and other receivables, net of
allowance for doubtful accounts of $2,050 and
$935, respectively
    
    
    6,257
    
    
    
    6,872Accrued straight-line rents, net of allowance
for doubtful accounts of $1,034 and $575,
respectively
    
    
    10,424
    
    
    
    8,727Investment in affiliate
    
    
    1,909
    
    
    
    Deferred costs, net
    
    
    17,619
    
    
    
    17,165Prepaid expenses and other assets
    
    
    9,835
    
    
    
    6,365Intangible assets, net
    
    
    15,089
    
    
    
    21,047Total assets
    
    $
    1,043,582
    
    
    $
    1,080,249Liabilities:Mortgage loans
    
    $
    291,747
    
    
    $
    322,846Exchangeable senior notes, net
    
    
    48,485
    
    
    
    80,435Senior notes
    
    
    75,000
    
    
    
    75,000Secured term loans
    
    
    100,000
    
    
    
    100,000Unsecured revolving credit facility
    
    
    99,400
    
    
    
    75,500Financing obligation
    
    
    4,157
    
    
    
    11,491Accounts payable and other liabilities
    
    
    15,465
    
    
    
    18,022Accrued interest
    
    
    3,780
    
    
    
    2,491Rents received in advance
    
    
    5,924
    
    
    
    4,812Tenant security deposits
    
    
    5,031
    
    
    
    5,243Deferred market rent, net
    
    
    6,393
    
    
    
    8,489Total liabilities
    
    
    655,382
    
    
    
    704,329Noncontrolling interests in the Operating
Partnership (redemption value of $8,470 and $7,186,
respectively)
    
    
    9,800
    
    
    
    10,627Shareholders equity:Common shares, $0.001 par value, 100,000 common
shares authorized: 29,966 and 27,353 shares
issued and outstanding, respectively
    
    
    30
    
    
    
    27Additional paid-in capital
    
    
    509,807
    
    
    
    484,825Accumulated other comprehensive loss
    
    
    (2,394
    )
    
    
    (3,823
    )Dividends in excess of accumulated earnings
    
    
    (129,043
    )
    
    
    (115,736
    )Total shareholders equity
    
    
    378,400
    
    
    
    365,293Total liabilities, noncontrolling interests and
shareholders equity
    
    $
    1,043,582
    
    
    $
    1,080,249
  3




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##### 



FIRST POTOMAC REALTY TRUST
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(as adjusted  see
    
    
    
    
    
    
    (as adjusted  seefootnote 2 (q))
    
    
    
    
    
    
    footnote 2 (q))Revenues:Rental
    
    $
    27,149
    
    
    $
    25,491
    
    
    $
    80,885
    
    
    $
    75,316Tenant reimbursements and other
    
    
    5,725
    
    
    
    5,577
    
    
    
    18,134
    
    
    
    16,304Total revenues
    
    
    32,874
    
    
    
    31,068
    
    
    
    99,019
    
    
    
    91,620Operating expenses:Property operating
    
    
    8,149
    
    
    
    7,160
    
    
    
    24,518
    
    
    
    20,091Real estate taxes and insurance
    
    
    3,183
    
    
    
    3,173
    
    
    
    9,709
    
    
    
    9,122General and administrative
    
    
    3,609
    
    
    
    2,797
    
    
    
    9,487
    
    
    
    8,336Depreciation and amortization
    
    
    10,132
    
    
    
    9,113
    
    
    
    30,183
    
    
    
    27,373Total operating expenses
    
    
    25,073
    
    
    
    22,243
    
    
    
    73,897
    
    
    
    64,922Operating income
    
    
    7,801
    
    
    
    8,825
    
    
    
    25,122
    
    
    
    26,698Other expenses (income):Interest expense
    
    
    7,929
    
    
    
    8,635
    
    
    
    24,368
    
    
    
    27,302Interest and other income
    
    
    (150
    )
    
    
    (142
    )
    
    
    (406
    )
    
    
    (377
    )Equity in losses of affiliate
    
    
    38
    
    
    
    
    
    
    
    92
    
    
    
    Gain on early retirement of debt
    
    
    (640
    )
    
    
    
    
    
    
    (6,346
    )
    
    
    (3,006
    )Total other expenses
    
    
    7,177
    
    
    
    8,493
    
    
    
    17,708
    
    
    
    23,919Income from continuing operations
    
    
    624
    
    
    
    332
    
    
    
    7,414
    
    
    
    2,779Discontinued operations:Income from operations of disposed property
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,335Gain on sale of disposed property
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,274Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,609Net income
    
    
    624
    
    
    
    332
    
    
    
    7,414
    
    
    
    18,388Less: Net income attributable to noncontrolling interests in the Operating Partnership
    
    
    (16
    )
    
    
    (10
    )
    
    
    (202
    )
    
    
    (567
    )Net income attributable to common shareholders
    
    $
    608
    
    
    $
    322
    
    
    $
    7,212
    
    
    $
    17,821Net income attributable to common shareholders per share  basic and diluted:Income from continuing operations
    
    $
    0.02
    
    
    $
    0.01
    
    
    $
    0.25
    
    
    $
    0.10Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.63Net income
    
    $
    0.02
    
    
    $
    0.01
    
    
    $
    0.25
    
    
    $
    0.73Weighted average common shares outstanding 
basic
    
    
    28,134
    
    
    
    24,150
    
    
    
    27,434
    
    
    
    24,121Weighted average common shares outstanding 
diluted
    
    
    28,231
    
    
    
    24,204
    
    
    
    27,502
    
    
    
    24,172
  4




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##### 



FIRST POTOMAC REALTY TRUST
 Nine Months Ended September 30,2009
    
    
    2008(as adjusted  seefootnote 2 (q))Cash flows from operating activities:Net income
    
    $
    7,414
    
    
    $
    18,388Adjustments to reconcile net income to net cash provided
by operating activities:Discontinued operations:Gain on sale of property
    
    
    
    
    
    
    (14,274
    )Depreciation and amortization
    
    
    
    
    
    
    479Depreciation and amortization
    
    
    30,828
    
    
    
    28,025Stock based compensation
    
    
    2,226
    
    
    
    1,459Bad debt expense
    
    
    1,780
    
    
    
    216Amortization of deferred market rent
    
    
    (1,107
    )
    
    
    (1,364
    )Amortization of deferred financing costs and bond discount
    
    
    2,010
    
    
    
    2,407Amortization of rent abatement
    
    
    1,329
    
    
    
    1,120Equity in losses of affiliate
    
    
    92
    
    
    
    Change in financing obligation
    
    
    (320
    )
    
    
    Gain on early retirement of debt
    
    
    (6,347
    )
    
    
    (3,006
    )Changes in assets and liabilities:Escrows and reserves
    
    
    (1,580
    )
    
    
    4,657Accounts and other receivables
    
    
    (905
    )
    
    
    (157
    )Accrued straight-line rents
    
    
    (2,188
    )
    
    
    (1,635
    )Prepaid expenses and other assets
    
    
    (1,661
    )
    
    
    (1,537
    )Tenant security deposits
    
    
    (176
    )
    
    
    (24
    )Accounts payable and accrued expenses
    
    
    1,797
    
    
    
    1,096Accrued interest
    
    
    1,374
    
    
    
    1,755Rents received in advance
    
    
    1,200
    
    
    
    591Deferred costs
    
    
    (4,585
    )
    
    
    (6,290
    )Total adjustments
    
    
    23,767
    
    
    
    13,518Net cash provided by operating activities
    
    
    31,181
    
    
    
    31,906Cash flows from investing activities:Proceeds from sale of real estate assets
    
    
    
    
    
    
    50,573Purchase deposit on future acquisitions
    
    
    (2,500
    )
    
    
    Additions to rental property
    
    
    (17,818
    )
    
    
    (18,090
    )Additions to construction in progress
    
    
    (905
    )
    
    
    (9,533
    )Acquisition of rental property and associated intangible assets
    
    
    
    
    
    
    (46,573
    )Net cash used in investing activities
    
    
    (21,223
    )
    
    
    (23,623
    )Cash flows from financing activities:Financing costs
    
    
    (1
    )
    
    
    (1,090
    )Proceeds from debt
    
    
    31,500
    
    
    
    192,300Proceeds from the issuance of stock, net
    
    
    22,277
    
    
    
    38,165Repayments of debt
    
    
    (47,026
    )
    
    
    (209,428
    )Dividends to shareholders
    
    
    (20,520
    )
    
    
    (24,892
    )Distributions to noncontrolling interests
    
    
    (572
    )
    
    
    (795
    )Redemption of partnership units
    
    
    
    
    
    
    (80
    )Stock option exercises
    
    
    
    
    
    
    38Net cash used in financing activities
    
    
    (14,342
    )
    
    
    (5,782
    )Net (decrease) increase in cash and cash equivalents
    
    
    (4,384
    )
    
    
    2,501Cash and cash equivalents, beginning of period
    
    
    16,352
    
    
    
    5,198Cash and cash equivalents, end of period
    
    $
    11,968
    
    
    $
    7,699
  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
  6




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##### 



(c) Revenue Recognition
    (d) Cash and Cash Equivalents
  (e) Escrows and Reserves
  (f) Rental Property
  7




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##### 



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
     (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;
 8




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##### 



■
    
    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 fourteen years; and■
    
    the intangible value of tenant or customer relationships.
  (h) Investment in Affiliate
 .
  ( i) Sales of Real Estate
    9




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##### 



(j) Intangible Assets
    (k) Derivatives and Hedging
   10




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##### 



(l) Income Taxes
  (m) Noncontrolling Interests
    (n) Earnings Per Share
  11




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##### 



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Numerator for basic and diluted earnings per share
calculations:Income from continuing operations
    
    $
    624
    
    
    $
    332
    
    
    $
    7,414
    
    
    $
    2,779Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,609Net income
    
    
    624
    
    
    
    332
    
    
    
    7,414
    
    
    
    18,388Less: Net income attributable to
noncontrolling interests in the
Operating Partnership
    
    
    (16
    )
    
    
    (10
    )
    
    
    (202
    )
    
    
    (567
    )Net income attributable to common
shareholders
    
    
    608
    
    
    
    322
    
    
    
    7,212
    
    
    
    17,821Less: Allocation to participating securities
    
    
    (153
    )
    
    
    (120
    )
    
    
    (362
    )
    
    
    (297
    )Income available to common shareholders
    
    $
    455
    
    
    $
    202
    
    
    $
    6,850
    
    
    $
    17,524Denominator for basic and diluted earnings per
share calculations:Weighted average shares outstanding  basic
    
    
    28,134
    
    
    
    24,150
    
    
    
    27,434
    
    
    
    24,121Effect of dilutive shares:Employee stock options and non-vested shares
    
    
    97
    
    
    
    54
    
    
    
    68
    
    
    
    51Weighted average shares outstanding  diluted
    
    
    28,231
    
    
    
    24,204
    
    
    
    27,502
    
    
    
    24,172Amounts attributable to common shareholders per
share basic and diluted:Income from continuing operations
    
    $
    0.02
    
    
    $
    0.01
    
    
    $
    0.25
    
    
    $
    0.10Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.63Net income
    
    $
    0.02
    
    
    $
    0.01
    
    
    $
    0.25
    
    
    $
    0.73Amounts attributable to common shareholders:Income from continuing operations
    
    $
    608
    
    
    $
    322
    
    
    $
    7,212
    
    
    $
    2,693Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,128Net income
    
    $
    608
    
    
    $
    322
    
    
    $
    7,212
    
    
    $
    17,821In accordance with accounting requirements regarding earnings per share, the Company did
not include the following anti-dilutive shares in its calculation of diluted earnings per share
(amounts in thousands).Three Months Ended September 30,
    
    Nine Months Ended September 30,2009
    
    2008
    
    2009
    
    2008Stock option awards
    
    
    763
    
    
    
    667
    
    
    
    771
    
    
    
    684Non-vested share awards
    
    
    212
    
    
    
    77
    
    
    
    252
    
    
    
    89975
    
    
    
    744
    
    
    
    1,023
    
    
    
    773
  (o) Share-Based Compensation
 Stock Options Summary
  12




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##### 



Non-vested share awards
   (p) Reclassifications
  (q) Application of New Accounting Standards
  
    
    Contractual cash interest expense includes $0.6 million and $0.9 million for the
three months ended September 30, 2009 and 2008, respectively, and $2.0 million and $3.1
million for the nine months ended September 30, 2009 and 2008, respectively. Non-cash
interest expense related to the amortization of the discount on the liability component
includes $0.2 million and $0.3 million for the three months ended September 30, 2009
and 2008, respectively, and $0.7 million and $1.1 million for the nine months ended
September 30, 2009 and 2008, respectively;
 
    
    Additional paid in capital increased by the total discount recorded of $8.7 million,
with a shareholders equity increase of $3.4 million at December 31, 2008;
 
    
    The gain on the early retirement of debt previously reported was reduced by $1.7
million for the nine months ended September 30, 2008, respectively;
 
    
    The unamortized discount was $1.5 million and $3.4 million at September 30, 2009 and
December 31, 2008, respectively; and
 
    
    The total impact of adoption of these new requirements was a reduction in net income
attributable to common shareholders of $0.5 million, or $0.02 per diluted share, and
$1.9 million, or $0.06 per diluted share, for the three and nine months ended September
30, 2009, respectively, and $0.3 million, or $0.01 per diluted share, and $2.8 million,
or $0.12 per diluted share, for the three and nine months ended September 30, 2008,
respectively.
 13




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##### 



Summary of Significant Account Policies
  .
 (3) Rental Property
  September 30, 2009
    
    
    December 31, 2008Land
    
    $
    225,333
    
    
    $
    235,911Buildings and improvements
    
    
    772,812
    
    
    
    786,401Construction in process
    
    
    13,234
    
    
    
    12,687Tenant improvements
    
    
    73,731
    
    
    
    61,674Furniture, fixtures and equipment
    
    
    9,898
    
    
    
    9,8981,095,008
    
    
    
    1,106,571Less: accumulated depreciation
    
    
    (133,668
    )
    
    
    (111,658
    )$
    961,340
    
    
    $
    994,913
 (a) Development and Redevelopment Activity
   14




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##### 



(b) Acquisitions
  Investment in
Affiliate
 (4) Investment in Affiliate
   September 30, 2009Assets:Rental property, net
    
    $
    25,208Cash and cash equivalents
    
    
    560Other assets
    
    
    2,087Total assets
    
    $
    27,855Liabilities:Mortgage loan
    
    $
    18,144Other liabilities
    
    
    1,663Total liabilities
    
    
    19,807Equity:
    
    
    8,048Total liabilities and equity
    
    $
    27,855
  The period March 17,Three Months Ended
    
    
    2009 throughSeptember 30, 2009
    
    
    September 30, 2009Total revenues
    
    $
    703
    
    
    $
    1,426Total operating expenses
    
    
    (185
    )
    
    
    (326
    )Net operating income
    
    
    518
    
    
    
    1,100Depreciation and amortization
    
    
    (365
    )
    
    
    (814
    )Interest expense
    
    
    (303
    )
    
    
    (653
    )Net loss
    
    $
    (150
    )
    
    $
    (367
    )
 15




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##### 



(5) Discontinued Operations
   Nine Months EndedSeptember 30, 2008Revenue
    
    $
    2,473Income from operations of disposed property
    
    
    1,335Gain on sale of disposed property
    
    
    14,274
 (6) Debt
  September 30,
    
    
    December 31,2009
    
    
    2008(as adjusted see footnote2 (q))Mortgage loans, effective interest rates ranging from 5.19% to 8.53%, maturing at various
dates through September 2021(1)
    
    $
    291,747
    
    
    $
    322,846Exchangeable senior notes, net of discounts, effective interest rate of 5.84%, maturing
December 2011(2)
    
    
    48,485
    
    
    
    80,435Series A senior notes, effective interest rate of 6.41%, maturing September 2013
    
    
    37,500
    
    
    
    37,500Series B senior notes, effective interest rate of 6.55%, maturing September 2016
    
    
    37,500
    
    
    
    37,500Secured term loan, effective interest rate of 3.81%, maturing August 2011(3)(4)
    
    
    50,000
    
    
    
    50,000Secured term loan, effective interest rate of 5.83%, maturing August 2011(4)(5)
    
    
    35,000
    
    
    
    35,000Secured term loan, effective interest rate of LIBOR plus 2.50%, maturing August
2011(4)(5)
    
    
    15,000
    
    
    
    15,000Unsecured revolving credit facility, effective interest rate of LIBOR plus 1.20%,
maturing April 2011(4)(6)
    
    
    99,400
    
    
    
    75,500$
    614,632
    
    
    $
    653,781
 
 (1)
    
    Mortgage loans include a variable interest rate mortgage of $9.9 million
for RiversPark I, which has an interest rate of LIBOR plus 2.50%. In September 2008, the
Company entered into an interest rate swap agreement that fixed the underlying interest
rate on the loan at 5.97%.(2)
    
    The principal balance of the Exchangeable Senior Notes was $50.5 million and
$85.0 million at September 30, 2009 and December 31, 2008, respectively.(3)
    
    The term loan has a contractual interest rate of LIBOR plus 1.10%. In
January 2008, the Company entered into an interest rate swap agreement that fixed the
underlying interest rate on the loan at 2.71% plus a spread of 70 to 125 basis points.(4)
    
    The unsecured revolving credit facility and secured term loans mature
in April 2010 and August 2010, respectively, and provide for a one-year extension of the
maturity date at the Companys option. The Company intends to exercise its extension option
or refinance the debt before it reaches maturity. The table above assumes the exercise by
the Company of the one-year extension, which is conditioned upon the payment of an
extension fee, the absence of an existing default under the loan agreement and the
continued accuracy of the representations and warranties contained in the loan agreement.(5)
    
    In August 2008, the Company entered into a $35.0 million variable-rate secured
term loan and an interest rate swap agreement that fixed the underlying interest rate on
the loan. In December 2008, the Company borrowed an additional $15.0 million under an
amendment to the loan, which increased its total obligation to $50.0 million. The
transaction increased the contractual interest rate on the entire loan balance by 0.25% to
LIBOR plus 250 basis points. As of September 30, 2009, the initial term loan balance is
fixed at 5.83%.(6)
    
    The unsecured revolving credit facility has a contractual interest rate of LIBOR
plus a spread of 80 to 135 basis points. 16




---



##### 



(a) Mortgage Loans
  Contractual
    
    
    Effective
    
    
    Maturity
    
    
    September 30,
    
    
    December 31,Property
    
    Interest Rate
    
    
    Interest Rate
    
    
    Date

    
    2009
    
    
    2008Glenn Dale Business Center (1)
    
    
    7.83
    %
    
    
    5.13
    %
    
    
    
    

    
    $
    
    
    
    $
    8,1524200 Tech Court (2)(4)
    
    
    8.07
    %
    
    
    8.07
    %
    
    October 2009
    
    
    1,705
    
    
    
    1,726Park Central I (3)
    
    
    8.00
    %
    
    
    5.66
    %
    
    November 2009
    
    
    4,565
    
    
    
    4,7544212 Tech Court
    
    
    8.53
    %
    
    
    8.53
    %
    
    June 2010
    
    
    1,671
    
    
    
    1,689Park Central II
    
    
    8.32
    %
    
    
    5.66
    %
    
    November 2010
    
    
    5,670
    
    
    
    5,902Enterprise Center (4)
    
    
    8.03
    %
    
    
    5.20
    %
    
    December 2010
    
    
    17,576
    
    
    
    18,102Indian Creek Court (4)
    
    
    7.80
    %
    
    
    5.90
    %
    
    January 2011
    
    
    12,518
    
    
    
    12,818403/405 Glenn Drive
    
    
    7.60
    %
    
    
    5.50
    %
    
    July 2011
    
    
    8,324
    
    
    
    8,5294612 Navistar Drive (4)
    
    
    7.48
    %
    
    
    5.20
    %
    
    July 2011
    
    
    12,791
    
    
    
    13,130RiversPark I and II (5)
    
    LIBOR+2.50%
    
    
    5.97
    %
    
    September 2011
    
    
    9,856
    
    
    
    28,000Campus at Metro Park (4)
    
    
    7.11
    %
    
    
    5.25
    %
    
    February 2012
    
    
    23,579
    
    
    
    24,1541434 Crossways Blvd Building II
    
    
    7.05
    %
    
    
    5.38
    %
    
    August 2012
    
    
    9,940
    
    
    
    10,202Crossways Commerce Center
    
    
    6.70
    %
    
    
    6.70
    %
    
    October 2012
    
    
    24,711
    
    
    
    25,008Newington Business Park Center
    
    
    6.70
    %
    
    
    6.70
    %
    
    October 2012
    
    
    15,588
    
    
    
    15,775Prosperity Business Center
    
    
    6.25
    %
    
    
    5.75
    %
    
    January 2013
    
    
    3,665
    
    
    
    3,752Aquia Commerce Center I
    
    
    7.28
    %
    
    
    7.28
    %
    
    February 2013
    
    
    518
    
    
    
    6101434 Crossways Blvd Building I
    
    
    6.25
    %
    
    
    5.38
    %
    
    March 2013
    
    
    8,557
    
    
    
    8,749Linden Business Center
    
    
    6.01
    %
    
    
    5.58
    %
    
    October 2013
    
    
    7,271
    
    
    
    7,379Owings Mills Business Center
    
    
    5.85
    %
    
    
    5.75
    %
    
    March 2014
    
    
    5,577
    
    
    
    5,650Annapolis Commerce Park East
    
    
    5.74
    %
    
    
    6.25
    %
    
    June 2014
    
    
    8,643
    
    
    
    8,728Plaza 500, Van Buren Business Park,
Rumsey Center, Snowden Center,
Greenbrier Technology Center II, Norfolk
Business Center, Northridge I & II and
15395 John Marshall Highway
    
    
    5.19
    %
    
    
    5.19
    %
    
    August 2015
    
    
    99,625
    
    
    
    100,000Hanover Business Center:Building D
    
    
    8.88
    %
    
    
    6.63
    %
    
    August 2015
    
    
    783
    
    
    
    862Building C
    
    
    7.88
    %
    
    
    6.63
    %
    
    December 2017
    
    
    1,181
    
    
    
    1,260Chesterfield Business Center:Buildings C,D,G and H
    
    
    8.50
    %
    
    
    6.63
    %
    
    August 2015
    
    
    2,042
    
    
    
    2,245Buildings A,B,E and F
    
    
    7.45
    %
    
    
    6.63
    %
    
    June 2021
    
    
    2,588
    
    
    
    2,695Gateway Centre Building I
    
    
    7.35
    %
    
    
    5.88
    %
    
    November 2016
    
    
    1,391
    
    
    
    1,505Airpark Business Center
    
    
    7.45
    %
    
    
    6.63
    %
    
    June 2021
    
    
    1,412
    
    
    
    1,470Total Mortgage Debt
    
    
    
    
    
    
    5.63
    %(6)
    
    
    
    
    
    $
    291,747
    
    
    $
    322,846
 
 (1)
    
    The loan was repaid on May 1, 2009.(2)
    
    The loan was repaid on October 1, 2009.(3)
    
    The loan was repaid on November 2, 2009.(4)
    
    The maturity date on these loans represents the anticipated repayment date of the
loans, after which date the interest rates on the loans will increase to a predetermined
amount identified in the debt agreement. The Company calculates interest expense using the
effective interest method over the anticipated period during which it expects the debt to be
outstanding.(5)
    
    On March 17, 2009, the Company deconsolidated RiversPark II and, therefore, the
assets, liabilities and operating results of RiversPark II are no longer consolidated on the
Companys consolidated financial statements, which include $18.1 million of mortgage debt. For
more information, see footnote 4, Investment in Affiliate.(6)
    
    Weighted average interest rate on total mortgage debt.   17




---



##### 



(b) Exchangeable Senior Notes
  (c) Unsecured Revolving Credit Facility
  (7) Derivative Instruments and Comprehensive Income
  
    
    available interest rate hedging may not correspond directly with the interest rate risk
for which the Company seeks protection;
 
    
    the duration of the hedge may not match the duration of the related liability;
 
    
    the party owing money in the hedging transaction may default on its obligation to pay;
and
 
    
    the credit quality of the party owing money on the hedge may be downgraded to such an
extent that it impairs the Companys ability to sell or assign its side of the hedging
transaction.
  Transaction Date
    
    Instrument
    
    Amount
    
    
    Contractual Interest Rate
    
    Effective Interest RateJanuary 2008
    
    Term Loan
    
    $
    50,000
    
    
    LIBOR plus variable spread(1)
    
    2.71% plus a variable spread(1)August 2008
    
    Term Loan
    
    
    35,000
    
    
    LIBOR plus 250 basis points
    
    5.83%September 2008
    
    Mortgage Loan(2)
    
    
    9,856
    
    
    LIBOR plus 250 basis points
    
    5.97%$
    94,856
 
 (1)
    
    At September 30, 2009, the contractual interest rate on the Companys $50 million
term loan was LIBOR plus 1.10% and the effective interest rate was 3.81%.(2)
    
    Excludes the $18.1 million mortgage loan for RiversPark II, which was deconsolidated
with the assets, liabilities and operating results of RiversPark II on March 17, 2009. The
swap agreement associated with the $18.1 million deconsolidated mortgage loan remains in
effect and under the same terms as the consolidated mortgage loan.  18




---



##### 



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income
    
    $
    624
    
    
    $
    332
    
    
    $
    7,414
    
    
    $
    18,388Unrealized gain (loss) on derivative instruments
    
    
    154
    
    
    
    (289
    )
    
    
    785
    
    
    
    393Total comprehensive income
    
    
    778
    
    
    
    43
    
    
    
    8,199
    
    
    
    18,781Comprehensive income attributable to
noncontrolling interests in the Operating
Partnership
    
    
    (20
    )
    
    
    (1
    )
    
    
    (223
    )
    
    
    (580
    )Comprehensive income attributable to common
shareholders
    
    $
    758
    
    
    $
    42
    
    
    $
    7,976
    
    
    $
    18,201
 (8) Fair Value of Financial Instruments
        Balance atSeptember 30, 2009
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Liabilities:Derivative instrument-swap agreements
    
    $
    2,252
    
    
    $
    
    
    
    $
    2,252
    
    
    $
    
   19




---



##### 



September 30, 2009
    
    
    December 31, 2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    ValueMortgage debt
    
    $
    291,747
    
    
    $
    268,150
    
    
    $
    322,846
    
    
    $
    307,247Exchangeable senior notes(1)
    
    
    48,485
    
    
    
    46,460
    
    
    
    80,435
    
    
    
    60,350Series A senior notes
    
    
    37,500
    
    
    
    37,467
    
    
    
    37,500
    
    
    
    28,199Series B senior notes
    
    
    37,500
    
    
    
    36,781
    
    
    
    37,500
    
    
    
    24,239Secured term loans
    
    
    100,000
    
    
    
    96,851
    
    
    
    100,000
    
    
    
    101,691Unsecured revolving credit facility
    
    
    99,400
    
    
    
    94,512
    
    
    
    75,500
    
    
    
    76,739Total
    
    $
    614,632
    
    
    $
    580,221
    
    
    $
    653,781
    
    
    $
    598,465
 
 (1)
    
    During the nine months ended September 30, 2009, the Company
repurchased $34.5 million of its Exchangeable Senior Notes at a discount. (9) Shareholders Equity
   RedeemableFirst Potomac
    
    
    noncontrollingRealty Trust
    
    
    interestsBalance, December 31, 2008
    
    $
    365,293
    
    
    $
    10,627Net income
    
    
    7,212
    
    
    
    202Changes in ownership
    
    
    25,651
    
    
    
    (478
    )Distributions to owners
    
    
    (20,520
    )
    
    
    (572
    )Other comprehensive income
    
    
    764
    
    
    
    21Balance, September 30, 2009
    
    $
    378,400
    
    
    $
    9,800
 (10) Segment Information
   20




---



##### 



Three Months Ended September 30, 2009Maryland(1)
    
    
    Northern Virginia
    
    
    Southern Virginia
    
    
    ConsolidatedNumber of buildings
    
    
    72
    
    
    
    48
    
    
    
    54
    
    
    
    174Square feet
    
    
    3,610,072
    
    
    
    2,820,535
    
    
    
    5,262,230
    
    
    
    11,692,837Total revenues
    
    $
    10,706
    
    
    $
    10,010
    
    
    $
    12,158
    
    
    $
    32,874Property operating expense
    
    
    (2,866
    )
    
    
    (2,281
    )
    
    
    (3,002
    )
    
    
    (8,149
    )Real estate taxes and insurance
    
    
    (1,142
    )
    
    
    (971
    )
    
    
    (1,070
    )
    
    
    (3,183
    )Total property operating income
    
    $
    6,698
    
    
    $
    6,758
    
    
    $
    8,086
    
    
    
    21,542Depreciation and amortization expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,132
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,609
    )Other expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,177
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    624Total assets(2)
    
    $
    383,701
    
    
    $
    294,577
    
    
    $
    318,954
    
    
    $
    1,043,582Capital expenditures(3)
    
    $
    4,068
    
    
    $
    7,605
    
    
    $
    6,988
    
    
    $
    18,723
 Three Months Ended September 30, 2008Maryland
    
    
    Northern Virginia
    
    
    Southern Virginia
    
    
    ConsolidatedNumber of buildings
    
    
    74
    
    
    
    47
    
    
    
    54
    
    
    
    175Square feet
    
    
    3,749,989
    
    
    
    2,816,409
    
    
    
    5,254,201
    
    
    
    11,820,599Total revenues
    
    $
    10,263
    
    
    $
    9,335
    
    
    $
    11,470
    
    
    $
    31,068Property operating expense
    
    
    (2,137
    )
    
    
    (2,041
    )
    
    
    (2,982
    )
    
    
    (7,160
    )Real estate taxes and insurance
    
    
    (1,040
    )
    
    
    (1,090
    )
    
    
    (1,043
    )
    
    
    (3,173
    )Total property operating income
    
    $
    7,086
    
    
    $
    6,204
    
    
    $
    7,445
    
    
    
    20,735Depreciation and amortization expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,113
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,797
    )Other expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,493
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    332Total assets(2)
    
    $
    431,507
    
    
    $
    281,872
    
    
    $
    308,236
    
    
    $
    1,069,972Capital expenditures(3)
    
    $
    8,178
    
    
    $
    9,647
    
    
    $
    9,582
    
    
    $
    27,623
 Nine Months Ended September 30, 2009Maryland(1)
    
    
    Northern Virginia
    
    
    Southern Virginia
    
    
    ConsolidatedTotal revenues
    
    $
    33,302
    
    
    $
    29,636
    
    
    $
    36,081
    
    
    $
    99,019Property operating expense
    
    
    (8,969
    )
    
    
    (6,822
    )
    
    
    (8,727
    )
    
    
    (24,518
    )Real estate taxes and insurance
    
    
    (3,319
    )
    
    
    (3,204
    )
    
    
    (3,186
    )
    
    
    (9,709
    )Total property operating income
    
    $
    21,014
    
    
    $
    19,610
    
    
    $
    24,168
    
    
    
    64,792Depreciation and amortization expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,183
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,487
    )Other expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,708
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    7,414
 21




---



##### 



Nine Months Ended September 30, 2008Maryland
    
    
    Northern Virginia
    
    
    Southern Virginia
    
    
    ConsolidatedTotal revenues
    
    $
    30,928
    
    
    $
    27,203
    
    
    $
    33,489
    
    
    $
    91,620Property operating expense
    
    
    (6,314
    )
    
    
    (5,830
    )
    
    
    (7,947
    )
    
    
    (20,091
    )Real estate taxes and insurance
    
    
    (2,926
    )
    
    
    (3,093
    )
    
    
    (3,103
    )
    
    
    (9,122
    )Total property operating income
    
    $
    21,688
    
    
    $
    18,280
    
    
    $
    22,439
    
    
    
    62,407Depreciation and amortization expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,373
    )General and administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,336
    )Other expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,919
    )Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,609Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    18,388
 
 (1)
    
    Includes the results of a three-building, 160,470 square foot property
that is owned by the Company through a consolidated joint venture.(2)
    
    Corporate assets not allocated to any of our reportable segments totaled $46,350 and
$48,357 at September 30, 2009 and 2008, respectively.(3)
    
    Capital expenditures for corporate assets not allocated to any of our reportable
segments totaled $62 and $216 for the nine months
ended September 30, 2009 and 2008, respectively. (11) Supplemental Disclosure of Cash Flow Information
  2009
    
    2008Cash paid for interest, net
    
    $
    22,882
    
    
    $
    24,389Non-cash investing and financing activities:Conversion of Operating Partnership units
into common shares
    
    
    507
    
    
    
    358
   Investment in Affiliate.
 22




---



##### 



ITEM 2:
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion and analysis of the Companys financial condition and results of
operations should be read in conjunction with the consolidated financial statements and notes
thereto appearing elsewhere in this Form 10-Q . The discussion and analysis is derived from the
consolidated operating results and activities of First Potomac Realty Trust.
     
    
    maintain and increase occupancy rates and/or increase rental rates at its
properties;
    
    sell assets to third parties or contribute properties to joint ventures; and
    
    continue to grow its portfolio through acquisition of new properties, potentially
through joint ventures.
  Executive Summary
   23




---



##### 



Significant Third Quarter and Subsequent Event Transactions
 
    
    During the third quarter of 2009, the Company issued 1.6 million common shares through
its controlled equity offering agreement at a weighted average price of $10.68 per share.
In October 2009, the Company issued an additional 0.1 million common shares through its
controlled equity offering agreement at a weighted average price of $11.75 per share. The
offerings generated net proceeds of $17.9 million, which were used to repurchase a
portion of the Companys Exchangeable Senior Notes at a discount, to reduce a portion of
its unsecured revolving credit facility and to fund the cash portion of the Cloverleaf
Center acquisition. Since the beginning of 2009 and through the filing date of these
consolidated financial statements, the Company has issued 2.2 million common shares
through its controlled equity offering agreement, generating net proceeds of $23.3
million;
    
    The Company repurchased $8.5 million of its Exchangeable Senior Notes, at a 12%
discount, resulting in a gain of $0.6 million, or $0.02 per diluted share. For the nine
months ended September 30, 2009, the Company repurchased $34.5 million of its Exchange
Senior Notes, at a 23% discount, resulting in a gain of $6.3 million, or $0.23 per
diluted share;
    
    The Company executed 80,000 square feet of new leases, including 24,000 square feet at
1400 Cavalier Boulevard, which is located in the Companys Southern Virginia reporting
segment, and 18,000 square feet at Annapolis Commerce Park East, which is located in the
Companys Maryland reporting segment. Rent is expected to commence for the majority of
these new leases by the end of the first quarter of 2010; and
    
    The Company executed 370,000 square feet of renewal leases, which reflects a 90%
retention rate. Renewal leases in the quarter include 79,000 square feet at Annapolis
Commerce Park East, 66,000 square feet at Crossways Commerce Center and 59,000 square
feet at Frederick Industrial Park.
    
    On October 8, 2009, the Company acquired Cloverleaf Center, a four-building, 174,000
square foot business park in Germantown, Maryland, for $25.5 million. The property is
currently 97% leased to seven tenants. The acquisition was financed with a $17.5 million
mortgage loan and available cash that was funded with proceeds from shares issued through
the Companys controlled equity offering agreement.
 Development and Redevelopment Activity
    Development
 
    
    Greenbrier Technology Center III  a 48,000 square foot three-story office building has
been designed, all permits have been received and construction is set to commence. Costs to
date include civil, architectural, mechanical, electrical and plumbing design as well as
permit fees; and
    
    Sterling Park Business Center, Lot 7  a 57,000 square foot office building, adjacent
to a recently completed building, has been designed, all permits have been received and
construction is pending further leasing activity. Costs to date include civil site
preparation work, architectural, mechanical, electrical and plumbing design as well as
permit fees.
 Redevelopment
 
    
    Enterprise Parkway  a 71,000 square foot multi-tenanted office redevelopment. Costs
incurred to date include building, lobby and common corridor renovations, design documents
and permit fees for major common area bathroom renovations as well as schematic
architectural and engineering design for future tenant layouts; and
 24




---



##### 




    
    Gateway 270  a 42,000 square foot business park redevelopment has been designed, all
permits have been processed and construction is set to commence. The majority of the costs
incurred to date include architectural and engineering design work.
  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
  25




---



##### 



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 fourteen years; and
 ■
    
    the intangible value of tenant or customer relationships.
  Goodwill and Impairment Analysis
  26




---



##### 



Investment in Affiliate
 .
  Derivative Instruments
   Share-Based Compensation
  Results of Operations
 Comparison of the Three and Nine Months Ended September 30, 2009 to the Three and Nine Months Ended
September 30, 2008
 2008 Acquisitions
  27




---



##### 



Total Revenues
  Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2009
    
    2008
    
    2009
    
    2008
    
    Increase
    
    Change
    
    Increase
    
    ChangeRental
    
    $
    27,149
    
    
    $
    25,491
    
    
    $
    80,885
    
    
    $
    75,316
    
    
    $
    1,658
    
    
    
    7
    %
    
    $
    5,569
    
    
    
    7
    %Tenant reimbursements & other
    
    $
    5,725
    
    
    $
    5,577
    
    
    $
    18,134
    
    
    $
    16,304
    
    
    $
    148
    
    
    
    3
    %
    
    $
    1,830
    
    
    
    11
    %
 Rental Revenue
   Tenant Reimbursements and Other Revenues
   28




---



##### 



Total Expenses
 Property Operating Expenses
  Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2009
    
    2008
    
    2009
    
    2008
    
    Increase
    
    Change
    
    Increase
    
    ChangeProperty operating
    
    $
    8,149
    
    
    $
    7,160
    
    
    $
    24,518
    
    
    $
    20,091
    
    
    $
    989
    
    
    
    14
    %
    
    $
    4,427
    
    
    
    22
    %Real estate taxes & insurance
    
    $
    3,183
    
    
    $
    3,173
    
    
    $
    9,709
    
    
    $
    9,122
    
    
    $
    10
    
    
    
    
    
    
    $
    587
    
    
    
    6
    %
     Other Operating Expenses
  Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2009
    
    2008
    
    2009
    
    2008
    
    Increase
    
    Change
    
    Increase
    
    ChangeGeneral and
administrative
    
    $
    3,609
    
    
    $
    2,797
    
    
    $
    9,487
    
    
    $
    8,336
    
    
    $
    812
    
    
    
    29
    %
    
    $
    1,151
    
    
    
    14
    %
  29




---



##### 



Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2009
    
    2008
    
    2009
    
    2008
    
    Increase
    
    Change
    
    Increase
    
    ChangeDepreciation and amortization
    
    $
    10,132
    
    
    $
    9,113
    
    
    $
    30,183
    
    
    $
    27,373
    
    
    $
    1,019
    
    
    
    11
    %
    
    $
    2,810
    
    
    
    10
    %Depreciation and amortization expense includes depreciation of real estate assets and
amortization of intangible assets and leasing commissions. For the three and nine months ended
September 30, 2009, depreciation and amortization expense increased $1.0 million and $2.8 million,
respectively. The Remaining Portfolio generated additional depreciation and amortization expense of
$0.8 million and $1.9 million, respectively, due to an increase in expense related to the disposal
of assets from tenants that vacated during the year. The remaining increase in depreciation and
amortization expense for the three and nine months ended September 30, 2009 was attributed to the
2008 Acquisitions.Other Expenses (Income)Interest expense is summarized as follows:Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2009
    
    2008
    
    2009
    
    2008
    
    Decrease
    
    Change
    
    Decrease
    
    ChangeInterest expense
    
    $
    7,929
    
    
    $
    8,635
    
    
    $
    24,368
    
    
    $
    27,302
    
    
    $
    706
    
    
    
    8
    %
    
    $
    2,934
    
    
    
    11
    %
    30




---



##### 



Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2009
    
    2008
    
    2009
    
    2008
    
    Increase
    
    Change
    
    Increase
    
    ChangeInterest and
other income
    
    $
    150
    
    
    $
    142
    
    
    $
    406
    
    
    $
    377
    
    
    $
    8
    
    
    
    6
    %
    
    $
    29
    
    
    
    8
    %
   Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2009
    
    2008
    
    2009
    
    2008
    
    Increase
    
    Change
    
    Increase
    
    ChangeEquity in losses of affiliate
    
    $
    38
    
    
    $
    
    
    
    $
    92
    
    
    $
    
    
    
    $
    38
    
    
    
    
    
    
    $
    92
    
    
    
    
   Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2009
    
    2008
    
    2009
    
    2008
    
    Increase
    
    Change
    
    Increase
    
    ChangeGain on early
retirement of debt
    
    $
    640
    
    
    $
    
    
    
    $
    6,346
    
    
    $
    3,006
    
    
    $
    640
    
    
    
    
    
    
    $
    3,340
    
    
    
    111
    %
  31




---



##### 



Noncontrolling Interests
  Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2009
    
    2008
    
    2009
    
    2008
    
    Increase
    
    Change
    
    Decrease
    
    ChangeNoncontrolling
interests
    
    $
    16
    
    
    $
    10
    
    
    $
    202
    
    
    $
    567
    
    
    $
    6
    
    
    
    60
    %
    
    $
    365
    
    
    
    64
    %
  Income from Discontinued Operations
  Three Months Ended
    
    Nine Months Ended
    
    Three Months
    
    Nine MonthsSeptember 30,
    
    September 30,
    
    
    
    
    

    Percent
    
    
    
    
    
    Percent(amounts in thousands)
    
    2009
    
    2008
    
    2009
    
    2008
    
    Change
    
    Change
    
    Decrease
    
    ChangeIncome from
discontinued
operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    15,609
    
    
    $
    
    
    
    
    
    
    
    $
    15,609
    
    
    
    100
    %
  32




---



##### 



Liquidity and Capital Resources
      Financial Covenants
  33




---



##### 



Unsecured Revolving Credit Facility and Secured Term Loans
 UnsecuredRevolving CreditFacility and 2007
    
    2008 SecuredSecured Term Loan
    
    Term Loan
    
    CovenantUnencumbered Pool Leverage(1)
    
    
    50.1
    %
    
    
    
    
    
    
    ≤ 65
    %Unencumbered Pool Debt Service Coverage
Ratio(1)
    
    
    3.50
    x
    
    
    
    
    
    
    ≥ 1.75
    xMaximum Consolidated Total Indebtedness
    
    
    55.0
    %
    
    
    55.4
    %
    
    
    ≤ 60
    %(2)Minimum Tangible Net Worth
    
    $517,030
    
    $506,929
    
    ≥ $373,279Fixed Charge Coverage Ratio
    
    
    1.93
    x
    
    
    1.91
    x
    
    
    ≥ 1.50
    xMaximum Dividend Payout Ratio(1)
    
    
    53.5
    %
    
    
    
    
    
    
    ≤ 95
    %
 
 (1)
    
    Covenant does not apply to the Companys 2007 secured term loan.(2)
    
    Company has a one time right to increase indebtedness to 65% for three
consecutive quarters. Senior Notes
 Senior Notes
    
    CovenantMaximum Consolidated Total Indebtedness
    
    
    56.6
    %
    
    
    ≤ 65
    %Minimum Tangible Net Worth
    
    $483,654
    
    ≥ $373,279Fixed Charge Coverage Ratio
    
    
    1.93
    x
    
    
    ≥ 1.50
    xMaximum Dividend Payout Ratio
    
    
    53.5
    %
    
    
    ≤ 95
    %
 Cash Flows
  Nine Months EndedSeptember 30,(amounts in thousands)
    
    2009
    
    2008
    
    ChangeCash provided by operating activities
    
    $
    31,181
    
    
    $
    31,906
    
    
    $
    (725
    )Cash used in investing activities
    
    
    (21,223
    )
    
    
    (23,623
    )
    
    
    2,400Cash used in financing activities
    
    
    (14,342
    )
    
    
    (5,782
    )
    
    
    (8,560
    )
    34




---



##### 



Same Property Net Operating Income
  35




---



##### 



Comparison of the Three and Nine Months Ended September 30, 2009 to the Three and Nine Months Ended
September 30, 2008
  Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    $
    
    
    %
    
    
    September 30,
    
    
    $
    
    
    %(dollars in thousands)
    
    2009
    
    
    2008
    
    
    Change
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change
    
    
    ChangeNumber of buildings (1)
    
    
    166
    
    
    
    166
    
    
    
    
    
    
    
    
    
    
    
    166
    
    
    
    166
    
    
    
    
    
    
    
    Same property revenueRental
    
    $
    26,452
    
    
    $
    25,431
    
    
    $
    1,021
    
    
    
    4.0
    
    
    $
    78,332
    
    
    $
    75,257
    
    
    $
    3,075
    
    
    
    4.1Tenant reimbursements
    
    
    5,511
    
    
    
    5,475
    
    
    
    36
    
    
    
    0.7
    
    
    
    17,195
    
    
    
    15,294
    
    
    
    1,901
    
    
    
    12.4Total same property revenue
    
    
    31,963
    
    
    
    30,906
    
    
    
    1,057
    
    
    
    3.4
    
    
    
    95,527
    
    
    
    90,551
    
    
    
    4,976
    
    
    
    5.5Same property operating expensesProperty
    
    
    7,404
    
    
    
    6,971
    
    
    
    433
    
    
    
    6.2
    
    
    
    22,433
    
    
    
    19,247
    
    
    
    3,186
    
    
    
    16.6Real estate taxes and insurance
    
    
    3,121
    
    
    
    3,177
    
    
    
    (56
    )
    
    
    (1.8
    )
    
    
    9,493
    
    
    
    9,161
    
    
    
    332
    
    
    
    3.6Total same property operating expenses
    
    
    10,525
    
    
    
    10,148
    
    
    
    377
    
    
    
    3.7
    
    
    
    31,926
    
    
    
    28,408
    
    
    
    3,518
    
    
    
    12.4Same property net operating income
    
    $
    21,438
    
    
    $
    20,758
    
    
    $
    680
    
    
    
    3.3
    
    
    $
    63,601
    
    
    $
    62,143
    
    
    $
    1,458
    
    
    
    2.3Reconciliation to net incomeSame property net operating income
    
    $
    21,438
    
    
    $
    20,758
    
    
    
    
    
    
    
    
    
    
    $
    63,601
    
    
    $
    62,143Non-comparable net operating income
(loss)(2)(3)(4)
    
    
    104
    
    
    
    (23
    )
    
    
    
    
    
    
    
    
    
    
    1,191
    
    
    
    264General and administrative expenses
    
    
    (3,609
    )
    
    
    (2,797
    )
    
    
    
    
    
    
    
    
    
    
    (9,487
    )
    
    
    (8,336
    )Depreciation and amortization
    
    
    (10,132
    )
    
    
    (9,113
    )
    
    
    
    
    
    
    
    
    
    
    (30,183
    )
    
    
    (27,373
    )Other expenses, net
    
    
    (7,177
    )
    
    
    (8,493
    )
    
    
    
    
    
    
    
    
    
    
    (17,708
    )
    
    
    (23,919
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,609Net income
    
    $
    624
    
    
    $
    332
    
    
    
    
    
    
    
    
    
    
    $
    7,414
    
    
    $
    18,388Weighted Average
    
    
    
    
    
    
    
    
    
    
    Weighted AverageOccupancy
    
    
    
    
    
    
    
    
    Occupancy2009
    
    
    2008
    
    
    
    
    
    
    
    
    2009
    
    
    2008Same Properties
    
    
    86.8
    %
    
    
    86.3
    %
    
    
    
    
    
    
    
    
    
    
    86.7
    %
    
    
    86.1
    %Total
    
    
    86.5
    %
    
    
    86.4
    %
    
    
    
    
    
    
    
    
    
    
    86.5
    %
    
    
    86.2
    %
 
 (1)
    
    Represents properties owned for the entirety of the periods presented.(2)
    
    Non-comparable Properties include: Alexandria Corporate Park, Triangle
Business Center and RiversPark I and II.(3)
    
    Excludes a 76,000 square foot redevelopment building at Ammendale Commerce
Center, which was placed in-service during the
fourth quarter of 2008.(4)
    
    Non-comparable net operating income has been adjusted to reflect a normalized
management fee percentage in lieu of an administrative
overhead allocation for comparative purposes.(5)
    
    Discontinued operations represent income and the gain on sale related to Alexandria
Corporate Park, which was sold in June 2008.  36




---



##### 



Maryland
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    $
    
    
    %
    
    
    September 30,
    
    
    $
    
    
    %(dollars in thousands)
    
    2009
    
    
    2008
    
    
    Change
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change
    
    
    ChangeNumber of buildings (1)
    
    
    64
    
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    64
    
    
    
    64
    
    
    
    
    
    
    
    Same property revenueRental
    
    $
    8,298
    
    
    $
    8,423
    
    
    $
    (125
    )
    
    
    (1.5
    )
    
    $
    25,025
    
    
    $
    25,586
    
    
    $
    (561
    )
    
    
    (2.2
    )Tenant reimbursements
    
    
    1,548
    
    
    
    1,767
    
    
    
    (219
    )
    
    
    (12.4
    )
    
    
    4,997
    
    
    
    5,025
    
    
    
    (28
    )
    
    
    (0.6
    )Total same property revenue
    
    
    9,846
    
    
    
    10,190
    
    
    
    (344
    )
    
    
    (3.4
    )
    
    
    30,022
    
    
    
    30,611
    
    
    
    (589
    )
    
    
    (1.9
    )Same property operating expensesProperty
    
    
    2,314
    
    
    
    2,077
    
    
    
    237
    
    
    
    11.4
    
    
    
    7,496
    
    
    
    6,041
    
    
    
    1,455
    
    
    
    24.1Real estate taxes and insurance
    
    
    1,082
    
    
    
    1,049
    
    
    
    33
    
    
    
    3.1
    
    
    
    3,114
    
    
    
    2,973
    
    
    
    141
    
    
    
    4.7Total same property operating expenses
    
    
    3,396
    
    
    
    3,126
    
    
    
    270
    
    
    
    8.6
    
    
    
    10,610
    
    
    
    9,014
    
    
    
    1,596
    
    
    
    17.7Same property net operating income
    
    $
    6,450
    
    
    $
    7,064
    
    
    $
    (614
    )
    
    
    (8.7
    )
    
    $
    19,412
    
    
    $
    21,597
    
    
    $
    (2,185
    )
    
    
    (10.1
    )Reconciliation to total property operating income:Same property net operating income
    
    $
    6,450
    
    
    $
    7,064
    
    
    
    
    
    
    
    
    
    
    $
    19,412
    
    
    $
    21,597Non-comparable net operating income(2) (3)
    
    
    248
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    1,602
    
    
    
    91Total property operating income
    
    $
    6,698
    
    
    $
    7,086
    
    
    
    
    
    
    
    
    
    
    $
    21,014
    
    
    $
    21,688Weighted Average
    
    
    
    
    
    
    
    
    
    
    Weighted AverageOccupancy
    
    
    
    
    
    
    
    
    Occupancy2009
    
    
    2008
    
    
    
    
    
    
    
    
    2009
    
    
    2008Same Properties
    
    
    82.6
    %
    
    
    88.6
    %
    
    
    
    
    
    
    
    
    
    
    84.5
    %
    
    
    89.0
    %Total
    
    
    82.3
    %
    
    
    88.7
    %
    
    
    
    
    
    
    
    
    
    
    83.9
    %
    
    
    89.0
    %
 
 (1)
    
    Represents properties owned for the entirety of the periods presented.(2)
    
    Non-comparable Properties include: Triangle Business Center, RiversPark I and II, and a 76,000 square foot redevelopment building at
Ammendale Commerce Center.(3)
    
    Non-comparable net operating income has been adjusted to reflect a normalized management fee percentage in lieu of an administrative
overhead allocation for comparative purposes.  37




---



##### 



Northern Virginia
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    $
    
    
    %
    
    
    September 30,
    
    
    $
    
    
    %(dollars in thousands)
    
    2009
    
    
    2008
    
    
    Change
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change
    
    
    ChangeNumber of buildings (1)
    
    
    48
    
    
    
    48
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    48
    
    
    
    
    
    
    
    Same property revenueRental
    
    $
    8,214
    
    
    $
    7,641
    
    
    $
    573
    
    
    
    7.5
    
    
    $
    24,061
    
    
    $
    22,446
    
    
    $
    1,615
    
    
    
    7.2Tenant reimbursements
    
    
    1,796
    
    
    
    1,695
    
    
    
    101
    
    
    
    6.0
    
    
    
    5,575
    
    
    
    4,734
    
    
    
    841
    
    
    
    17.8Total same property revenue
    
    
    10,010
    
    
    
    9,336
    
    
    
    674
    
    
    
    7.2
    
    
    
    29,636
    
    
    
    27,180
    
    
    
    2,456
    
    
    
    9.0Same property operating expensesProperty
    
    
    2,230
    
    
    
    2,004
    
    
    
    226
    
    
    
    11.3
    
    
    
    6,632
    
    
    
    5,655
    
    
    
    977
    
    
    
    17.3Real estate taxes and insurance
    
    
    971
    
    
    
    1,090
    
    
    
    (119
    )
    
    
    (10.9
    )
    
    
    3,204
    
    
    
    3,093
    
    
    
    111
    
    
    
    3.6Total same property operating
expenses
    
    
    3,201
    
    
    
    3,094
    
    
    
    107
    
    
    
    3.5
    
    
    
    9,836
    
    
    
    8,748
    
    
    
    1,088
    
    
    
    12.4Same property net operating income
    
    $
    6,809
    
    
    $
    6,242
    
    
    $
    567
    
    
    
    9.1
    
    
    $
    19,800
    
    
    $
    18,432
    
    
    $
    1,368
    
    
    
    7.4Reconciliation to total property operating incomeSame property net operating income
    
    $
    6,809
    
    
    $
    6,242
    
    
    
    
    
    
    
    
    
    
    $
    19,800
    
    
    $
    18,432Non-comparable net operating loss(2) (3)
    
    
    (51
    )
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    (190
    )
    
    
    (152
    )Total property operating income
    
    $
    6,758
    
    
    $
    6,204
    
    
    
    
    
    
    
    
    
    
    $
    19,610
    
    
    $
    18,280Weighted Average
    
    
    
    
    
    
    
    
    
    
    Weighted AverageOccupancy
    
    
    
    
    
    
    
    
    Occupancy2009
    
    
    2008
    
    
    
    
    
    
    
    
    2009
    
    
    2008Same Properties
    
    
    88.3
    %
    
    
    87.8
    %
    
    
    
    
    
    
    
    
    
    
    88.8
    %
    
    
    86.6
    %Total
    
    
    88.3
    %
    
    
    87.8
    %
    
    
    
    
    
    
    
    
    
    
    88.8
    %
    
    
    86.7
    %
 
 (1)
    
    Represents properties owned for the entirety of the periods presented.(2)
    
    Non-comparable net operating income has been adjusted to reflect a normalized management fee percentage in lieu of an
administrative overhead allocation for comparative purposes.(3)
    
    Non-comparable Properties include: Alexandria Corporate Park.  38




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##### 



Southern Virginia
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    $
    
    
    %
    
    
    September 30,
    
    
    $
    
    
    %(dollars in thousands)
    
    2009
    
    
    2008
    
    
    Change
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change
    
    
    ChangeNumber of buildings (1)
    
    
    54
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    54
    
    
    
    
    
    
    
    Same property revenueRental
    
    $
    9,940
    
    
    $
    9,367
    
    
    $
    573
    
    
    
    6.1
    
    
    $
    29,246
    
    
    $
    27,225
    
    
    $
    2,021
    
    
    
    7.4Tenant reimbursements
    
    
    2,167
    
    
    
    2,013
    
    
    
    154
    
    
    
    7.7
    
    
    
    6,623
    
    
    
    5,535
    
    
    
    1,088
    
    
    
    19.7Total same property revenue
    
    
    12,107
    
    
    
    11,380
    
    
    
    727
    
    
    
    6.4
    
    
    
    35,869
    
    
    
    32,760
    
    
    
    3,109
    
    
    
    9.5Same property operating expensesProperty
    
    
    2,860
    
    
    
    2,890
    
    
    
    (30
    )
    
    
    (1.0
    )
    
    
    8,305
    
    
    
    7,551
    
    
    
    754
    
    
    
    10.0Real estate taxes and insurance
    
    
    1,068
    
    
    
    1,038
    
    
    
    30
    
    
    
    2.9
    
    
    
    3,175
    
    
    
    3,095
    
    
    
    80
    
    
    
    2.6Total same property operating
expenses
    
    
    3,928
    
    
    
    3,928
    
    
    
    
    
    
    
    
    
    
    
    11,480
    
    
    
    10,646
    
    
    
    834
    
    
    
    7.8Same property net operating income
    
    $
    8,179
    
    
    $
    7,452
    
    
    $
    727
    
    
    
    9.8
    
    
    $
    24,389
    
    
    $
    22,114
    
    
    $
    2,275
    
    
    
    10.3Reconciliation to total property operating incomeSame property net operating income
    
    $
    8,179
    
    
    $
    7,452
    
    
    
    
    
    
    
    
    
    
    $
    24,389
    
    
    $
    22,114Non-comparable net operating
(loss) income (2)
    
    
    (93
    )
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    (221
    )
    
    
    325Total property operating income
    
    $
    8,086
    
    
    $
    7,445
    
    
    
    
    
    
    
    
    
    
    $
    24,168
    
    
    $
    22,439Weighted Average
    
    
    
    
    
    
    
    
    
    
    Weighted AverageOccupancy
    
    
    
    
    
    
    
    
    Occupancy2009
    
    
    2008
    
    
    
    
    
    
    
    
    2009
    
    
    2008Same Properties
    
    
    88.6
    %
    
    
    84.1
    %
    
    
    
    
    
    
    
    
    
    
    87.0
    %
    
    
    84.0
    %Total
    
    
    88.6
    %
    
    
    84.1
    %
    
    
    
    
    
    
    
    
    
    
    87.0
    %
    
    
    84.0
    %
 
 (1)
    
    Represents properties owned for the entirety of the periods presented.(2)
    
    Non-Comparable net operating income has been adjusted to reflect a normalized management fee
percentage in lieu of an administrative overhead allocation for
comparative purposes.  Contractual Obligations
  39




---



##### 



Dividends and Distributions
   Funds From Operations
    40




---



##### 



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income attributable to common shareholders
    
    $
    608
    
    
    $
    322
    
    
    $
    7,212
    
    
    $
    17,821Add:Depreciation and amortization:Real estate assets
    
    
    10,132
    
    
    
    9,113
    
    
    
    30,183
    
    
    
    27,373Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    479Unconsolidated joint venture
    
    
    91
    
    
    
    
    
    
    
    202
    
    
    
    Consolidated joint venture
    
    
    (149
    )
    
    
    
    
    
    
    (652
    )
    
    
    Gain on sale of disposed property
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,274
    )Net income attributable to noncontrolling interests
    
    
    16
    
    
    
    10
    
    
    
    202
    
    
    
    567FFO available to common shareholders and unitholders
    
    $
    10,698
    
    
    $
    9,445
    
    
    $
    37,147
    
    
    $
    31,966Weighted average common shares and Operating Partnership
units outstanding  diluted
    
    
    28,991
    
    
    
    24,980
    
    
    
    28,271
    
    
    
    24,952
 Off-Balance Sheet Arrangements
 Investment in Affiliate
 Forward Looking Statements
  
 ITEM 3:
    
    QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
   41




---



##### 



Fair Value of Financial Instruments
  
 ITEM 4:
    
    CONTROLS AND PROCEDURES
   42




---



##### 



PART II: OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  Recent disruptions in the financial markets could affect our ability to obtain financing on
reasonable terms and have other adverse effects on us and the market price of our common shares.
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 None.
 
 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).
 43




---



##### 



No.
    
    Description4.2
    
    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.)
 44




---



##### 



FIRST POTOMAC REALTY TRUSTDate: November 6, 2009
    /s/ Douglas J. DonatelliDouglas J. DonatelliChairman of the Board and Chief Executive OfficerDate: November 6, 2009
    /s/ Barry H. BassBarry H. BassExecutive Vice President and Chief Financial
Officer 45




---



##### 



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.)