##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006
 COMMISSION FILE NUMBER 001-31962
 
 GOVERNMENT PROPERTIES TRUST, INC.
  MARYLAND
    
    20-0611663(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)13625 CALIFORNIA STREET, SUITE 310OMAHA, NEBRASKA 68154
    
    (402) 391-0010(Address of principal executive
    
    (Registrants telephone number,offices, including zip code)
    
    including area code)
 þ o
  o þ o
 o þ




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##### 



PAGEPART I  FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements (unaudited)Consolidated Balance Sheets as of June 30, 2006 (unaudited) and December 31, 2005
    
    
    3Consolidated Statements of Operations and Comprehensive Income for the three and six months
ended June 30, 2006 and 2005 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the six months ended June 30, 2006 and 2005 (unaudited)
    
    
    5Notes to Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    19PART II  OTHER INFORMATIONItem 1. Not ApplicableItem 1A. Risk Factors
    
    
    20Item 2. Not ApplicableItem 3. Not ApplicableItem 4. Submission of Matters to a Vote of Security Holders
    
    
    20Item 5. Not ApplicableItem 6. Exhibits
    
    
    20Signatures
    
    
    21
  2




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GOVERNMENT PROPERTIES TRUST, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except share amounts)
 June 30,
    
    
    December 31,2006
    
    
    2005(unaudited)ASSETSReal estate at cost:Land
    
    $
    37,665
    
    
    $
    32,800Buildings and improvements
    
    
    326,311
    
    
    
    280,861Tenant origination costs
    
    
    78,513
    
    
    
    60,405Real estate under development
    
    
    773
    
    
    
    16,577Furniture and equipment
    
    
    475
    
    
    
    456443,737
    
    
    
    391,099Accumulated depreciation
    
    
    (20,956
    )
    
    
    (13,295
    )422,781
    
    
    
    377,804Cash and cash equivalents
    
    
    5,227
    
    
    
    4,857Restricted cash escrows
    
    
    7,303
    
    
    
    16,887Tenant receivables
    
    
    8,954
    
    
    
    6,873Notes receivable from tenant
    
    
    569
    
    
    
    603Deferred costs, net
    
    
    3,956
    
    
    
    4,020Real estate deposits
    
    
    
    
    
    
    450Other assets
    
    
    4,504
    
    
    
    1,583Total assets
    
    $
    453,294
    
    
    $
    413,077LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Accounts payable and accrued expenses
    
    $
    7,881
    
    
    $
    8,420Dividends payable
    
    
    2,336
    
    
    
    3,110Lines of credit
    
    
    35,080
    
    
    
    17,500Mortgage notes payable
    
    
    252,480
    
    
    
    225,033Total liabilities
    
    
    297,777
    
    
    
    254,063Stockholders equity:Common stock ($0.01 par value;
50,000,000 shares authorized,
20,763,136 and 20,721,612 shares
issued and outstanding at June 30,
2006 and December 31, 2005,
respectively)
    
    
    206
    
    
    
    206Additional paid-in capital
    
    
    189,733
    
    
    
    189,123Accumulated deficit
    
    
    (37,896
    )
    
    
    (30,916
    )Accumulated other comprehensive income
    
    
    3,474
    
    
    
    601Total stockholders equity
    
    
    155,517
    
    
    
    159,014Total liabilities and stockholders equity
    
    $
    453,294
    
    
    $
    413,077
  3




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GOVERNMENT PROPERTIES TRUST, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 (unaudited and in thousands, except per share amounts)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005RevenueRental income
    
    $
    11,031
    
    
    $
    6,141
    
    
    $
    20,831
    
    
    $
    10,465Tenant reimbursements
    
    
    609
    
    
    
    132
    
    
    
    1,175
    
    
    
    312Total revenue
    
    
    11,640
    
    
    
    6,273
    
    
    
    22,006
    
    
    
    10,777ExpensesProperty operations
    
    
    1,892
    
    
    
    1,123
    
    
    
    3,703
    
    
    
    1,978Real estate taxes
    
    
    1,012
    
    
    
    569
    
    
    
    1,938
    
    
    
    1,025Depreciation and amortization
    
    
    4,020
    
    
    
    2,342
    
    
    
    7,661
    
    
    
    3,665General and administrative
    
    
    1,330
    
    
    
    1,201
    
    
    
    2,639
    
    
    
    2,341Total expenses
    
    
    8,254
    
    
    
    5,235
    
    
    
    15,941
    
    
    
    9,009Operating income
    
    
    3,386
    
    
    
    1,038
    
    
    
    6,065
    
    
    
    1,768Other income (expense)Interest income
    
    
    111
    
    
    
    441
    
    
    
    233
    
    
    
    1,099Interest expense
    
    
    (3,996
    )
    
    
    (2,133
    )
    
    
    (7,399
    )
    
    
    (3,471
    )Amortization of deferred financing fees
    
    
    (225
    )
    
    
    (58
    )
    
    
    (428
    )
    
    
    (168
    )Net loss
    
    $
    (724
    )
    
    $
    (712
    )
    
    $
    (1,529
    )
    
    $
    (772
    )Earnings per share (basic and diluted)Net loss
    
    $
    (0.04
    )
    
    $
    (0.03
    )
    
    $
    (0.07
    )
    
    $
    (0.04
    )Distributions declared per share
    
    $
    0.1125
    
    
    $
    0.15
    
    
    $
    0.2625
    
    
    $
    0.30Weighted average shares outstanding (basic and diluted)
    
    
    20,631
    
    
    
    20,573
    
    
    
    20,617
    
    
    
    20,556Net loss
    
    $
    (724
    )
    
    $
    (712
    )
    
    $
    (1,529
    )
    
    $
    (772
    )Other comprehensive income (loss)Unrealized derivative gain (loss) on
forward-starting interest rate swaps
    
    
    1,212
    
    
    
    (1,368
    )
    
    
    2,873
    
    
    
    (1,368
    )Comprehensive income (loss)
    
    $
    488
    
    
    $
    (2,080
    )
    
    $
    1,344
    
    
    $
    (2,140
    )
  4




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GOVERNMENT PROPERTIES TRUST, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited and in thousands)
 Six Months EndedJune 30,2006
    
    
    2005Operating activitiesNet loss
    
    $
    (1,529
    )
    
    $
    (772
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    7,661
    
    
    
    3,665Amortization of deferred financing fees
    
    
    428
    
    
    
    168Amortization of premium on mortgage notes payable
    
    
    (51
    )
    
    
    Compensation expense
    
    
    365
    
    
    
    362Changes in assets and liabilities:Tenant receivables
    
    
    (2,081
    )
    
    
    (1,681
    )Restricted cash escrows
    
    
    414
    
    
    
    (2,245
    )Other assets
    
    
    (47
    )
    
    
    (698
    )Accounts payable and accrued expenses
    
    
    2,197
    
    
    
    288Net cash provided by (used in) operating activities
    
    
    7,357
    
    
    
    (913
    )Investing activitiesExpenditures for real estate
    
    
    (36,849
    )
    
    
    (131,098
    )Deposits on future real estate purchases
    
    
    
    
    
    
    (2,829
    )Development of real estate assets
    
    
    (8,937
    )
    
    
    (2,571
    )Restricted cash escrows
    
    
    9,170
    
    
    
    (15,284
    )Note receivable from tenant
    
    
    34
    
    
    
    31Expenditures for furniture and equipment
    
    
    (19
    )
    
    
    Net cash used in investing activities
    
    
    (36,601
    )
    
    
    (151,751
    )Financing activitiesFinancing fees
    
    
    (364
    )
    
    
    (1,457
    )Net borrowings under lines of credit
    
    
    17,580
    
    
    
    Proceeds from mortgage notes payable
    
    
    19,950
    
    
    
    91,732Principal payments on mortgage notes payable
    
    
    (1,328
    )
    
    
    (689
    )Dividends paid
    
    
    (6,224
    )
    
    
    (6,213
    )Net cash provided by financing activities
    
    
    29,614
    
    
    
    83,373Net increase (decrease) in cash and cash equivalents
    
    
    370
    
    
    
    (69,291
    )Cash and cash equivalents, beginning of period
    
    
    4,857
    
    
    
    93,815Cash and cash equivalents, end of period
    
    $
    5,227
    
    
    $
    24,524Non-Cash Investing ActivityAccounts payable and accrued expenses included in real estate, net
    
    $
    2,492
    
    
    $
    Non-Cash Financing ActivityAssumption of mortgage note payable included in real estate, net
    
    $
    8,876
    
    
    $
    15,753
  5




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GOVERNMENT PROPERTIES TRUST, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Basis of Presentation
   Nature of Business and Operations
  Common Stock and Earnings Per Share
  Deferred Costs
  June 30,
    
    
    December 31,2006
    
    
    2005Financing costs
    
    $
    5,020
    
    
    $
    4,656Accumulated amortization
    
    
    (1,064
    )
    
    
    (636
    )$
    3,956
    
    
    $
    4,020
 Equity Incentive Plan
 Share-Based Payment
  6




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Mortgage Notes Payable and Line-of-Credit
  June 30,
    
    
    December 31,2006
    
    
    2005Mortgage Notes Payable(A),(B),(C)Mortgage notes payable to various
financial institutions, collateralized by
various properties, interest at fixed
rates ranging from 5.09% to 8.23% per
annum, with principal and interest
payable monthly through 2026. The
weighted average interest rate at June
30, 2006 and December 31, 2005 was 5.83%
and 5.80%, respectively.
    
    $
    251,099
    
    
    $
    223,601Lines of CreditLine-of-credit with a financial
institution for property acquisitions
(maximum borrowing level of $65 million
and available through November 20, 2008).
The weighted average interest rate at
June 30, 2006 and December 31, 2005 was
equal to 6.84% and 5.57%, respectively.
Advances are collateralized by various
properties.(D)
    
    $
    35,080
    
    
    $
    17,500Line-of-credit with a financial
institution for property acquisitions
(maximum borrowing level of $10 million
and available through April 2007).
Advances are uncollateralized.(E)
    
    $
    
    
    
    $
    
 
 (A)
    
    The mortgages notes payable are subject to various operating covenants. In addition, the
Company must periodically fund and maintain escrow accounts, to make future real estate taxes,
repairs and maintenance and insurance payments, as well as to fund certain tenant releasing
costs. These are included in restricted cash escrows.(B)
    
    Certain of the Companys real estate assets have been pledged as collateral for its mortgages
notes payable. The amount of gross assets that have been encumbered is $360.5 million and
$309.0 million at June 30, 2006 and December 31, 2005, respectively.(C)
    
    Amounts exclude a premium of $1.4 million at June 30, 2006 and December 31, 2005 related to
the above market interest rate on a mortgage assumed.(D)
    
    This line-of-credit facility was obtained in November 2005 and bears an interest rate equal
to either (a) a base rate determined by the higher of the prime rate or the federal funds rate
plus 1/2 of 1%, or (b) an applicable margin, based upon the Companys total indebtedness to
total asset value, plus LIBOR. At June 30, 2006 and December 31, 2005, the margin was LIBOR
plus 1.40% and LIBOR plus 1.20%, respectively. Payments are interest only through the term and
are payable at least quarterly. The line-of-credit facility contains certain covenants
including maintenance of leverage, minimum fixed charge coverage ratios, minimum tangible net
worth and limitations on certain indebtedness, guarantees and cash dividends. Advances under
the line-of-credit totaled $17.58 million for the six months ended June 30, 2006 and $17.5
million during the year ended December 31, 2005. The line-of-credit facility is guaranteed by
the Company. The amount of gross assets that have been encumbered is $81.9 million at June 30,
2006 and $81.5 million at December 31, 2005. In April 2006, the maximum borrowing level of
the line-of-credit was increased from $50 million to $65 million.(E)
    
    This line-of-credit facility was obtained in April 2006 and is subject to the covenants
described above in Item (D). Borrowings under this facility bear an interest rate equal to an
applicable margin, based upon our total indebtedness to total asset value, plus 7




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the three month LIBOR rate. Any borrowings on the credit facility would be priced at LIBOR plus
2.40% as of June 30, 2006. Payments are interest only through the term of the credit facility
and are payable monthly.  Derivative Instruments and Hedging Activities
     Related Party Transactions
  Property Acquisitions
  8




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Acquisition
    
    
    MonthProperty
    
    Location
    
    Cost
    
    
    Acquired(in thousands)2005 acquisitions(A):1201 Lloyd Boulevard (Portland Property)
    
    Portland, OR
    
    $
    50,653
    
    
    MarchNiagara Center (Buffalo Niagara Center Property)
    
    Buffalo, NY
    
    
    71,673
    
    
    MaySocial Security Administration (Buffalo SSA Property)
    
    Buffalo, NY
    
    
    5,435
    
    
    MayDrug Enforcement Administration (Sterling DEA Property)(B)
    
    Sterling, VA
    
    
    21,070
    
    
    JuneInternal Revenue Service (Martinsburg IRS Property)(C)
    
    Martinsburg, WV
    
    
    30,643
    
    
    JulySocial Security Administration (Dallas SSA Property)
    
    Dallas, TX
    
    
    9,583
    
    
    SeptemberArmy Corps of Engineers (Vicksburg MS Property)
    
    Vicksburg, MS
    
    
    26,850
    
    
    November$
    215,9072006 acquisitions(A):Riverside County (Riverside Property)(D)
    
    Riverside, CA
    
    $
    18,415
    
    
    FebruaryUnited States Citizenship and Immigration Service (Harlingen USCIS Property)
    
    Harlingen, TX
    
    
    27,330
    
    
    May$
    45,745
 
 (A)
    
    In accordance with SFAS 141, the Company allocated the purchase price for these properties to
net tangible and identified intangible assets acquired based on their fair values (including
land, buildings, tenant improvements, acquired above and below market leases and the
origination cost of acquired in-place leases) and acquired liabilities, and allocated the
purchase price based on these assessments, including land at appraised value and buildings at
replacement costs. The Company assessed fair value based on estimated cash flow projections
that utilize discount and capitalization rates deemed appropriate by management and available
market information. Such estimates are subject to refinement as additional valuation
information is received. The value of tenant origination costs are amortized over the
remaining term of the respective leases.(B)
    
    In connection with the purchase of this property, the Company assumed a first mortgage note
in the amount of $15.8 million. Also included in the acquisition cost is an amount of $1.5
million related to the premium recognized on the above market interest rate on the assumed
mortgage.(C)
    
    Under terms of the existing lease, the federal government has an option to purchase the
Martinsburg IRS Property for approximately $24.8 million. Real estate at cost, net of
accumulated depreciation of the Martinsburg IRS Property, was $29.7 million at June 30, 2006.(D)
    
    In connection with the purchase of this property, the Company assumed a first mortgage note
in the amount of $8.9 million. Real Estate Development
  Unaudited Pro Forma Condensed Consolidated Financial Information
  Date PropertyBegan OperationBuffalo SSA Property
    
    June 2005Dallas SSA Property
    
    August 2005
 9




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Pro Forma Condensed Consolidated Financial Information  (Unaudited and in thousands, except per share amounts)
 Six MonthsEnded June 30,2006
    
    
    2005Total revenue
    
    $
    23,423
    
    
    $
    19,328Net loss
    
    $
    (1,443
    )
    
    $
    (1,708
    )Loss per diluted common share
    
    $
    (0.07
    )
    
    $
    (0.08
    )
 10




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
    
    our estimated general and administrative expense;
    
    our risk mitigation strategy;
    
    our policy to reserve for operating expenses and capital costs:
    
    our distribution policy;
    
    our operating expenses;
    
    our adequacy of our available capital for future capital requirements;
    
    our capital expenditures; and
    
    the impact of changes in interest rates.
         11




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Comparison of three months ended June 30, 2006 to June 30, 2005
   Acquired
    
    
    General &Same Properties Portfolio
    
    
    Properties
    
    

    Administrative
    
    
    Total Portfolio(in thousands)
    
    2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    ChangeRevenue:Rental income
    
    $
    4,966
    
    
    $
    4,312
    
    
    $
    654
    
    
    $
    6,065
    
    
    $
    1,829
    
    
    $
    
    
    
    $
    
    
    
    $
    11,031
    
    
    $
    6,141
    
    
    $
    4,890Tenant
reimbursements and
other
    
    
    213
    
    
    
    4
    
    
    
    209
    
    
    
    396
    
    
    
    128
    
    
    
    
    
    
    
    
    
    
    
    609
    
    
    
    132
    
    
    
    477Total revenue
    
    
    5,179
    
    
    
    4,316
    
    
    
    863
    
    
    
    6,461
    
    
    
    1,957
    
    
    
    
    
    
    
    
    
    
    
    11,640
    
    
    
    6,273
    
    
    
    5,367Expenses:Property operations
    
    
    679
    
    
    
    689
    
    
    
    (10
    )
    
    
    1,213
    
    
    
    434
    
    
    
    
    
    
    
    
    
    
    
    1,892
    
    
    
    1,123
    
    
    
    769Real estate taxes
    
    
    589
    
    
    
    458
    
    
    
    131
    
    
    
    423
    
    
    
    111
    
    
    
    
    
    
    
    
    
    
    
    1,012
    
    
    
    569
    
    
    
    443Depreciation and
amortization
    
    
    1,516
    
    
    
    1,297
    
    
    
    219
    
    
    
    2,486
    
    
    
    1,037
    
    
    
    18
    
    
    
    8
    
    
    
    4,020
    
    
    
    2,342
    
    
    
    1,678General and
administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,330
    
    
    
    1,201
    
    
    
    1,330
    
    
    
    1,201
    
    
    
    129Total expenses
    
    
    2,784
    
    
    
    2,444
    
    
    
    340
    
    
    
    4,122
    
    
    
    1,582
    
    
    
    1,348
    
    
    
    1,209
    
    
    
    8,254
    
    
    
    5,235
    
    
    
    3,019Operating
income(loss)
    
    
    2,395
    
    
    
    1,872
    
    
    
    523
    
    
    
    2,339
    
    
    
    375
    
    
    
    (1,348
    )
    
    
    (1,209
    )
    
    
    3,386
    
    
    
    1,038
    
    
    
    2,348Interest income
    
    
    60
    
    
    
    83
    
    
    
    (23
    )
    
    
    11
    
    
    
    15
    
    
    
    40
    
    
    
    343
    
    
    
    111
    
    
    
    441
    
    
    
    (330
    )Interest expense
    
    
    (1,860
    )
    
    
    (1,736
    )
    
    
    (124
    )
    
    
    (1,643
    )
    
    
    (397
    )
    
    
    (493
    )
    
    
    
    
    
    
    (3,996
    )
    
    
    (2,133
    )
    
    
    (1,863
    )Amortization of
deferred financing
fees
    
    
    (54
    )
    
    
    (54
    )
    
    
    
    
    
    
    (16
    )
    
    
    (4
    )
    
    
    (155
    )
    
    
    
    
    
    
    (225
    )
    
    
    (58
    )
    
    
    (167
    )Net income (loss)
    
    $
    541
    
    
    $
    165
    
    
    $
    376
    
    
    $
    691
    
    
    $
    (11
    )
    
    $
    (1,956
    )
    
    $
    (866
    )
    
    $
    (724
    )
    
    $
    (712
    )
    
    $
    (12
    )
     12




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Comparison of six months ended June 30, 2006 to June 30, 2005
  Acquired
    
    
    General &Same Properties Portfolio
    
    
    Properties
    
    
    Administrative
    
    
    Total Portfolio(in thousands)
    
    2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    ChangeRevenue:Rental income
    
    $
    9,420
    
    
    $
    8,621
    
    
    $
    799
    
    
    $
    11,411
    
    
    $
    1,844
    
    
    $
    
    
    
    $
    
    
    
    $
    20,831
    
    
    $
    10,465
    
    
    $
    10,366Tenant
reimbursements and
other
    
    
    405
    
    
    
    184
    
    
    
    221
    
    
    
    770
    
    
    
    128
    
    
    
    
    
    
    
    
    
    
    
    1,175
    
    
    
    312
    
    
    
    863Total revenue
    
    
    9,825
    
    
    
    8,805
    
    
    
    1,020
    
    
    
    12,181
    
    
    
    1,972
    
    
    
    
    
    
    
    
    
    
    
    22,006
    
    
    
    10,777
    
    
    
    11,229Expenses:Property operations
    
    
    1,357
    
    
    
    1,536
    
    
    
    (179
    )
    
    
    2,346
    
    
    
    442
    
    
    
    
    
    
    
    
    
    
    
    3,703
    
    
    
    1,978
    
    
    
    1,725Real estate taxes
    
    
    1,177
    
    
    
    909
    
    
    
    268
    
    
    
    761
    
    
    
    116
    
    
    
    
    
    
    
    
    
    
    
    1,938
    
    
    
    1,025
    
    
    
    913Depreciation and
amortization
    
    
    2,858
    
    
    
    2,594
    
    
    
    264
    
    
    
    4,766
    
    
    
    1,056
    
    
    
    37
    
    
    
    15
    
    
    
    7,661
    
    
    
    3,665
    
    
    
    3,996General and
administrative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,639
    
    
    
    2,341
    
    
    
    2,639
    
    
    
    2,341
    
    
    
    298Total expenses
    
    
    5,392
    
    
    
    5,039
    
    
    
    353
    
    
    
    7,873
    
    
    
    1,614
    
    
    
    2,676
    
    
    
    2,356
    
    
    
    15,941
    
    
    
    9,009
    
    
    
    6,932Operating
income(loss)
    
    
    4,433
    
    
    
    3,766
    
    
    
    667
    
    
    
    4,308
    
    
    
    358
    
    
    
    (2,676
    )
    
    
    (2,356
    )
    
    
    6,065
    
    
    
    1,768
    
    
    
    4,297Interest income
    
    
    156
    
    
    
    112
    
    
    
    44
    
    
    
    27
    
    
    
    15
    
    
    
    50
    
    
    
    972
    
    
    
    233
    
    
    
    1,099
    
    
    
    (866
    )Interest expense
    
    
    (3,540
    )
    
    
    (3,074
    )
    
    
    (466
    )
    
    
    (3,056
    )
    
    
    (397
    )
    
    
    (803
    )
    
    
    
    
    
    
    (7,399
    )
    
    
    (3,471
    )
    
    
    (3,928
    )Amortization of
deferred financing
fees
    
    
    (108
    )
    
    
    (93
    )
    
    
    (15
    )
    
    
    (31
    )
    
    
    (4
    )
    
    
    (289
    )
    
    
    (71
    )
    
    
    (428
    )
    
    
    (168
    )
    
    
    (260
    )Net income (loss)
    
    $
    941
    
    
    $
    711
    
    
    $
    230
    
    
    $
    1,248
    
    
    $
    (28
    )
    
    $
    (3,718
    )
    
    $
    (1,455
    )
    
    $
    (1,529
    )
    
    $
    (772
    )
    
    $
    (757
    )
  13




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##### Table of Contents




    
    acquisition costs, deposits on properties and purchases of properties;
    
    recurring maintenance, repairs and other operating expenses necessary to maintain our properties;
    
    property taxes, state and local tax assessments, and insurance expenses;
    
    interest expense and scheduled principal payments on outstanding indebtedness;
    
    capital expenditures incurred to facilitate the leasing of space at our properties,
including tenant improvements and leasing commissions; and
 14




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##### Table of Contents




    
    general and administrative expenses.
   Balance as ofLender
    
    Collateral
    
    June 30, 2006(In Millions)CW Capital
    
    Bakersfield DEA property
    
    $
    1.4CW Capital
    
    Baton Rouge VA property
    
    
    4.8LaSalle Bank/GEMSA
    
    Charleston SSA property
    
    
    13.4LaSalle Bank/GEMSA
    
    Clarksburg GSA property
    
    
    8.0Charleston FederalCW Capital
    
    Courthouse property
    
    
    14.4Capital Realty
    
    College Park FDA property
    
    
    16.1Key Bank
    
    Dallas SSA property
    
    
    6.2CW Capital
    
    Harlingen USCIS property
    
    
    19.9Bank of America
    
    Kingsport SSA property
    
    
    2.2Wachovia Bank
    
    Lenexa FDA property
    
    
    7.8PNC Bank
    
    Martinsburg IRS property
    
    
    19.6Bank of New York
    
    Parkersburg BPD property
    
    
    31.6PNC Bank
    
    Pittsburgh FBI property
    
    
    20.3Nomura Credit
    
    Pittsburgh USCIS property
    
    
    7.8Wachovia Bank
    
    Portland property
    
    
    39.1Northwestern Mutual
    
    Sterling DEA property
    
    
    15.3J.P. Morgan Chase
    
    Riverside County property
    
    
    8.8Merrill Lynch
    
    Vicksburg property
    
    
    14.4251.1Premium on mortgage debt (Sterling DEA property)
    
    
    
    
    1.4Total  Mortgage Notes Payable
    
    
    
    $
    252.5
       15




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16




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17




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##### Table of Contents



Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net loss
    
    $
    (724
    )
    
    $
    (712
    )
    
    $
    (1,529
    )
    
    $
    (772
    )Adjustments to reconcile to funds from operations:Real estate depreciation and amortization (a)
    
    
    4,001
    
    
    
    2,334
    
    
    
    7,624
    
    
    
    3,650Funds from operations
    
    $
    3,277
    
    
    $
    1,622
    
    
    $
    6,095
    
    
    $
    2,878Funds from operations per common share
    
    $
    0.16
    
    
    $
    0.08
    
    
    $
    0.30
    
    
    $
    0.14
 
 (a)
    
    Excludes depreciation of non-real estate assets of $19,000 and $8,000 for the three months
ended June 30, 2006 and 2005, respectively, and $37,000 and $15,000 for the six months ended
June 30, 2006 and 2005, respectively. 18




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##### Table of Contents



2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    THEREAFTER
    
    TOTALMORTGAGE NOTES PAYABLE:Fixed rate amount
    
    $
    3,915
    
    
    $
    4,400
    
    
    $
    4,697
    
    
    $
    30,736
    
    
    $
    4,624
    
    
    $
    202,727
    
    
    $
    251,099Weighted-average interest rate
    
    
    6.01
    %
    
    
    5.98
    %
    
    
    5.99
    %
    
    
    5.57
    %
    
    
    6.08
    %
    
    
    5.86
    %
    
    
    5.83
    %
 
    19




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##### Table of Contents



1.
    
    Election of directors to hold office until the next Annual Meeting of Shareholders:
 NOMINEE
    
    FOR
    
    
    WITHHELDJerry D. Bringard
    
    
    13,038,611
    
    
    
    5,375,443Robert M. Ames
    
    
    13,234,494
    
    
    
    5,179,560Philip S. Cottone
    
    
    13,177,442
    
    
    
    5,236,612Robert A. Peck
    
    
    13,234,594
    
    
    
    5,179,460Thomas D. Peschio
    
    
    13,226,961
    
    
    
    5,187,093Richard H. Schwachter
    
    
    13,166,742
    
    
    
    5,247,629
 There are no directors other than those listed above whose term of office continued after the
Annual Meeting.2.
    
    Proposal to ratify the appointment of Ernst & Young LLP as the Companys independent auditors
for 2006:
 For: 15,151,703
    
    Against: 174,574
    
    Abstain: 498,547
    
    Broker Non-Vote: -0-
 
  12.1
    
    Ratio of Fixed Charges31.1
    
    Certification of Chief Executive Officer pursuant to SEC Rule 13a-14, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to SEC Rule 13a-14, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    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 200232.2
    
    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
 20




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GOVERNMENT PROPERTIES TRUST, INC.Date: August 9, 2006
    
    By: /s/ NANCY D. OLSONNancy D. OlsonChief Financial Officer and Treasurer(principal financial officer)
 21