10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012.

¨ 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

(Exact name of registrant as specified in its charter)

MARYLAND	37-1470730
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

7600 Wisconsin Avenue, 11^th Floor, Bethesda, MD 20814

(Address of principal executive offices) (Zip Code)

(301) 986-9200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filter,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

x	Large Accelerated Filer	¨	Accelerated Filer
¨	Non-Accelerated Filer	¨	Smaller Reporting Company

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

As of May 14, 2012, there were 50,967,635 common shares, par value $0.001 per share, outstanding.

FIRST POTOMAC REALTY TRUST

FORM 10-Q

INDEX

		Page
Part I:	Financial Information
Item 1.	Condensed Consolidated Financial Statements
	Consolidated balance sheets as of March 31, 2012 (unaudited) and December 31, 2011		3
	Consolidated statements of operations (unaudited) for the three months ended March 31, 2012 and 2011		4
	Consolidated statements of comprehensive loss (unaudited) for the three months ended March 31, 2012 and 2011		5
	Consolidated statements of cash flows (unaudited) for the three months ended March 31, 2012 and 2011		6
	Notes to condensed consolidated financial statements (unaudited)		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		58
Item 4.	Controls and Procedures		59
Part II:	Other Information
Item 1.	Legal Proceedings		61
Item 1A.	Risk Factors		61
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		62
Item 3.	Defaults Upon Senior Securities		62
Item 4.	Mine Safety Disclosures		62
Item 5.	Other Information		62
Item 6.	Exhibits		62
	Signatures		64

Explanatory Note

As previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2011, management of First Potomac Realty Trust (the “Company”) identified a material weakness in the Company’s internal control over financial reporting as of December 31, 2011. In response to this material weakness, on March 20, 2012, the Company’s Board of Trustees appointed a special committee of independent trustees to review the facts and circumstances relating to the material weakness determination and the Company’s processes surrounding the monitoring and oversight of compliance with Company’s financial covenants. The Board of Trustees determined in late April that a more detailed, internal investigation of these matters should be undertaken by the Audit Committee of the Board of Trustees (the “Internal Investigation”), with the assistance of independent outside professionals, which Internal Investigation is ongoing. The filing of this Form 10-Q for the quarter ended March 31, 2012 was delayed due to the time required to address various matters prior to the filing thereof, including those relating to the Internal Investigation and the execution of various waivers and amendments to certain bank debt agreements. For more information regarding these matters, see the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Internal Investigation” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Amendments to Unsecured Revolving Credit Facility, Unsecured Term Loan and Secured Term Loan” under Part I. Item 2 hereof. The Company is unable to predict the ultimate outcome of the Internal Investigation, or the timing of its completion. Notwithstanding the ongoing Internal Investigation, management believes that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present in all material respects the Company’s financial condition, results of operations and cash flows for each of the periods presented in this report.

In light of the ongoing Internal Investigation, Michael H. Comer, the Company’s Chief Accounting Officer, has been performing the functions of the Company’s principal financial officer in connection with this Quarterly Report on Form 10-Q and, as such, has provided the certifications included as Exhibits 31.2 and 32.2 to this Form 10-Q. Barry H. Bass continues to serve as the Company’s Chief Financial Officer.

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FIRST POTOMAC REALTY TRUST

Consolidated Balance Sheets

(Amounts in thousands, except per share amounts)

	March 31, 2012			December 31, 2011
	(unaudited)
Assets:
Rental property, net	$	1,437,847		$	1,439,661
Assets held for sale		2,933			5,297
Cash and cash equivalents		17,157			16,749
Escrows and reserves		18,097			18,455
Accounts and other receivables, net of allowance for doubtful accounts of $2,991 and $3,065, respectively		10,701			11,404
Accrued straight-line rents, net of allowance for doubtful accounts of $299 and $369, respectively		19,814			18,028
Notes receivable, net		54,679			54,661
Investment in affiliates		73,300			72,518
Deferred costs, net		37,241			34,683
Prepaid expenses and other assets		10,821			9,275
Intangible assets, net		56,020			59,021
Total assets	$	1,738,610		$	1,739,752
Liabilities:
Mortgage loans	$	408,241		$	432,023
Senior notes		75,000			75,000
Secured term loans		20,000			30,000
Unsecured term loan		300,000			225,000
Unsecured revolving credit facility		107,000			183,000
Accounts payable and other liabilities		54,984			53,507
Accrued interest		3,765			2,782
Rents received in advance		11,326			11,550
Tenant security deposits		5,740			5,603
Deferred market rent, net		4,537			4,815
Total liabilities		990,593			1,023,280
Noncontrolling interests in the Operating Partnership		40,044			39,981
Equity:
Preferred Shares, $0.001 par value, 50,000 shares authorized; Series A Preferred Shares, $25 liquidation preference, 6,400 and 4,600 shares issued and outstanding, respectively		160,000			115,000
Common shares, $0.001 par value, 150,000 shares authorized; 50,722 and 50,321 shares issued and outstanding, respectively		51			50
Additional paid-in capital		799,605			798,171
Noncontrolling interests in consolidated partnerships		4,270			4,245
Accumulated other comprehensive loss		(5,161	)		(5,849	)
Dividends in excess of accumulated earnings		(250,792	)		(235,126	)
Total equity		707,973			676,491
Total liabilities, noncontrolling interests and equity	$	1,738,610		$	1,739,752

See accompanying notes to condensed consolidated financial statements.

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FIRST POTOMAC REALTY TRUST

Consolidated Statements of Operations

(unaudited)

(Amounts in thousands, except per share amounts)

	Three Months Ended March 31,
	2012			2011
Revenues:
Rental	$	37,573		$	31,639
Tenant reimbursements and other		9,199			7,902
Total revenues		46,772			39,541
Operating expenses:
Property operating		11,509			10,546
Real estate taxes and insurance		4,846			3,898
General and administrative		4,897			4,008
Acquisition costs		17			2,185
Depreciation and amortization		16,091			12,504
Impairment of real estate assets		2,751			—
Total operating expenses		40,111			33,141
Operating income		6,661			6,400
Other expenses, net:
Interest expense		11,239			8,626
Interest and other income		(1,508	)		(824	)
Equity in losses of affiliates		46			32
Total other expenses, net		9,777			7,834
Loss from continuing operations before income taxes		(3,116	)		(1,434	)
(Provision) benefit for income taxes		(61	)		313
Loss from continuing operations		(3,177	)		(1,121	)
Loss from discontinued operations		(297	)		(2,771	)
Net loss		(3,474	)		(3,892	)
Less: Net loss attributable to noncontrolling interests		318			138
Net loss attributable to First Potomac Realty Trust		(3,156	)		(3,754	)
Less: Dividends on preferred shares		(2,664	)		(1,783	)
Net loss attributable to common shareholders	$	(5,820	)	$	(5,537	)
Basic and diluted earnings per common share:
Loss from continuing operations	$	(0.11	)	$	(0.07	)
Loss from discontinued operations		(0.01	)		(0.05	)
Net loss	$	(0.12	)	$	(0.12	)
Weighted average common shares outstanding:
Basic and diluted		49,781			49,234

See accompanying notes to condensed consolidated financial statements.

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FIRST POTOMAC REALTY TRUST

Consolidated Statements of Comprehensive Loss

(unaudited)

(Amounts in thousands)

	Three Months Ended March 31,
	2012			2011
Net loss	$	(3,474	)	$	(3,892	)
Unrealized gain on derivative instruments		742			257
Unrealized loss on derivative instruments		(15	)		—
Total comprehensive loss		(2,747	)		(3,635	)
Net loss attributable to noncontrolling interests		318			138
Net unrealized gain from derivative instruments attributable to noncontrolling interests		(39	)		(5	)
Comprehensive loss attributable to First Potomac Realty Trust	$	(2,468	)	$	(3,502	)

See accompanying notes to condensed consolidated financial statements.

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FIRST POTOMAC REALTY TRUST

Consolidated Statements of Cash Flows

(Unaudited, amounts in thousands)

	Three Months Ended March 31,
	2012			2011
Cash flows from operating activities:
Net loss	$	(3,474	)	$	(3,892	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Discontinued operations:
Depreciation and amortization		30			395
Impairment of real estate assets		270			2,711
Depreciation and amortization		16,337			12,710
Stock based compensation		696			691
Bad debt expense		69			330
Deferred income taxes		(100	)		(313	)
Amortization of deferred market rent		(20	)		172
Amortization of financing costs and discounts		1,277			566
Equity in losses of affiliates		46			32
Distributions from investments in affiliates		122			9
Impairment of real estate assets		2,751			—
Changes in assets and liabilities:
Escrows and reserves		451			(5,434	)
Accounts and other receivables		877			(1,630	)
Accrued straight-line rents		(2,596	)		(1,416	)
Prepaid expenses and other assets		(213	)		126
Tenant security deposits		162			230
Accounts payable and accrued expenses		2,635			140
Accrued interest		983			1,564
Rents received in advance		(253	)		184
Deferred costs		(3,987	)		(2,911	)
Total adjustments		19,537			8,156
Net cash provided by operating activities		16,063			4,264
Cash flows from investing activities:
Purchase deposit on future acquisitions		—			(3,465	)
Proceeds from sale of real estate assets		5,206			10,824
Change in escrow and reserve accounts		15			—
Acquisition of rental property and associated intangible assets		—			(9,974	)
Additions to rental property		(17,207	)		(6,303	)
Acquisition of land parcel		—			(7,500	)
Additions to construction in progress		(1,782	)		(2,807	)
Investment in affiliates		(949	)		(260	)
Net cash used in investing activities		(14,717	)		(19,485	)
Cash flows from financing activities:
Financing costs		(621	)		(920	)
Issuance of preferred shares, net		43,562			111,016
Issuance of common shares, net		3,599			—
Issuance of debt		119,000			30,000
Repayments of debt		(153,567	)		(128,652	)
Dividends to common shareholders		(10,108	)		(10,649	)
Dividends to preferred shareholders		(2,228	)		—
Distributions to noncontrolling interests		(584	)		(191	)
Stock option exercises		9			18
Net cash (used in) provided by financing activities		(938	)		622
Net increase (decrease) in cash and cash equivalents		408			(14,599	)
Cash and cash equivalents, beginning of period		16,749			33,280
Cash and cash equivalents, end of period	$	17,157		$	18,681

See accompanying notes to condensed consolidated financial statements.

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FIRST POTOMAC REALTY TRUST

Consolidated Statements of Cash Flows – Continued

(unaudited)

Supplemental disclosure of cash flow information for the three months ended March 31 is as follows (amounts in thousands):

	2012		2011
Cash paid for interest, net	$	9,480	$	6,452
Non-cash investing and financing activities:
Debt assumed in connection with acquisitions of real estate		—		86,464
Contingent consideration recorded at acquisition		—		9,356
Conversion of Operating Partnership units into common shares		—		19
Issuance of Operating Partnership units associated with the acquisition of real estate		—		21,721

Cash paid for interest on indebtedness is net of capitalized interest of $0.8 million and $0.4 million for the three months ended March 31, 2012 and 2011, respectively. For the three months ended March 31, 2012 and 2011, the Company did not pay any cash for franchise taxes levied by the city of Washington, D.C.

During the three months ended March 31, 2011, 1,300 Operating Partnership units were redeemed for an equivalent number of the Company’s common shares. No Operating Partnership units were redeemed for an equivalent number of the Company’s common shares during the three months ended March 31, 2012.

During the three months ended March 31, 2011, the Company acquired three consolidated properties at an aggregate purchase price of $131.5 million, including the assumption of $86.5 million of mortgage debt and the issuance of 1,418,715 Operating Partnership units valued at $21.7 million on the date of acquisition. The 2011 acquisitions included 840 First Street, NE, which was acquired for an aggregate purchase price of $90.0 million, with up to $10.0 million of additional consideration payable upon the terms of a lease renewal by the building’s sole tenant or the re-tenanting of the property. As a result, the Company recorded a contingent consideration obligation of $9.4 million at acquisition. In July 2011, the building’s sole tenant renewed its lease through August 2023 on the entire building with the exception of two floors. As a result, the Company issued 544,673 Operating Partnership units to satisfy $7.1 million of its contingent consideration obligation.

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FIRST POTOMAC REALTY TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Description of Business

First Potomac Realty Trust (the “Company”) is a leader in the ownership, management, development and redevelopment of office and industrial properties in the greater Washington, D.C. region. The Company separates its properties into four distinct segments, which it refers to as the Washington, D.C., Maryland, Northern Virginia and Southern Virginia reporting segments. The Company strategically focuses on acquiring and redeveloping properties that it believes can benefit from its intensive property management and seeks to reposition these properties to increase their profitability and value. The Company’s portfolio contains a mix of single-tenant and multi-tenant office and industrial properties as well as business parks. Office properties are single-story and multi-story buildings that are used primarily for office use; business parks contain buildings with office features combined with some industrial property space; and industrial properties generally are used as warehouse, distribution or manufacturing facilities.

References in these unaudited condensed consolidated financial statements to “we,” “our” or “First Potomac,” refer to the Company and its subsidiaries, on a consolidated basis, unless the context indicates otherwise.

The Company conducts its business through First Potomac Realty Investment Limited Partnership, the Company’s operating partnership (the “Operating Partnership”). The Company is the sole general partner of, and, as of March 31, 2012, owned a 94.6% interest in the Operating Partnership. The remaining interests in the Operating Partnership, which are presented as noncontrolling interests in the Operating Partnership in the accompanying unaudited condensed consolidated financial statements, are limited partnership interests, some of which are owned by several of the Company’s executive officers and trustees who contributed properties and other assets to the Company upon its formation, and the remainder of which are owned by other unrelated parties.

At March 31, 2012, the Company wholly-owned or had a controlling interest in properties totaling 13.9 million square feet and had a noncontrolling ownership interest in properties totaling an additional 1.0 million square feet through six unconsolidated joint ventures. The Company also owned land that can support development of approximately 2.4 million square feet of additional development. The Company’s consolidated properties were 83.0% occupied by 610 tenants at March 31, 2012. The Company did not include square footage that was in development or redevelopment, which totaled 0.5 million square feet at March 31, 2012, in its occupancy calculation. The Company derives substantially all of its revenue from leases of space within its properties. As of March 31, 2012, the Company’s largest tenant was the U.S. Government, which along with government contractors, accounted for over 25% of the Company’s total annualized base rent. The U.S. Government accounted for approximately 11% of the Company’s outstanding accounts receivables at March 31, 2012. The Company operates so as to qualify as a real estate investment trust (“REIT”) for federal income tax purposes.

(2) Summary of Significant Accounting Policies

(a) Principles of Consolidation

The unaudited condensed consolidated financial statements of the Company include the accounts of the Company, the Operating Partnership and the subsidiaries in which the Company or Operating Partnership has a controlling interest, which includes First Potomac Management LLC, a wholly-owned subsidiary that manages the majority of the Company’s properties. All intercompany balances and transactions have been eliminated in consolidation.

The Company has condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with U.S. generally accepted accounting principles (“GAAP”) in the accompanying unaudited condensed consolidated financial statements. The Company believes the disclosures made are adequate to prevent the information presented from being misleading. However, the unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2011 and as updated from time to time in other filings with the Securities and Exchange Commission.

In the Company’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments and accruals necessary to present fairly the Company’s financial position as of March 31, 2012 and the results of its operations, its comprehensive loss and its cash flows for the three months ended March 31, 2012 and 2011. Interim results are not necessarily indicative of full-year performance due, in part, to the timing of transactions and the impact of acquisitions and dispositions throughout the year as well as the seasonality of certain operating expenses such as utility expense and snow and ice removal costs.

8

(b) Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management of the Company to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the period. Estimates include the amount of accounts receivable that may be uncollectible; recoverability of notes receivable, future cash flows, discount and capitalization rate assumptions used to fair value acquired properties and to test impairment of certain long-lived assets and goodwill; derivative valuations; market lease rates, lease-up periods, leasing and tenant improvement costs used to fair value intangible assets acquired and probability weighted cash flow analysis used to fair value contingent liabilities. Actual results could differ from those estimates.

(c) Rental Property

Rental property is initially recorded at fair value, if acquired in a business combination, or initial cost when constructed or acquired in an asset purchase, less accumulated depreciation and, when appropriate, impairment losses. Improvements and replacements are capitalized at fair value when they extend the useful life, increase capacity or improve the efficiency of the asset. Repairs and maintenance are charged to expense when incurred. Depreciation and amortization are recorded on a straight-line basis over the estimated useful lives of the assets. The estimated useful lives of the Company’s assets, by class, are as follows:

Buildings	39 years
Building improvements	5 to 20 years
Furniture, fixtures and equipment	5 to 15 years
Lease related intangible assets	The term of the related lease
Tenant improvements	Shorter of the useful life of the asset or the term of the related lease

The Company regularly reviews market conditions for possible impairment of a property’s carrying value. When circumstances such as adverse market conditions, changes in management’s intended holding period or potential sale to a third party indicate a possible impairment of the fair value of a property, an impairment analysis is performed. The Company assesses potential impairments based on an estimate of the future undiscounted cash flows (excluding interest charges) expected to result from the property’s use and eventual disposition. This estimate is based on projections of future revenues, expenses, capital improvement costs, expected holding periods and capitalization rates. These cash flows consider factors such as expected market trends and leasing prospects, as well as the effects of leasing demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a real estate investment based on forecasted undiscounted cash flows, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property less anticipated selling costs. The Company is required to make estimates as to whether there are impairments in the carrying values of its investments in real estate. Further, the Company will record an impairment loss if it expects to dispose of a property, in the near term, at a price below carrying value. In such an event, the Company will record an impairment loss based on the difference between a property’s carrying value and its projected sales price less any estimated costs to sell.

The Company will classify a building as held-for-sale in the period in which it has made the decision to dispose of the building, the Company’s Board of Trustees or a designated delegate has approved the sale, there is a high likelihood a binding agreement to purchase the property will be signed under which the buyer will be required to commit a significant amount of nonrefundable cash and no significant financing contingencies will exist that could cause the transaction not to be completed in a timely manner. If these criteria are met, the Company will cease depreciation of the asset. The Company will classify any impairment loss, together with the building’s operating results, as discontinued operations in its consolidated statements of operations for all periods presented and classify the assets and related liabilities as held-for-sale in its consolidated balance sheets in the period the held-for-sale criteria are met. Interest expense is reclassified to discontinued operations only to the extent the held-for-sale property is secured by specific mortgage debt and the mortgage debt will not be assigned to another property owned by the Company after the disposition.

The Company recognizes the fair value, if sufficient information exists to reasonably estimate the fair value, of any liability for conditional asset retirement obligations when incurred, which is generally upon acquisition, construction, development or redevelopment and/or through the normal operation of the asset.

9

The Company capitalizes interest costs incurred on qualifying expenditures for real estate assets under development or redevelopment, which include its investment in assets owned through unconsolidated joint ventures that are under development or redevelopment, while being readied for their intended use in accordance with accounting requirements regarding capitalization of interest. The Company will capitalize interest when qualifying expenditures for the asset have been made, activities necessary to get the asset ready for its intended use are in progress and interest costs are being incurred. Capitalized interest also includes interest associated with expenditures incurred to acquire developable land while development activities are in progress and interest on the direct compensation costs of the Company’s construction personnel who manage the development and redevelopment projects, but only to the extent the employee’s time can be allocated to a project. Any portion of construction management costs not directly attributable to a specific project are recognized as general and administrative expense in the period incurred. The Company does not capitalize any other general administrative costs such as office supplies, office rent expense or an overhead allocation to its development or redevelopment projects. Capitalized compensation costs were immaterial for the three months ended March 31, 2012 and 2011. Capitalization of interest will end when the asset is substantially complete and ready for its intended use, but no later than one year from completion of major construction activity, if the property is not occupied. The Company will also place redevelopment and development assets in service at this time and commence depreciation upon the substantial completion of tenant improvements and the recognition of revenue. Capitalized interest is depreciated over the useful life of the underlying assets, commencing when those assets are placed into service.

(d) Notes Receivable

The Company provides loans to the owners of real estate properties, which can be collateralized by interest in the real estate property. The Company records these investments as “Notes receivable, net” in its consolidated balance sheets. The investments are recorded net of any discount or issuance costs, which are amortized over the life of the respective note receivable using the effective interest method. The Company records interest earned from notes receivable and amortization of any discount or issuance costs within “Interest and other income” in its consolidated statements of operations.

The Company will establish a provision for anticipated credit losses associated with its notes receivable and debt investments when it anticipates that it may be unable to collect any contractually due amounts. This determination is based upon such factors as delinquencies, loss experience, collateral quality and current economic or borrower conditions. The Company’s collectability of its notes receivable may be adversely impacted by the financial stability of the Washington, D.C. region and the ability of its underlying assets to keep current tenants or attract new tenants. Estimated losses are recorded as a charge to earnings to establish an allowance for credit losses that the Company estimates to be adequate based on these factors. Based on the review of the above criteria, the Company did not record an allowance for credit losses for its notes receivable during the three months ended March 31, 2012 and 2011.

(e) Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation, primarily as a result of reclassifying the operating results of several properties that were disposed of after March 31, 2011 as discontinued operations. For more information, see footnote 7, Discontinued Operations.

(f) Application of New Accounting Standards

In June 2011, new accounting guidance was issued that allows only two options for presenting the components of net income (loss) and comprehensive income (loss): (1) in a single continuous financial statement, a statement of comprehensive income (loss), or (2) in two separate but consecutive financial statements, consisting of an income statement followed by a separate statement of comprehensive income (loss). Also, items that are reclassified from other comprehensive income to net income must be presented on the face of the consolidated financial statements. In the fourth quarter of 2011, the requirements to present reclassifications from other comprehensive income to net income were indefinitely deferred. The requirements to present comprehensive income in one of the options mentioned above were effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company adopted the new requirements on January 1, 2012. The Company’s adoption of this update changed the order in which its condensed consolidated financial statements are presented as the Company elected to present a separate statement of comprehensive loss.

In May 2011, additional disclosure requirements were issued that impact the Company’s disclosure of fair value measurements. The new requirements include: (1) quantitative disclosure about the Company’s Level 3 unobservable inputs and information about the Company’s valuation process and other qualitative information; (2) disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy; and (3) for items not measured at fair value, but for which the fair value is required to be disclosed, a description of the level in which the fair value measurements were determined. The Company adopted these requirements, which did not have a material impact on its condensed consolidated financial statements, on January 1, 2012.

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(3) Earnings Per Share

Basic earnings or loss per share (“EPS”) is calculated by dividing net income or loss attributable to common shareholders by the weighted average common shares outstanding for the periods presented. Diluted EPS is computed after adjusting the basic EPS computation for the effect of dilutive common equivalent shares outstanding during the periods presented, which include stock options, non-vested shares, preferred shares and exchangeable senior notes. The Company applies the two-class method for determining EPS as its outstanding unvested shares with non-forfeitable dividend rights are considered participating securities. The Company’s excess of distributions over earnings related to participating securities are shown as a reduction in total earnings attributable to common shareholders in the Company’s computation of EPS.

The following table sets forth the computation of the Company’s basic and diluted earnings per share (amounts in thousands, except per share amounts):

	Three Months Ended March 31,
	2012			2011
Numerator for basic and diluted earnings per share:
Loss from continuing operations	$	(3,177	)	$	(1,121	)
Loss from discontinued operations		(297	)		(2,771	)
Net loss		(3,474	)		(3,892	)
Less: Net loss from continuing operations attributable to noncontrolling interests		302			70
Less: Net loss from discontinued operations attributable to noncontrolling interests		16			68
Net loss attributable to First Potomac Realty Trust		(3,156	)		(3,754	)
Less: Dividends on preferred shares		(2,664	)		(1,783	)
Net loss available to common shareholders		(5,820	)		(5,537	)
Less: Allocation to participating securities		(141	)		(137	)
Net loss attributable to common shareholders	$	(5,961	)	$	(5,674	)
Denominator for basic and diluted earnings per share:
Weighted average shares outstanding – basic and diluted		49,781			49,234
Basic and diluted earnings per share:
Loss from continuing operations	$	(0.11	)	$	(0.07	)
Loss from discontinued operations		(0.01	)		(0.05	)
Net loss	$	(0.12	)	$	(0.12	)

In accordance with accounting requirements regarding earnings per share, the Company did not include the following potential common shares in its calculation of diluted earnings per share as they are anti-dilutive (amounts in thousands):

	Three Months Ended March 31,
	2012		2011
Stock option awards		1,462		902
Non-vested share awards		521		421
Conversion of Exchangeable Senior Notes(1)		—		854
Series A Preferred Shares(2)		9,218		7,302
		11,201		9,479

⁽¹⁾ On December 15, 2011, the Company repaid the outstanding balance of $30.4 million on its Exchangeable Senior Notes. At March 31, 2011, each $1,000 principal amount of the Exchangeable Senior Notes was convertible into 28.039 common shares.

⁽²⁾ The Company’s Series A Preferred Shares, which have a $25 per share liquidation value, are only convertible into the Company’s common shares upon certain changes in control of the Company. The dilutive shares are calculated as the daily average of the face value of the Series A Preferred Shares divided by the outstanding common share price. In March 2012, the Company issued an additional 1.8 million Series A Preferred Shares.

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(4) Rental Property

Rental property represents property, net of accumulated depreciation, and developable land that are wholly-owned or owned by an entity in which the Company has a controlling interest. All of the Company’s rental properties are located within the greater Washington, D.C. region. Rental property consists of the following (amounts in thousands):

	March 31, 2012			December 31, 2011
Land and land improvements	$	387,227		$	384,409
Buildings and improvements		1,061,005			1,052,341
Construction in process		57,081			70,362
Tenant improvements		125,705			116,148
Furniture, fixtures and equipment		5,415			5,400
		1,636,433			1,628,660
Less: accumulated depreciation		(198,586	)		(188,999	)
	$	1,437,847		$	1,439,661

Development and Redevelopment Activity

The Company constructs office buildings, business parks and/or industrial buildings on a build-to-suit basis or with the intent to lease upon completion of construction. Also, the Company owns developable land that can accommodate 2.4 million square feet of additional building space. Below is a summary of the approximate building square footage that can be developed on the Company’s developable land and the Company’s current development and redevelopment activity as of March 31, 2012 (amounts in thousands):

Reporting Segment	Developable Square Feet		Square Feet Under Development		Cost to Date of Development Activities		Square Feet Under Redevelopment		Cost to Date of Redevelopment Activities(1)
Washington, D.C.		713		—	$	—		135	$	2,755
Maryland		250		—		—		—		—
Northern Virginia		568		—		—		209		12,044
Southern Virginia		841		166		582		—		—
		2,372		166	$	582		344	$	14,799

⁽¹⁾  Costs to date of redevelopment activities excludes tenant improvements and leasing commissions.

At March 31, 2012, the Company had substantially completed development and redevelopment activities that have yet to be placed in service on 209,000 square feet, at a cost of $12.0 million, in its Northern Virginia reporting segment. The majority of the costs on the construction projects to be placed in service relate to redevelopment activities at Three Flint Hill, located in the Company’s Northern Virginia reporting segment. The Company will place completed construction activities in service upon the shorter of a tenant taking occupancy or twelve months from substantial completion.

During the first quarter of 2012, the Company completed and placed in-service development and redevelopment efforts totaling 93,000 square feet at Sterling Park Business Center and Three Flint Hill, at a cost of $7.2 million, in its Northern Virginia reporting segment.

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(5) Notes Receivable

Below is a summary of the Company’s notes receivable at March 31, 2012 (dollars in thousands):

	Balance at March 31, 2012
Issued	Face Amount		Unamortized Origination Costs			Balance		Interest Rate			Property
December 2010	$	25,000	$	(200	)	$	24,800		12.5	%	950 F Street, NW
April 2011		30,000		(121	)		29,879		9.0	%	America’s Square
	$	55,000	$	(321	)	$	54,679

	Balance at December 31, 2011
Issued	Face Amount		Unamortized Origination Costs			Balance		Interest Rate			Property
December 2010	$	25,000	$	(211	)	$	24,789		12.5	%	950 F Street, NW
April 2011		30,000		(128	)		29,872		9.0	%	America’s Square
	$	55,000	$	(339	)	$	54,661

During the three months ended March 31, 2012 and 2011, the Company recorded interest income of $1.5 million and $0.8 million, respectively, related to its notes receivable.

The notes require monthly payments of interest to the Company. During the three months ended March 31, 2012 and 2011, the Company recorded income from the amortization of origination costs of $17 thousand and $10 thousand, respectively, within “Interest and other income” in its consolidated statements of operations.

(6) Investment in Affiliates

The Company owns an interest in several properties in which it does not control the activities that are most significant to the operations of the properties. As a result, the assets, liabilities and operating results of these noncontrolled properties are not consolidated within the Company’s condensed consolidated financial statements. The Company’s investment in these properties is recorded as “Investment in affiliates” in its consolidated balance sheets. The Company’s investment in affiliates consisted of the following at March 31, 2012 (dollars in thousands):

	Reporting Segment	Ownership Interest	Company Investment
1200 17th Street, NW	Washington, D.C.	95%	$	21,279
Metro Place III & IV	Northern Virginia	51%		27,926
1750 H Street, NW	Washington, D.C.	50%		16,573
Aviation Business Park	Maryland	50%		4,658
RiversPark I and II	Maryland	25%		2,864
			$	73,300

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The net assets of the Company’s unconsolidated joint ventures consisted of the following (amounts in thousands):

	March 31, 2012		December 31, 2011
Assets:
Rental property, net	$	242,311	$	242,767
Cash and cash equivalents		6,465		4,009
Other assets		21,194		22,734
Total assets		269,970		269,510
Liabilities:
Mortgage loans(1)		131,639		132,370
Other liabilities		7,786		7,207
Total liabilities		139,425		139,577
Net assets	$	130,545	$	129,933

⁽¹⁾  Of the total mortgage debt that encumbers the Company’s unconsolidated properties, $7.0 million is recourse to the Company. The fair value of the potential liability to the Company is inconsequential as the likelihood of the debt being called is remote.

The Company’s share of earnings or losses related to its unconsolidated joint ventures is recorded in its consolidated statements of operations as “Equity in losses of affiliates.” The following table summarizes the results of operations of the Company’s unconsolidated joint ventures, which due to its varying ownership interests in the joint ventures and the varying operations of the joint ventures may or may not be reflective of the amounts recorded in its consolidated statements of operations (amounts in thousands):

	Three Months Ended March 31,
	2012			2011
Total revenues	$	6,080		$	3,078
Total operating expenses		(1,768	)		(1,136	)
Net operating income		4,312			1,942
Depreciation and amortization		(3,168	)		(1,302	)
Other expenses, net		(1,082	)		(723	)
Net income (loss)	$	62		$	(83	)

The Company earns various fees from several of its joint ventures, which include management fees, leasing commissions and construction management fees. The Company recognizes fees only to the extent of the third party ownership interest in its unconsolidated joint ventures. The Company recognized $79 thousand and $48 thousand in fees from joint ventures during the three months ended March 31, 2012 and 2011, respectively.

(7) Discontinued Operations

In March 2012, the Company sold its Airpark Place Business Center property, a three-building, 82,400 square foot business park in Gaithersburg, Maryland for net sale proceeds of $5.2 million. During 2011, the Company recorded impairment charges totaling $3.6 million and, during the first quarter of 2012, recorded an immaterial impairment charge based on the difference between the contractual sales price less anticipated selling costs and the carrying value of the property.

During the first quarter of 2012, the Company entered into a contract, which became binding in April 2012, to sell Woodlands Business Center, a 38,000 square foot office building in Largo, Maryland, which the Company acquired as part of a portfolio acquisition in 2004. The property was sold in May 2012 for net proceeds of $2.9 million. The Company recorded impairment charges of $1.6 million in 2011 and $0.2 million in the first quarter of 2012 based on the difference between the contractual sales price less anticipated selling costs and the carrying value of the property. As of March 31, 2012, the Woodlands Business Center property met the GAAP held for sale criteria and, therefore, the property’s assets were classified within “Assets held for sale” and the property’s liabilities, which were immaterial, were classified within “Accounts payable and other liabilities” in the Company’s consolidated balance sheets.

In the second quarter of 2011, the Company sold its Gateway West property in Westminster, Maryland, which was acquired as part of a portfolio acquisition in 2004. Based on the contractual sales price less anticipated selling costs, the Company recorded a $2.7 million impairment charge related to the sale during the first quarter of 2011.

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The following table is a summary of property dispositions whose operating results are reflected as discontinued operations in the Company’s consolidated statements of operations for the periods presented:

	Reporting Segment	Disposition Date			Property Type	Square Feet
Woodlands Business Center	Maryland		5/8/2012	(1)	Office		37,887
Airpark Place Business Center	Maryland		3/22/2012		Business Park		82,429
Aquia Commerce Center I & II	Northern Virginia		6/22/2011		Office		64,488
Gateway West	Maryland		5/27/2011		Office		111,481
Old Courthouse Square	Maryland		2/18/2011		Retail		201,208

⁽¹⁾  The property was classified as held-for-sale at March 31, 2012.

The Company has had, and will have, no continuing involvement with any of its disposed properties subsequent to their disposal. The operations of the disposed properties were not subject to any income based taxes. The Company did not dispose of or enter into any binding agreements to sell any other properties during the three months ended March 31, 2012 and 2011.

The following table summarizes the components of net loss from discontinued operations (amounts in thousands):

	Three Months Ended March 31,
	2012			2011
Revenues	$	208		$	974
Net loss, before taxes		(297	)		(2,771	)

(8) Debt

The Company’s borrowings consisted of the following (amounts in thousands):

	March 31, 2012		December 31, 2011
Mortgage loans, effective interest rates ranging from 4.40% to 7.29%, maturing at various dates through June 2021	$	408,241	$	432,023
Series A senior notes, effective interest rate of 6.41%, maturing June 2013(1)		37,500		37,500
Series B senior notes, effective interest rate of 6.55%, maturing June 2016(1)		37,500		37,500
Secured term loan, effective interest rate of LIBOR plus 4.50%, with maturity dates in January 2013 and 2014(2)(3)		20,000		30,000
Unsecured term loan, effective interest rates ranging from LIBOR plus 2.15% to LIBOR plus 2.30%, with staggered maturity dates ranging from July 2016 to July 2018(3)(4)		300,000		225,000
Unsecured revolving credit facility, effective interest rate of LIBOR plus 2.50%, maturing January 2015(3)(5)		107,000		183,000
	$	910,241	$	945,023

⁽¹⁾  Subsequent to March 31, 2012, a prepayment notice was sent with respect to the senior notes. See Note 16, Subsequent Events.

⁽²⁾ In January 2012, the Company repaid $10.0 million of the loan’s outstanding balance.

⁽³⁾ At March 31, 2012, LIBOR was 0.24%.

⁽⁴⁾ In February 2012, the Company increased its unsecured term loan by $75.0 million to $300.0 million.

⁽⁵⁾  The unsecured revolving credit facility matures in January 2014 with a one-year extension at the Company’s option, which it intends to exercise.

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(a) Mortgage Loans

The following table provides a summary of the Company’s mortgage debt at March 31, 2012 and December 31, 2011 (dollars in thousands):

Encumbered Property	Contractual Interest Rate			Effective Interest Rate			Maturity Date	March 31, 2012			December 31, 2011
Campus at Metro Park North(1)		7.11	%		5.25	%	February 2012	$	—		$	21,692
One Fair Oaks(2)		6.31	%		6.72	%	June 2012		52,502			52,604
1434 Crossways Blvd Building II		7.05	%		5.38	%	August 2012		8,999			9,099
Crossways Commerce Center		6.70	%		6.70	%	October 2012		23,600			23,720
Newington Business Park Center		6.70	%		6.70	%	October 2012		14,886			14,963
Prosperity Business Center		6.25	%		5.75	%	January 2013		3,346			3,381
Cedar Hill		6.00	%		6.58	%	February 2013		15,731			15,838
Merrill Lynch Building		6.00	%		7.29	%	February 2013		13,502			13,571
1434 Crossways Blvd Building I		6.25	%		5.38	%	March 2013		7,871			7,943
Linden Business Center		6.01	%		5.58	%	October 2013		6,875			6,918
840 First Street, NE		5.18	%		6.05	%	October 2013		55,486			55,745
Owings Mills Business Center		5.85	%		5.75	%	March 2014		5,310			5,338
Annapolis Business Center		5.74	%		6.25	%	June 2014		8,326			8,360
Cloverleaf Center		6.75	%		6.75	%	October 2014		16,829			16,908
Plaza 500, Van Buren Office Park, Rumsey Center, Snowden Center, Greenbrier Technology Center II, Norfolk Business Center, Northridge and 15395 John Marshall Highway		5.19	%		5.19	%	August 2015		97,301			97,681
Hanover Business Center:
Building D		8.88	%		6.63	%	August 2015		489			520
Building C		7.88	%		6.63	%	December 2017		889			920
Chesterfield Business Center:
Buildings C,D,G and H		8.50	%		6.63	%	August 2015		1,288			1,369
Buildings A,B,E and F		7.45	%		6.63	%	June 2021		2,192			2,235
Mercedes Center– Note 1		4.67	%		6.04	%	January 2016		4,704			4,713
Mercedes Center – Note 2		6.57	%		6.30	%	January 2016		9,666			9,722
Gateway Centre Manassas Building I		7.35	%		5.88	%	November 2016		971			1,016
Hillside Center		5.75	%		4.62	%	December 2016		14,026			14,122
500 First Street, NW		5.72	%		5.79	%	July 2020		38,143			38,277
Battlefield Corporate Center		4.26	%		4.40	%	November 2020		4,113			4,149
Airpark Business Center		7.45	%		6.63	%	June 2021		1,196			1,219
					5.97	%(3)			408,241			432,023
Unamortized fair value adjustments									(932	)		(1,147	)
Mortgage loans principal								$	407,309		$	430,876

⁽¹⁾ The loan was repaid in February 2012 with borrowings on the Company’s unsecured revolving credit facility.

⁽²⁾  The Company intends to refinance the mortgage loan or, if it does not find refinancing terms acceptable, repay the loan with proceeds of additional borrowings under the unsecured revolving credit facility.

⁽³⁾  Weighted average interest rate on total mortgage debt.

(b) Term Loans

Unsecured Term Loan

In February 2012, the Company expanded its unsecured term loan from $225.0 million to $300.0 million and used the proceeds to pay down $73.0 million of the outstanding balance under its unsecured revolving credit facility and for other general corporate purposes.

16

The table below shows the outstanding balances of the three tranches of the $300.0 million unsecured term loan at March 31, 2012 (dollars in thousands):

	Maturity Date	Amount		Interest Rate
Tranche A	July 2016	$	60,000	LIBOR, plus 215 basis points
Tranche B	July 2017		147,500	LIBOR, plus 225 basis points
Tranche C	July 2018		92,500	LIBOR, plus 230 basis points
		$	300,000

The term loan agreement contains various restrictive covenants substantially similar to those contained in the Company’s revolving credit facility, including with respect to liens, indebtedness, investments, distributions, mergers and asset sales. In addition, the agreement requires that the Company satisfy certain financial covenants that are also substantially similar to those contained in the Company’s revolving credit facility. The agreement also includes customary events of default, the occurrence of which, following any applicable cure period, would permit the lenders to, among other things, declare the principal, accrued interest and other obligations of the Company under the agreement to be immediately due and payable.

Secured Term Loan

On January 13, 2012, the Company repaid $10.0 million of the outstanding balance on its secured term loan with borrowings under its unsecured revolving credit facility. Of the $20.0 million balance at March 31, 2012, $10.0 million matures in January 2013 and $10.0 million matures in January 2014. At March 31, 2012, the loan’s applicable interest rate was LIBOR plus 450 basis points, which will increase to 550 basis points in January 2013. Interest on the loan is payable on a monthly basis. The Company’s secured term loan contains several restrictive covenants, which in the event of non-compliance may cause the outstanding balance of the loan and accrued interest to become immediately due and payable.

(c) Unsecured Revolving Credit Facility

During the first quarter of 2012, the Company repaid $120.0 million of the outstanding balance of its unsecured revolving credit facility with proceeds from the expansion of its unsecured term loan, the issuance of its Series A Cumulative Redeemable Perpetual Preferred Shares (the “Series A Preferred Shares”) and available cash. During the first quarter of 2012, the Company borrowed $44.0 million on its unsecured revolving credit facility, which was used to repay the outstanding balance on a mortgage loan, to make a $10.0 million principal payment on a secured term loan and for general corporate purposes. The weighted average borrowings outstanding on the unsecured revolving credit facility were $161.0 million with a weighted average interest rate of 2.8% for the three months ended March 31, 2012, compared with $114.6 million and 3.3%, respectively, for the three months ended March 31, 2011. The Company’s maximum outstanding borrowings were $198.0 million and $191.0 million during the three months ended March 2012 and 2011, respectively. At March 31, 2012, outstanding borrowings under the unsecured revolving credit facility were $107.0 million with a weighted average interest rate of 2.7%. The Company is required to pay an annual commitment fee of 0.25% based on the amount of unused capacity under the unsecured revolving credit facility. As of March 31, 2012, the available capacity under the unsecured revolving credit facility was $148.0 million. The Company’s ability to borrow under the credit facility is subject to its satisfaction of certain financial and restrictive covenants.

(d) Interest Rate Swap Agreements

During the first quarter of 2012, the Company entered into four interest rate swap agreements that fixed LIBOR on $75.0 million of its variable rate debt. At March 31, 2012, the Company had fixed LIBOR, at a weighted average interest rate of 1.6328%, on $275.0 million of its variable rate debt through ten interest rate swap agreements. See footnote 10, Derivative Instruments, for more information about the Company’s interest rate swap agreements.

(e) Financial Covenants

The Company’s outstanding corporate debt agreements contain specific financial covenants that may impact future financing decisions made by the Company or may be impacted by a decline in operations. These covenants differ by debt instrument and relate to the Company’s allowable leverage, minimum tangible net worth, fixed charge coverage and other financial metrics. As of March 31, 2012, after giving effect to the amendments described in Note 16, Subsequent Events, the Company was in compliance with all of the financial covenants of its unsecured term loan, secured term loan and unsecured revolving credit facility (together “Bank Debt”). In connection with the Internal Investigation and the review of the Company’s financial and other non-financial covenants contained in its Bank Debt and its 6.41% Series A Senior Notes and 6.55% Series B Senior Notes (collectively, the “Senior Notes”) agreements and further clarification provided as a result of such review, the Company determined it would not have been in compliance with certain of the financial covenants under the documents governing the Senior Notes, as of March 31, 2012, and for one or more prior periods, including the fourth quarter of 2010. However, in connection with the amendments to the Bank Debt agreements, the lenders under the Bank Debt agreements waived, among other things, any cross-defaults with respect to financial covenant non-compliance under the Senior Notes that may have existed with respect to periods prior to the date of such amendments. As a result, any financial covenant non-compliance under the Senior Notes would not create an event of default under the Company’s Bank Debt agreements. Furthermore, the sole remedy available to the holders of the Senior Notes upon the occurrence of an event of default is to accelerate the maturity thereof and to receive a make-whole amount in connection therewith. The Company already sent notices of prepayment to the holders of the Senior Notes on May 11, 2012, pursuant to which the Senior Notes will be repaid on or prior to June 11, 2012, including the payment of a make-whole amount (see footnote 16, Subsequent Events, for further discussion).

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The Company’s continued ability to borrow under the revolving credit facility is subject to compliance with financial and operating covenants, and a failure to comply with any of these covenants could result in a default under the credit facility. These debt agreements also contain cross-default provisions that would be triggered if the Company is in default under other loans, including mortgage loans, in excess of certain amounts. In the event of a default, the lenders could accelerate the timing of payments under the debt obligations and the Company may be required to repay such debt with capital from other sources, which may not be available on attractive terms, or at all, which would have a material adverse effect on the Company’s liquidity, financial condition, results of operations and ability to make distributions to our shareholders.

(9) Income Taxes

The Company owns properties located in Washington, D.C. that are subject to local income based franchise taxes at an effective rate of 9.975%. During the three months ended March 31, 2012, the Company recognized a provision for income taxes of $0.1 million and recognized a benefit from income taxes of $0.3 million during the three months ended March 31, 2011. The Company also has interests in two unconsolidated joint ventures that own real estate in Washington, D.C. that are subject to the franchise tax. The impact for income taxes related to these unconsolidated joint ventures is reflected within “Equity in losses of affiliates” in the Company’s consolidated statements of operations.

The Company recognizes deferred tax assets only to the extent that it is more likely than not that deferred tax assets will be realized based on consideration of available evidence, including future reversals of existing taxable temporary differences, future projected taxable income and tax planning strategies. The Company expects to amortize its current deferred tax assets over the life of their respective underlying assets or 39 years. The Company’s deferred tax assets and liabilities are primarily associated with differences in the GAAP and tax basis of recently acquired real estate assets, particularly acquisition costs, but also including intangible assets and deferred market rent assets and liabilities, that are associated with properties located in Washington, D.C. and recorded in its consolidated balance sheets.

The Company has not recorded a valuation allowance as it determined that it is more likely than not that future operations will generate sufficient taxable income to realize the deferred tax assets. The Company has not recognized any deferred tax assets or liabilities as a result of uncertain tax positions and has no material net operating loss, capital loss or alternative minimum tax carryovers. There was no benefit or provision for income taxes associated with the Company’s discontinued operations for any period presented. At March 31, 2012 and December 31, 2011, the Company had deferred tax assets totaling $2.1 million and $1.4 million, respectively, and deferred tax liabilities totaling $5.5 million and $5.0 million, respectively. At March 31, 2012 and December 31, 2011, the Company recorded its deferred tax assets within “Prepaid expenses and other assets” and recorded its deferred tax liabilities within “Accounts payable and other liabilities” in the Company’s consolidated balance sheets.

As the Company believes it both qualifies as a REIT and will not be subject to federal income tax, a reconciliation between the income tax provision calculated at the statutory federal income tax rate and the actual income tax provision has not been provided.

(10) Derivative Instruments

The Company is exposed to certain risks arising from business operations and economic factors. The Company uses derivative financial instruments to manage exposures that arise from business activities in which its future exposure to interest rate fluctuations is unknown. The objective in the use of an interest rate derivative is to add stability to interest expenses and manage exposure to interest rate changes. The Company does not use derivatives for trading or speculative purposes and intends to enter into derivative agreements only with counterparties that it believes have a strong credit rating to mitigate the risk of counterparty default or insolvency. No hedging activity can completely insulate the Company from the risks associated with changes in interest rates. Moreover, interest rate hedging could fail to protect the Company or adversely affect it because, among other things:

• 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;

18

• 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.

The Company enters into interest rate swap agreements to hedge its exposure on its variable rate debt against fluctuations in prevailing interest rates. The interest rate swap agreements fix LIBOR to a specified interest rate; however, the swap agreements do not affect the contractual spreads associated with each variable debt instrument’s applicable interest rate. During the first quarter of 2012, the Company entered into four interest rate swap agreements that fixed LIBOR on $75.0 million of its variable rate debt. At March 31, 2012, the Company had fixed LIBOR at a weighted average rate of 1.6328% on $275.0 million of its variable rate debt through ten interest rate swap agreements that are summarized below (dollars in thousands):

Effective Date	Maturity Date	Amount		Interest Rate Contractual Component		Fixed LIBOR Interest Rate
January 2011	January 2014	$	50,000		LIBOR		1.474	%
July 2011	July 2016		35,000		LIBOR		1.754	%
July 2011	July 2016		25,000		LIBOR		1.7625	%
July 2011	July 2017		30,000		LIBOR		2.093	%
July 2011	July 2017		30,000		LIBOR		2.093	%
September 2011	July 2018		30,000		LIBOR		1.660	%
January 2012	July 2018		25,000		LIBOR		1.394	%
March 2012	July 2017		25,000		LIBOR		1.129	%
March 2012	July 2017		12,500		LIBOR		1.129	%
March 2012	July 2018		12,500		LIBOR		1.383	%
			$275,000

The Company’s interest rate swap agreements are designated as cash flow hedges and the Company records any unrealized gains associated with the change in fair value of the swap agreements within “Accumulated other comprehensive loss” and “Prepaid expenses and other assets” and any unrealized losses within “Accumulated other comprehensive loss” and “Accounts payable and other liabilities” on its consolidated balance sheets. The Company records its proportionate share of any unrealized gains or losses on its cash flow hedges associated with its unconsolidated joint ventures within “Accumulated other comprehensive loss” and “Investment in affiliates” on its consolidated balance sheets. The Company records any cash received or paid as a result of each interest rate swap agreement’s fixed rate deviating from its respective loan’s contractual rate within “Interest expense” in its consolidated statements of operations. The Company did not have any ineffectiveness associated with its cash flow hedges during the three months ended March 31, 2012 and 2011, which would have been recorded in earnings, and does not expect any future ineffectiveness. Therefore, no amounts have been or are expected to be reclassified from “Accumulated other comprehensive loss” into earnings.

(11) Fair Value Measurements

The Company adopted accounting provisions that outline a valuation framework and create a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and a reporting entity’s own assumptions about market data (unobservable inputs). The new disclosures increase the consistency and comparability of fair value measurements and the related disclosures. Fair value is identified, under the standard, as the price that would be received to sell an asset or paid to transfer a liability between willing third parties at the measurement date (an exit price). In accordance with GAAP, certain assets and liabilities must be measured at fair value, and the Company provides the necessary disclosures that are required for items measured at fair value as outlined in the accounting requirements regarding fair value.

Financial assets and liabilities, as well as those non-financial assets and liabilities requiring fair value measurement, are measured using inputs from three levels of the fair value hierarchy.

The three levels are as follows:

Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

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Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs).

Level 3 - Unobservable inputs, only used to the extent that observable inputs are not available, reflect the Company’s assumptions about the pricing of an asset or liability.

In accordance with accounting provisions and the fair value hierarchy described above, the following table shows the fair value of the Company’s consolidated assets and liabilities that are measured on a non-recurring and recurring basis as of March 31, 2012 and December 31, 2011 (amounts in thousands):

	Balance at March 31,  2012		Level 1		Level 2		Level 3
Non-recurring Measurements:
Impaired real estate assets	$	18,516	$	—	$	2,929	$	15,587
Recurring Measurements:
Derivative instrument-swap assets		344		—		344		—
Derivative instrument-swap liabilities		5,746		—		5,746		—
Contingent consideration related to acquisition of:
Corporate Campus at Ashburn Center		1,448		—		—		1,448
840 First Street, NE		745		—		—		745
	Balance at December 31, 2011		Level 1		Level 2		Level 3
Non-recurring Measurements:
Impaired real estate assets	$	10,583	$	—	$	5,250	$	5,333
Recurring Measurements:
Derivative instrument-swap liabilities		6,129		—		6,129		—
Contingent consideration related to acquisition of:
Corporate Campus at Ashburn Center		1,448		—		—		1,448
840 First Street, NE		745		—		—		745

Impairment of Real Estate Assets

The Company regularly reviews market conditions for possible impairment of a property’s carrying value. When circumstances such as adverse market conditions, changes in management’s intended holding period or potential sale to a third party indicate a possible impairment of a property, an impairment analysis is performed.

During the first quarter of 2012, the Company reduced its intended holding period for its Owings Mills Business Park property, which is located in the Company’s Maryland reporting segment. Based on an analysis of the property’s cash flows over the Company’s reduced holding period for the property, the Company recorded an impairment charge of $2.8 million in the first quarter of 2012. The Company determined the fair value of the property through an assessment of market data and through an income approach based on discounted cash flows of the future operations and disposition of the property over a reduced holding period.

In April 2012, the Company entered into a binding contract to sell its Woodlands Business Center property and recorded an additional impairment charge of $0.2 million to reduce the Woodlands Business Center property’s carrying value to reflect its fair value, less anticipated selling costs at March 31, 2012. The property was sold in May 2012 for net proceeds of $2.9 million. As of March 31, 2012, the Woodlands Business Center property met the GAAP guidelines to classify its assets and liabilities as held-for-sale in the Company’s consolidated balance sheets and reflected its operating results as discontinued operations in the Company’s consolidated statements of operations for each of the periods presented.

20

During the fourth quarter of 2011, the Company reduced its intended holding period for its Woodlands Business Center and Goldenrod Lane properties, which are both located in the Company’s Maryland reporting segment. Based on an analysis of each property’s cash flows over the Company’s reduced holding period for each respective property, the Company recorded impairment charges of $1.6 million and $0.9 million, respectively, in the fourth quarter of 2011. The Company determined the fair value of the properties through an assessment of market data and through an income approach based on discounted cash flows anticipated over a reduced holding period. The Company signed an agreement to sell its Goldenrod property in April 2012. The sale is expected to close during the second quarter of 2012.

During the third quarter of 2011, the Company reduced its intended holding period for its Airpark Place Business Center property, which is located in its Maryland reporting segment. Based on an analysis of the property’s anticipated cash flows over the Company’s reduced holding period for the property, the Company recorded an impairment charge of $3.1 million in the third quarter of 2011. In January 2012, the Company entered into a binding contract to sell the property and recorded an impairment charge of $0.4 million to reduce the property’s carrying value to reflect its fair value, less anticipated selling costs at December 31, 2011. The property was sold in March 2012 for net proceeds of $5.2 million. The Company determined the fair value of the property based on the execution of a contract to sell.

For the three months ended March 31, 2012 and 2011, the Company incurred impairment charges of $3.0 million and $2.7 million, respectively. The Company recorded the $2.8 million Owings Mills Business Park impairment charge described above within continuing operations on its consolidated statements of operations. The remaining impairment charges incurred during the three months ended March 31, 2012 and 2011 relate to properties that were or will be subsequently disposed of, including Woodlands Business Center, which was sold in May 2012, and are recorded within discontinued operations in the Company’s consolidated statements of operations.

Interest Rate Derivatives

During the first quarter of 2012, the Company entered into four interest rate swap agreements that fixed LIBOR on $75.0 million of its variable rate debt. At March 31, 2012, the Company had fixed LIBOR, at a weighted average rate of 1.6328%, on $275.0 million of its variable rate debt through ten interest rate swap agreements. See footnote 10, Derivative Instruments, for more information about the Company’s interest rate swap agreements.

The interest rate derivatives are fair valued based on prevailing market yield curves on the measurement date. The Company uses a third party to value its interest rate swap agreements. The third party takes a daily “snapshot” of the market to obtain close of business rates. The snapshot includes over 7,500 rates including LIBOR fixings, Eurodollar futures, swap rates, exchange rates, treasuries, etc. This market data is obtained via direct feeds from Bloomberg and Reuters and from Inter-Dealer Brokers. The selected rates are compared to their historical values. Any rate that has changed by more than normal mean and related standard deviation would be considered an outlier and flagged for further investigation. The rates are then compiled through a valuation process that generates daily valuations, which are used to value the Company’s interest rate swap agreements.

21

Contingent Consideration

On March 25, 2011, the Company acquired 840 First Street, NE, in Washington, D.C. for an aggregate purchase price of $90.0 million, with up to $10.0 million of additional consideration payable in Operating Partnership units upon the terms of a lease renewal by the building’s sole tenant or the re-tenanting of the property through November 2013. Based on assessment of the probability of renewal and anticipated lease rates, the Company recorded a contingent consideration obligation of $9.4 million at acquisition. In July 2011, the building’s sole tenant renewed its lease through August 2023 on the entire building with the exception of two floors. As a result, the Company issued 544,673 Operating Partnership units to satisfy $7.1 million of its contingent consideration obligation. The Company recognized a $1.5 million gain associated with the issuance of the additional units, which represented the difference between the contractual value of the units and the fair value of the units at the date of issuance. The fair value of the contingent consideration obligation was determined based on several probability weighted discounted cash flow scenarios that projected stabilization being achieved at certain timeframes. The fair value was based, in part, on significant inputs, which are not observable in the market, thus representing a Level 3 measurement in accordance with the fair value hierarchy. At March 31, 2012, the contingent consideration obligation was $0.7 million, which may result in the issuance of additional units dependent upon the leasing of any of the vacant space.

The Company has a contingent consideration obligation associated with the 2009 acquisition of Corporate Campus at Ashburn Center. As part of the acquisition price of Corporate Campus at Ashburn Center, the Company entered into a fee agreement with the seller under which the Company will be obligated to pay additional consideration upon the property achieving stabilization per specified terms of the agreement. The Company determines the fair value of the obligation through an income approach based on discounted cash flows that project stabilization being achieved within a certain timeframe. The more significant inputs associated with the fair value determination of the contingent consideration include estimates of capitalization rates, discount rates and various assumptions regarding the property’s operating performance and profitability. The fair value was based, in part, on significant inputs, which are not observable in the market, thus representing a Level 3 measurement in accordance with the fair value hierarchy. At March 31, 2012, the contingent consideration obligation was $1.4 million.

The Company did not recognize any additional gains or losses associated with its contingent consideration, as there was no change in the fair value of the contingent consideration, for the three months ended March 31, 2012 and 2011.

With the exception of its contingent consideration obligations, the Company did not re-measure or complete any transactions involving non-financial assets or non-financial liabilities that are measured on a recurring basis during the three months ended March 31, 2012 and 2011. Also, no transfers into and out of fair value measurements levels for assets or liabilities that are measured on a recurring basis occurred during the three months ended March 31, 2012 and 2011.

Financial Instruments

The carrying amounts of cash equivalents, accounts and other receivables, accounts payable and other liabilities, with the exception of any items listed above, approximate their fair values due to their short-term maturities. The Company determines the fair value of its notes receivable and debt instruments by discounting future contractual principal and interest payments using prevailing market rates for securities with similar terms and characteristics at the balance sheet date. The Company deems the fair value measurement of its debt instruments as a Level 2 measurement as the Company uses quoted interests rates for similar debt instruments to value its debt instruments. The Company also uses quoted market interest rates to value its notes receivable, which the Company considers a Level 2 measurement as it does not believe notes receivable trade in an active market.

22

The carrying amount and estimated fair value of the Company’s notes receivable and debt instruments at March 31, 2012 and December 31, 2011 are as follows (amounts in thousands):

	March 31, 2012				December 31, 2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets:
Notes receivable(1)	$	54,679	$	55,000	$	54,661	$	55,000
Financial Liabilities:
Mortgage debt	$	408,241	$	416,942	$	432,023	$	437,593
Series A senior notes		37,500		39,098		37,500		39,128
Series B senior notes		37,500		41,904		37,500		41,383
Secured term loan(2)		20,000		20,265		30,000		29,990
Unsecured term loan(3)		300,000		300,376		225,000		224,388
Unsecured revolving credit facility		107,000		107,518		183,000		182,740
Total	$	910,241	$	926,103	$	945,023	$	955,222

⁽¹⁾  The face value of the Company’s notes receivable was $55.0 million at March 31, 2012 and December 31, 2011.

⁽²⁾  During the first quarter of 2012, the Company made a $10.0 million principal payment on its secured term loan.

⁽³⁾  During the first quarter of 2012, the Company expanded its unsecured term loan by $75.0 million.

(12) Equity

In March 2012, the Company issued 1.8 million additional Series A Preferred Shares with a liquidation preference of $25.00 per share, which generated net proceeds of approximately $44 million. The issuance costs were recorded as a reduction to the Company’s “Additional paid in capital” in its consolidated balance sheets. Dividends on the additional Series A Preferred Shares are cumulative and payable on a quarterly basis beginning on May 15, 2012, at a rate of 7.750%. The Series A Preferred Shares are convertible into the Company’s common shares upon certain changes in control of the Company and have no maturity date or voting rights. The Company can redeem the Series A Preferred Shares, at their par value plus accrued and unpaid dividends, any time after January 18, 2016. The Company used the net proceeds from the issuance of the additional Series A Preferred Shares to repay a portion of the outstanding balance on its unsecured revolving credit facility. The offering was a reopening of the Company’s original issuance of the Series A Preferred Shares, which occurred in January 2011.

During the first quarter of 2012, the Company sold 245,000 common shares through its controlled equity offering program at a weighted average offering price of $14.83 per common share, generating net proceeds of $3.6 million. The Company used the proceeds for general corporate purposes. At March 31, 2012, the Company had 4.3 million common shares available for issuance under its controlled equity offering program.

On February 10, 2012, the Company paid a dividend of $0.20 per common share to common shareholders of record as of February 3, 2012 and, on February 15, 2012, paid a dividend of $0.484375 per share to preferred shareholders of record as of February 3, 2012. On April 24, 2012, the Company declared a dividend of $0.20 per common share, equating to an annualized dividend of $0.80 per common share. The dividend was paid on May 11, 2012 to common shareholders of record as of May 4, 2012. The Company also declared a dividend of $0.484375 per share on its Series A Preferred Shares. The dividend was paid on May 15, 2012 to preferred shareholders of record as of May 4, 2012. Dividends on all non-vested share awards are recorded as a reduction of shareholders’ equity. For each dividend paid by the Company on its common shares, the Operating Partnership distributes an equivalent distribution on its Operating Partnership common units.

The Company’s unsecured revolving credit facility, unsecured term loan, secured term loan and senior notes contain certain restrictions that include, among other things, requirements to maintain specified coverage ratios and other financial covenants, which may limit the Company’s ability to make distributions to its common and preferred shareholders. Further, distributions with respect to the Company’s common shares are subject to its ability to first satisfy its obligations to pay distributions to the holders of its Series A Preferred Shares.

23

As a result of the redemption feature of the Operating Partnership units requiring delivery of registered shares of the Company, the noncontrolling interests associated with the Operating Partnerhsip are recorded outside of permanent equity. The Company’s equity and redeemable noncontrolling interests are as follows (amounts in thousands):

	First Potomac Realty Trust			Non-redeemable noncontrolling interests		Total Equity			Redeemable noncontrolling interests
Balance at December 31, 2011	$	672,246		$	4,245	$	676,491		$	39,981
Net (loss) income		(3,156	)		17		(3,139	)		(335	)
Changes in ownership, net		46,262			8		46,270			942
Distributions to owners		(12,337	)		—		(12,337	)		(583	)
Other comprehensive income		688			—		688			39
Balance at March 31, 2012	$	703,703		$	4,270	$	707,973		$	40,044

	First Potomac Realty Trust			Non- redeemable noncontrolling interests			Total Equity			Redeemable noncontrolling interests
Balance at December 31, 2010	$	614,983		$	3,077		$	618,060		$	16,122
Net loss		(3,754	)		(2	)		(3,756	)		(136	)
Changes in ownership, net		110,430			2			110,424			21,620
Distributions to owners		(10,649	)		—			(10,641	)		(191	)
Other comprehensive income		252			—			252			5
Balance at March 31, 2011	$	711,262		$	3,077		$	714,339		$	37,420

A summary of the Company’s accumulated other comprehensive loss is as follows (amounts in thousands):

	2012			2011
Beginning balance at January 1,	$	(5,849	)	$	(545	)
Net unrealized gain on derivative instruments		727			257
Net unrealized gain attributable to noncontrolling interests		(39	)		(5	)
Ending balance at March 31,	$	(5,161	)	$	(293	)

(13) Noncontrolling Interests

(a) Noncontrolling Interests in the Operating Partnership

Noncontrolling interests relate to the common interests in the Operating Partnership not owned by the Company. Interests in the Operating Partnership are owned by limited partners who contributed buildings and other assets to the Operating Partnership in exchange for common Operating Partnership units. Limited partners have the right to tender their units for redemption in exchange for, at the Company’s option, common shares of the Company on a one-for-one basis or cash based on the fair value of the Company’s common shares at the date of redemption. Unitholders receive a distribution per unit equivalent to the dividend per common share. Differences between amounts paid to redeem noncontrolling interests and their carrying values are charged or credited to equity. As a result of the redemption feature of the Operating Partnership units, the noncontrolling interests are recorded outside of permanent equity.

Noncontrolling interests are presented at the greater of their fair value or their cost basis, which is comprised of their fair value at issuance, subsequently adjusted for the noncontrolling interests’ share of net income or losses available to common shareholders, other comprehensive income or losses, distributions received or additional contributions. The Company accounts for issuances of Operating Partnership units individually, which could result in some portion of its noncontrolling interests being carried at fair value with the remainder being carried at historical cost. Based on the closing share price of the Company’s common stock at March 31, 2012, the cost to acquire, through cash purchase or issuance of the Company’s common shares, all of the outstanding common Operating Partnership units not owned by the Company would be approximately $35.3 million. At March 31, 2012, the Company recorded an adjustment of $3.1 million to present certain noncontrolling interests at the greater of their carrying value or redemption value.

At March 31, 2012 and December 31, 2011, 2,920,561 of the total common Operating Partnership units were not owned by the Company. There were no common Operating Partnership units redeemed for common shares or with available cash during the three months ended March 31, 2012.

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(b) Noncontrolling Interests in the Consolidated Partnerships

When the Company is deemed to have a controlling interest in a partially-owned entity, it will consolidate all of the entity’s assets, liabilities and operating results within its condensed consolidated financial statements. The net assets contributed to the consolidated entity by the third party, if any, will be reflected within permanent equity in the Company’s consolidated balance sheets to the extent they are not mandatorily redeemable. The amount will be recorded based on the third party’s initial investment in the consolidated entity and will be adjusted to reflect the third party’s share of earnings or losses in the consolidated entity and any distributions received or additional contributions made by the third party. The earnings or losses from the entity attributable to the third party are recorded as a component of “Net loss attributable to noncontrolling interests” in the Company’s consolidated statements of operations.

At March 31, 2012, the Company’s consolidated joint ventures owned the following properties:

Property	Acquisition Date	Reporting Segment	First Potomac Controlling Interest	Square Footage
1005 First Street, NE	August 2011	Washington, D.C.	97%		30,414	(1)
Redland Corporate Center	November 2010	Maryland	97%		348,469

⁽¹⁾  The site is currently occupied by Greyhound Bus Lines, Inc., which has announced its intention to relocate. Upon the tenant leaving, the Company intends on re-developing the site, which can accommodate up to 712,000 square feet of office space.

(14) Share-Based Compensation

The Company records costs related to its share-based compensation based on the grant-date fair value calculated in accordance with GAAP. The Company recognizes share-based compensation costs on a straight-line basis over the requisite service period for each award and these costs are recorded within “General and administrative expense” or “Property operating expense” in the Company’s consolidated statements of operations based on the employee’s job function.

Stock Options Summary

During the first quarter of 2012, the Company awarded 627,500 stock options, which consisted of 500,000 stock options awarded to an officer and 127,500 stock options awarded to its non-officer employees. The stock options issued to the officer vest ratably over an eight-year service period. The options vest 12.5% on the first anniversary of the date of the grant and 3.125% in each subsequent calendar quarter. The stock options issued to its non-officer employees vest ratably over a four-year service period. The options vest 25% on the first anniversary of the date of grant and 6.25% in each subsequent calendar quarter. Both stock option awards described above have a 10-year contractual life. The Company recognized compensation expense related to stock options of $130 thousand and $65 thousand during the three months ended March 31, 2012 and 2011, respectively.

A summary of the Company’s stock option activity during the three months ended March 31, 2012 is presented below:

	Options			Weighted Average Exercise  Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2011		887,168		$	16.76		4.4 years	$	293,930
Granted		627,500			14.70
Exercised		(907	)		10.43
Forfeited		(7,969	)		17.89
Outstanding at March 31, 2012		1,505,792		$	15.90		6.5 years	$	188,026
Exercisable at March 31, 2012		734,146		$	17.17		3.3 years	$	135,865
Options expected to vest, subsequent to March 31, 2012		736,991		$	14.71		9.5 years	$	49,031

25

As of March 31, 2012, the Company had $2.4 million of unrecognized compensation cost, net of estimated forfeitures, related to stock option awards. The Company anticipates this cost will be recognized over a weighted-average period of approximately 6.1 years. The Company calculates the grant date fair value of option awards using a Black-Scholes option-pricing model. Expected volatility is based on an assessment of the Company’s realized volatility over the preceding period that is equivalent to the award’s expected life, which in management’s opinion, gives an accurate indication of future volatility. The expected term represents the period of time the options are anticipated to remain outstanding as well as the Company’s historical experience for groupings of employees that have similar behavior and are considered separately for valuation purposes. The risk-free rate is based on the U.S. Treasury rate at the time of grant for instruments of similar term.

The assumptions used in the fair value determination of stock options granted to employees in 2012 are summarized as follows:

Non-Officer Stock Option Award

Risk-free interest rate	0.83	%
Expected volatility	50.7	%
Expected dividend yield	5.71	%
Weighted average expected life of options	5 years

Officer Stock Option Award

Risk-free interest rate	1.39	%
Expected volatility	44.3	%
Expected dividend yield	5.71	%
Weighted average expected life of options	7 years

The weighted average grant date fair value of the stock options issued during the three months ended March 31, 2012 was $3.27 per share.

Option Exercises

The Company received approximately $9 thousand and $18 thousand from the exercise of stock options during the three months ended March 31, 2012 and 2011, respectively. New common shares are issued as a result of stock option exercises. The total intrinsic value of options exercised during the quarter ended March 31, 2012 and 2011 were $3 thousand and $10 thousand, respectively.

Non-vested share awards

The Company issues non-vested share awards that either vest over a specific time period that is identified at the time of issuance or vest upon the achievement of specific performance goals that are identified at the time of issuance. The Company issues new shares, subject to restrictions, upon each grant of non-vested share awards. In February 2012, the Company granted 249,654 restricted common shares to its officers. The non-vested shares will vest ratably over a five year term and fair value was determined based on the share price of the underlying common shares on the date of issuance.

The Company recognized $0.6 million of compensation expense associated with its non-vested share awards during both the three months ended March 31, 2012 and 2011. Dividends on all non-vested share awards are recorded as a reduction of equity. The Company applies the two-class method for determining EPS as its outstanding unvested shares with non-forfeitable dividend rights are considered participating securities. The Company’s excess of dividends over earnings related to participating securities are shown as a reduction in income available to common shareholders in the Company’s computation of EPS.

26

A summary of the Company’s non-vested share awards as of March 31, 2012 is as follows:

	Non-vested Shares			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2011		748,968		$	12.67
Granted		249,654			14.32
Vested		(109,282	)		16.00
Expired		(61,932	)		11.36
Non-vested at March 31, 2012		827,408		$	12.83

As of March 31, 2012, the Company had $6.7 million of unrecognized compensation cost related to non-vested shares. The Company anticipates this cost will be recognized over a weighted-average period of 4.0 years.

(15) Segment Information

The Company’s reportable segments consist of four distinct reporting and operational segments within the greater Washington D.C, region in which it operates: Maryland, Washington, D.C., Northern Virginia and Southern Virginia. The Company evaluates the performance of its segments based on the operating results of the properties located within each segment, which excludes large non-recurring gains and losses, gains from sale of real estate assets, interest expense, general and administrative costs, acquisition costs or any other indirect corporate expense to the segments. In addition, the segments do not have significant non-cash items other than straight-line and deferred market rent amortization reported in their operating results. There are no inter-segment sales or transfers recorded between segments.

27

The results of operations for the Company’s four reportable segments are as follows (dollars in thousands):

	Three Months Ended March 31, 2012
	Maryland			Washington, D.C.			Northern Virginia			Southern Virginia			Consolidated
Number of buildings		66			4			55			57			182
Square feet		3,878,306			666,714			3,665,510			5,649,491			13,860,021
Total revenues	$	14,406		$	6,826		$	13,315		$	12,225		$	46,772
Property operating expense		(3,828	)		(1,188	)		(3,113	)		(3,380	)		(11,509	)
Real estate taxes and insurance		(1,209	)		(1,042	)		(1,551	)		(1,044	)		(4,846	)
Total property operating income	$	9,369		$	4,596		$	8,651		$	7,801			30,417
Depreciation and amortization expense														(16,091	)
General and administrative														(4,897	)
Acquisition costs														(17	)
Impairment of real estate assets														(2,751	)
Other expenses, net														(9,777	)
Provision for income taxes														(61	)
Loss from discontinued operations														(297	)
Net loss													$	(3,474	)
Total assets(1)(2)	$	497,880		$	331,971		$	458,094		$	366,192		$	1,738,610
Capital expenditures(3)	$	8,052		$	863		$	6,458		$	3,012		$	18,989
	Three Months Ended March 31, 2011
	Maryland			Washington, D.C.			Northern Virginia			Southern Virginia			Consolidated
Number of buildings		71			4			57			55			187
Square feet		3,986,034			633,452			3,512,734			5,361,332			13,493,552
Total revenues	$	12,874		$	3,572		$	10,527		$	12,568		$	39,541
Property operating expense		(3,745	)		(721	)		(2,978	)		(3,102	)		(10,546	)
Real estate taxes and insurance		(1,120	)		(573	)		(1,188	)		(1,017	)		(3,898	)
Total property operating income	$	8,009		$	2,278		$	6,361		$	8,449			25,097
Depreciation and amortization expense														(12,504	)
General and administrative														(4,008	)
Acquisition costs														(2,185	)
Other expenses, net														(7,834	)
Benefit from income taxes														313
Loss from discontinued operations														(2,771	)
Net loss													$	(3,892	)
Total assets(1)(2)	$	482,565		$	265,313		$	367,836		$	340,953		$	1,521,016
Capital expenditures(3)	$	2,799		$	260		$	3,608		$	1,755		$	9,110

⁽¹⁾  Total assets include the Company’s investment in properties that are owned through joint ventures that are not consolidated within the Company’s financial statements. For more information on the Company’s unconsolidated investments, including location within the Company’s reportable segments, see footnote 6, Investment in Affiliates.

⁽²⁾  Corporate assets not allocated to any of our reportable segments totaled $84,473 and $64,349 at March 31, 2012 and 2011, respectively.

⁽³⁾ Capital expenditures for corporate assets not allocated to any of our reportable segments totaled $604 and $688 at March 31, 2012 and 2011, respectively.

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(16) Subsequent Events

On May 10, 2012, the Company and its Bank Debt lenders amended the Company’s unsecured revolving credit facility, unsecured term loan and secured loan to, among other things, revise certain financial and other covenants to provide additional operating flexibility for the Company to execute its business strategy and clarify the treatment of certain covenant compliance-related definitions. In addition, the unsecured revolving credit facility and the unsecured term loan were amended to give the lenders the right, at their option, to record mortgages on substantially all of the Company’s unencumbered properties. The unsecured term loan also was amended to convert the fixed interest rate spread over LIBOR to an interest rate spread that is floating based on the Company’s leverage levels, which will have the effect of initially increasing the pricing of the unsecured term loan by 25 basis points. Pricing can increase by an additional 25 basis points to the extent the Company’s leverage levels increase further or can revert to the original pricing if the Company’s leverage ratio improves. In connection with these amendments, the lenders under those loan agreements waived (i) all financial covenant non-compliance, if any, and any cross-defaults related thereto, that may have existed with respect to periods prior to the date of such amendments and (ii) any claim to increased or additional interest that may have accrued and been owing by the Company as a result of any such default or event of default described in clause (i). Such waivers are effective with respect to such default or event of default, if any, as of the date such default or event of default occurred. The Company paid $1.2 million in financing costs to amend its unsecured revolving credit facility, unsecured term loan and secured term loan, half of which the Company anticipates expensing in the second quarter of 2012.

On May 11, 2012, the Company delivered notices regarding its intention to prepay in full the $37.5 million principal amount outstanding under each of its Series A and Series B Senior Notes, for an aggregate principal amount of $75.0 million, plus accrued interest to the prepayment date and an estimated $10.5 million make-whole amount, in accordance with the optional prepayment provisions governing the Senior Notes. The Company intends to draw on its unsecured revolving credit facility to finance the prepayment, which is expected to occur on or prior to June 11, 2012. As of the date of this filing, the Company has $141.0 million available under its unsecured revolving credit facility. The make-whole payment of $10.5 million and the extinguishment of unamortized deferred financing costs of $0.1 million will be recorded as a loss on early debt extinguishment in the second quarter of 2012, which is expected to be partially offset by a decrease in interest expense as a result of the lower interest rate on the Company’s unsecured credit facility, compared with the interest rate of the Senior Notes.

As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, management identified a material weakness in the Company’s internal control over financial reporting as of December 31, 2011. In response to this material weakness, on March 20, 2012, the Company’s Board of Trustees appointed a special committee of independent trustees to review the facts and circumstances relating to the material weakness determination and the Company’s processes surrounding the monitoring and oversight of compliance with the Company’s financial covenants. The Board of Trustees determined in late April that a more detailed, internal investigation of these matters should be undertaken by the Audit Committee of the Board of Trustees (the “Internal Investigation”), with the assistance of independent outside professionals, which Internal Investigation is ongoing. The Company is unable to predict the ultimate outcome of the investigation, or the timing of its completion. See “Risk Factors—The Audit Committee of the Board of Trustees currently is conducting an internal investigation to review the facts and circumstances relating to management’s identification of a material weakness in our internal control over financial reporting as of December 31, 2011, and the processes surrounding the monitoring and oversight of compliance with our financial covenants. We are unable to predict the ultimate outcome and potential impact of the investigation, or the timing of its completion. In addition, we may be required to incur substantial costs and divert management resources in connection with the internal investigation and any related remedial measures, which could have a material adverse effect on our business, financial condition and results of operations.”

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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 condensed 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.

First Potomac Realty Trust (the “Company”) is a leader in the ownership, management, development and redevelopment of office and industrial properties in the greater Washington, D.C. region. The Company separates its properties into four distinct segments, which it refers to as the Washington, D.C., Maryland, Northern Virginia and Southern Virginia reporting segments. The Company strategically focuses on acquiring and redeveloping properties that it believes can benefit from its intensive property management and seeks to reposition these properties to increase their profitability and value. The Company’s portfolio contains a mix of single-tenant and multi-tenant office and industrial properties as well as business parks. Office properties are single-story and multi-story buildings that are used primarily for office use; business parks contain buildings with office features combined with some industrial property space; and industrial properties generally are used as warehouse, distribution or manufacturing facilities.

The Company conducts its business through First Potomac Realty Investment Limited Partnership, the Company’s operating partnership (the “Operating Partnership”). The Company is the sole general partner of, and, as of March 31, 2012, owned a 94.6% interest in the Operating Partnership. The remaining interests in the Operating Partnership, which are presented as noncontrolling interests in the Operating Partnership in the accompanying unaudited condensed consolidated financial statements, are limited partnership interests, some of which are owned by several of the Company’s executive officers and trustees who contributed properties and other assets to the Company upon its formation, and other unrelated parties.

At March 31, 2012, the Company wholly-owned or had a controlling interest in properties totaling 13.9 million square feet and had a noncontrolling ownership interest in properties totaling an additional 1.0 million square feet through six unconsolidated joint ventures. The Company also owned land that can accommodate approximately 2.4 million square feet of additional development. The Company’s consolidated properties were 83.0% occupied by 610 tenants. The Company does not include square footage that is in development or redevelopment in its occupancy calculation, which totaled 0.5 million square feet at March 31, 2012. The Company derives substantially all of its revenue from leases of space within its properties. As of March 31, 2012, the Company’s largest tenant was the U.S. Government, which along with government contractors, accounted for over 25% of the Company’s total annualized base rent.

The primary source of the Company’s revenue and earnings is rent received from customers under long-term (generally three to ten years) operating leases at its properties, including reimbursements from customers for certain operating costs. Additionally, the Company may generate earnings from the sale of assets either outright or contributed into joint ventures.

The Company’s long-term growth will principally be driven by its ability to:

• maintain and increase occupancy rates and/or increase rental rates at its properties;

• sell assets to third parties at favorable prices or contribute properties to joint ventures; and

• continue to grow its portfolio through acquisition of new properties, potentially through joint ventures.

Executive Summary

For the three months ended March 31, 2012, the Company incurred a net loss of $3.5 million compared with a net loss of $3.9 million during the three months ended March 31, 2011. The Company’s net loss decreased for the three months ended March 31, 2012 compared with the same period in 2011 primarily due to a decrease in acquisition costs. The Company did not acquire any properties during the three months ended March 31, 2012 compared to the acquisition of three properties during the three months ended March 31, 2011, incurring $2.2 million in acquisition costs.

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The Company’s funds from operations (“FFO”) available to common shareholders were $14.4 million, or $0.27 per diluted share, for the three months ended March 31, 2012 compared with FFO of $10.4 million, or $0.21 per diluted share, for the three months ended March 31, 2011. The increase in FFO for the three months ended March 31, 2012 compared with the same period in 2011 is due to an increase in the Company’s net operating income, primarily related to its 2011 acquisitions, which resulted in a larger portfolio in 2012. FFO is a non-GAAP financial measure. For a description of FFO, including why management believes its presentation is useful and a reconciliation of FFO to net loss attributable to First Potomac Realty Trust, see “Funds From Operations.”

Significant Transactions

• Executed 576,000 square feet of leases, generating over 127,000 square feet of positive net absorption;

• Expanded unsecured term loan from $225.0 million to $300.0 million; and

• Raised net proceeds of approximately $44 million through the issuance of 1.8 million additional 7.750% Series A Preferred Shares.

Internal Investigation

As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, management identified a material weakness in the Company’s internal control over financial reporting as of December 31, 2011. In response to this material weakness, on March 20, 2012, the Company’s Board of Trustees appointed a special committee of independent trustees to review the facts and circumstances relating to the material weakness determination and the Company’s processes surrounding the monitoring and oversight of compliance with the Company’s financial covenants. The Board of Trustees determined in late April that a more detailed, internal investigation of these matters should be undertaken by the Audit Committee of the Board of Trustees (the “Internal Investigation”), with the assistance of independent outside professionals, which Internal Investigation is ongoing. The Company is unable to predict the ultimate outcome of the investigation, or the timing of its completion. See “Risk Factors—The Audit Committee of the Board of Trustees currently is conducting an internal investigation to review the facts and circumstances relating to management’s identification of a material weakness in our internal control over financial reporting as of December 31, 2011, and the processes surrounding the monitoring and oversight of compliance with our financial covenants. We are unable to predict the ultimate outcome and potential impact of the investigation, or the timing of its completion. In addition, we may be required to incur substantial costs and divert management resources in connection with the internal investigation and any related remedial measures, which could have a material adverse effect on our business, financial condition and results of operations.”

In light of the ongoing Internal Investigation, it was necessary for the Company to address various matters prior to the filing of this Form 10-Q, including those relating to the Internal Investigation, the execution of various waivers and amendments to certain bank debt agreements discussed below, and the prepayment of the Senior Notes.

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Properties:

The following sets forth certain information for the Company’s consolidated properties by segment as of March 31, 2012 (including properties in development and redevelopment, dollars in thousands):

WASHINGTON, D.C. REGION

Property	Buildings	Sub-Market(1)	Square Feet		Annualized Cash Basis Rent(2)		Leased at March 31, 2012(3)			Occupied at March  31, 2012(3)
Downtown DC-Office
500 First Street, NW	1	Capitol Hill		129,035	$	4,783		100.0	%		100.0	%
840 First Street, NE	1	NoMA		247,146		6,841		100.0	%		100.0	%
1005 First Street, NE(4)	1	NoMA		30,414		2,496		100.0	%		100.0	%
1211 Connecticut Avenue, NW	1	CBD		125,119		3,457		98.2	%		98.2	%
Total	4			531,714		17,577		99.6	%		99.6	%
Redevelopment
440 First Street, NW	1	Capitol Hill		135,000		—		—			—
Joint Venture Properties (unconsolidated)
1750 H Street, NW	1	CBD		111,373		4,038		100.0	%		100.0	%
1200 17th Street, NW (Development)	1	CBD		170,000		N/A		N/A			N/A
	2			281,373		4,038		100.0	%		100.0	%
Grand Total	7			948,087	$	21,615		99.7	%		99.7	%

⁽¹⁾  CBD = Central Business District; NoMA = North of Massachusetts Avenue.

⁽²⁾  Annualized cash basis rent, which is calculated as the contractual rent due under the terms of the lease, without taking into account rent abatements, is reflected on a triple-net equivalent basis, by deducting operating expense reimbursements that are included, along with base rent, in the contractual payments of the Company’s full service leases. The operating expense reimbursements primarily relate to real estate taxes and insurance expenses.

⁽³⁾ Does not include space in development or redevelopment.

⁽⁴⁾  The property was acquired through a consolidated joint venture in which the Company has a 97% controlling economic interest.

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MARYLAND REGION

Property	Buildings	Location	Square Feet		Annualized Cash Basis Rent(1)		Leased at March 31, 2012(2)			Occupied at March  31, 2012(2)
SUBURBAN MD
Business Park
Ammendale Business Park(3)	7	Beltsville		312,736	$	4,259		97.4	%		95.1	%
Gateway 270 West	6	Clarksburg		255,574		3,207		87.7	%		81.9	%
Girard Business Center(4)	7	Gaithersburg		298,009		3,104		89.7	%		86.7	%
Rumsey Center	4	Columbia		134,514		1,090		70.1	%		67.3	%
Snowden Center	5	Columbia		144,726		2,037		94.6	%		89.5	%
Total Business Park	29			1,145,559		13,697		89.7	%		86.0	%
Office
Worman’s Mill Court	1	Frederick		40,051		367		87.7	%		87.7	%
Goldenrod Lane	1	Germantown		23,518		56		25.9	%		25.9	%
Annapolis Business Center	2	Annapolis		101,898		1,545		98.8	%		98.8	%
Campus at Metro Park North	4	Rockville		190,720		3,488		93.3	%		78.4	%
Cloverleaf Center	4	Germantown		173,655		2,732		86.1	%		86.1	%
Gateway Center	2	Gaithersburg		44,249		635		92.4	%		88.7	%
Hillside Center	2	Columbia		86,189		1,376		100.0	%		100.0	%
Merrill Lynch Building	1	Columbia		136,485		1,546		75.4	%		73.5	%
Patrick Center	1	Frederick		66,469		953		77.8	%		77.8	%
Redland Corporate Center	2	Rockville		348,469		6,664		88.0	%		78.7	%
West Park	1	Frederick		28,566		356		92.9	%		76.6	%
Woodlands Business Center(5)	1	Largo		37,887		205		50.2	%		50.2	%
Total Office	22			1,278,156		19,923		86.3	%		80.9	%
Industrial
Frederick Industrial Park(6)	3	Frederick		550,490		4,050		91.5	%		85.7	%
Glenn Dale Business Center	1	Glenn Dale		315,962		1,490		86.9	%		86.9	%
Total Industrial	4			866,452		5,540		89.8	%		86.2	%
Total Suburban Maryland	55			3,290,167		39,160		88.4	%		84.1	%
BALTIMORE
Business Park
Owings Mills Business Park(7)	6	Owings Mills		219,284		1,644		58.8	%		58.8	%
Triangle Business Center	4	Baltimore		74,182		488		63.2	%		63.2	%
Total Business Park	10			293,466		2,132		59.9	%		59.9	%
Industrial
Mercedes Center	1	Hanover		294,673		1,061		73.1	%		73.1	%
Total Baltimore	11			588,139		3,193		66.5	%		66.5	%
Total Consolidated	66			3,878,306		42,353		85.1	%		81.4	%
Joint Venture Properties (Unconsolidated)
RiversPark I and II	6	Columbia		307,567		3,615		87.5	%		87.5	%
Aviation Business Park	3	Glen Burnie		120,662		568		32.4	%		26.3	%
Total Joint Ventures	9			428,229		4,183		72.0	%		70.3	%
Grand Total	75			4,306,535	$	46,536		83.8	%		80.3	%

⁽¹⁾  Annualized cash basis rent, which is calculated as the contractual rent due under the terms of the lease, without taking into account rent abatements, is reflected on a triple-net equivalent basis, by deducting operating expense reimbursements that are included, along with base rent, in the contractual payments of the Company’s full service leases. The operating expense reimbursements primarily relate to real estate taxes and insurance expenses.

⁽²⁾  Does not include space in development or redevelopment.

⁽³⁾  Ammendale Business Park consists of the following properties: Ammendale Commerce Center and Indian Creek Court.

⁽⁴⁾ Girard Business Center consists of the following properties: Girard Business Center and Girard Place.

⁽⁵⁾ The property was sold in May 2012 for net proceeds of $2.9 million.

⁽⁶⁾ Frederick Industrial Park consists of the following properties: 4451 Georgia Pacific Boulevard, 4612 Navistar Drive, and 6900 English Muffin Way.

⁽⁷⁾ Owings Mills Business Park consists of the following properties: Owings Mills Business Center and Owings Mills Commerce Center.

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NORTHERN VIRGINIA REGION

Property	Buildings	Location	Square Feet		Annualized Cash Basis Rent(1)		Leased at March 31, 2012(2)			Occupied at March 31, 2012(2)
Business Park
Corporate Campus at Ashburn Center	3	Ashburn		194,184	$	2,795		100.0	%		100.0	%
Gateway Centre Manassas	3	Manassas		102,388		533		51.1	%		51.1	%
Linden Business Center	3	Manassas		109,724		763		62.4	%		62.4	%
Prosperity Business Center	1	Merrifield		71,343		881		100.0	%		77.4	%
Sterling Park Business Center(3)	7	Sterling		446,401		3,755		81.0	%		81.0	%
Total Business Park	17			924,040		8,727		80.9	%		79.2	%
Office
Atlantic Corporate Park	2	Sterling		221,372		1,058		29.1	%		29.1	%
Cedar Hill	2	Tysons Corner		102,632		2,301		100.0	%		100.0	%
Herndon Corporate Center	4	Herndon		127,918		1,721		89.3	%		89.3	%
Lafayette Business Center(4)	6	Chantilly		254,296		3,518		85.0	%		85.0	%
One Fair Oaks	1	Fairfax		214,214		5,020		100.0	%		100.0	%
Reston Business Campus	4	Reston		83,210		731		60.8	%		60.8	%
Three Flint Hill	1	Oakton		48,787		903		100.0	%		100.0	%
Van Buren Office Park	4	Herndon		70,494		739		73.6	%		73.6	%
Windsor at Battlefield	2	Manassas		155,511		1,984		90.3	%		90.3	%
Total Office	26			1,278,434		17,975		78.5	%		78.5	%
Industrial
13129 Airpark Road	1	Culpeper		149,888		630		75.9	%		75.9	%
15395 John Marshall Highway	1	Haymarket		236,082		3,369		100.0	%		100.0	%
Interstate Plaza	1	Alexandria		109,029		1,122		98.9	%		98.9	%
Newington Business Park Center	7	Lorton		254,272		2,476		87.2	%		85.8	%
Plaza 500	2	Alexandria		505,074		5,071		77.8	%		77.8	%
Total Industrial	12			1,254,345		12,668		85.5	%		85.2	%
Total Consolidated	55			3,456,819		39,370		81,7	%		81.1	%
Total Development / Redevelopment(5)	1	Various(5)		208,691		—		—			—
Joint Venture Property (Unconsolidated)
Metro Place III & IV	2	Merrifield		325,328		5,797		100.0	%		100.0	%
Grand Total	58			3,990,838	$	45,167		83.3	%		82.7	%

⁽¹⁾  Annualized cash basis rent, which is calculated as the contractual rent due under the terms of the lease, without taking into account rent abatements, is reflected on a triple-net equivalent basis, by deducting operating expense reimbursements that are included, along with base rent, in the contractual payments of the Company’s full service leases. The operating expense reimbursements primarily relate to real estate taxes and insurance expenses.

⁽²⁾  Does not include space in development or redevelopment.

⁽³⁾  Sterling Park Business Center consists of the following properties: 403/405 Glenn Drive, Davis Drive, and Sterling Park Business Center.

⁽⁴⁾  Lafayette Business Center consists of the following properties: Enterprise Center and Tech Court.

⁽⁵⁾  Includes development at Sterling Park Business Center and redevelopment at Three Flint Hill, Sterling Park and Van Buren Office Park.

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SOUTHERN VIRGINIA REGION

Property	Buildings	Location	Square Feet		Annualized Cash Basis Rent(1)		Leased at March 31, 2012(2)			Occupied at March  31, 2012(2)
RICHMOND
Business Park
Chesterfield Business Center(3)	11	Richmond		320,261	$	1,775		86.3	%		82.8	%
Hanover Business Center	4	Ashland		183,643		786		67.1	%		67.1	%
Park Central	3	Richmond		204,762		1,709		77.9	%		77.9	%
Virginia Center Technology Park	1	Glen Allen		118,579		1,237		85.2	%		74.9	%
Total Business Park	19			827,245		5,507		79.8	%		77.0	%
Industrial
Northridge	2	Ashland		139,346		905		100.0	%		83.5	%
River’s Bend Center(4)	6	Chester		795,080		4,354		95.6	%		95.6	%
Total Industrial	8			934,426		5,259		96.3	%		93.8	%
Total Richmond	27			1,761,671		10,766		88.5	%		85.9	%
NORFOLK
Business Park
Crossways Commerce Center(5)	9	Chesapeake		1,087,250		10,269		93.1	%		91.6	%
Battlefield Corporate Center	1	Chesapeake		96,720		780		100.0	%		100.0	%
Greenbrier Business Park(6)	4	Chesapeake		411,815		3,669		79.2	%		78.0	%
Hampton Roads Center(7)	3	Hampton		585,205		2,609		60.5	%		60.5	%
Norfolk Commerce Park(8)	3	Norfolk		261,886		1,962		74.1	%		68.9	%
Total Business Park	20			2,442,876		19,289		81.2	%		79.8	%
Office
Greenbrier Towers	2	Chesapeake		172,353		2,002		92.9	%		87.6	%
Total Office	2			172,353		2,002		92.9	%		87.6	%
Industrial
Cavalier Industrial Park	4	Chesapeake		394,308		1,520		88.6	%		88.6	%
Diamond Hill Distribution Center	4	Chesapeake		712,683		2,572		88.5	%		88.5	%
Total Industrial	8			1,106,991		4,092		88.5	%		88.5	%
Total Norfolk	30			3,722,220		25,383		83.9	%		82.8	%
Grand Total	57			5,483,891	$	36,149		85.4	%		83.8	%

⁽¹⁾  Annualized cash basis rent, which is calculated as the contractual rent due under the terms of the lease, without taking into account rent abatements, is reflected on a triple-net equivalent basis, by deducting operating expense reimbursements that are included, along with base rent, in the contractual payments of the Company’s full service leases. The operating expense reimbursements primarily relate to real estate taxes and insurance expenses.

⁽²⁾  Does not include space in development or redevelopment.

⁽³⁾  Chesterfield Business Center consists of the following properties: Airpark Business Center, Chesterfield Business Center, and Pine Glen.

⁽⁴⁾  River’s Bend Center consists of the following properties: River’s Bend Center and River’s Bend Center II.

⁽⁵⁾  Crossways Commerce Center consists of the following properties: Coast Guard Building, Crossways Commerce Center I, Crossways Commerce Center II, 1434 Crossways Boulevard, and 1408 Stephanie Way

⁽⁶⁾  Greenbrier Business Park consists of the following properties: Greenbrier Technology Center I, Greenbrier Technology Center II, and Greenbrier Circle Corporate Center.

⁽⁷⁾  Hampton Roads Center consists of the following properties: 1000 Lucas Way and Enterprise Parkway.

⁽⁸⁾  Norfolk Commerce Park consists of the following properties: Norfolk Business Center, Norfolk Commerce Park II, and Gateway II.

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Development and Redevelopment Activity

The Company constructs office buildings, business parks and/or industrial buildings on a build-to-suit basis or with the intent to lease upon completion of construction. Also, the Company owns developable land that can accommodate 2.4 million square feet of additional building space. Below is a summary of the approximate building square footage that can be developed on the Company’s developable land and the Company’s current development and redevelopment activity as of March 31, 2012 (amounts in thousands):

Reporting Segment	Developable Square Feet		Square Feet Under Development		Cost to Date of Development Activities		Square Feet Under Redevelopment		Cost to Date of Redevelopment Activities(1)
Washington, D.C.		713		—	$	—		135	$	2,755
Maryland		250		—		—		—		—
Northern Virginia		568		—		—		209		12,044
Southern Virginia		841		166		582		—		—
		2,372		166	$	582		344	$	14,799

⁽¹⁾  Costs to date of redevelopment activities excludes tenant improvements and leasing commissions.

At March 31, 2012, the Company had completed development and redevelopment activities that have yet to be placed in service on 209,000 square feet, at a cost of $12.0 million, in its Northern Virginia reporting segment. The majority of the costs on the construction projects to be placed in service relate to redevelopment activities at Three Flint Hill, located in the Company’s Northern Virginia reporting segment, which were substantially completed in the third quarter of 2011 at a cost of approximately $10.4 million. The Company will place completed construction activities in service upon the shorter of a tenant taking occupancy or twelve months from substantial completion.

During the first quarter of 2012, the Company completed and placed in-service development and redevelopment efforts totaling 93,000 square feet at Sterling Park Business Center and Three Flint Hill, at a cost of $7.2 million, in its Northern Virginia reporting segment.

Lease Expirations

Approximately 6.4% of the Company’s annualized base rent, excluding month-to-month leases, is scheduled to expire during the remainder of 2012, with 9.4% expiring through the twelve months ending March 31, 2013. Current tenants may not renew their leases upon the expiration of their terms. If non-renewals or terminations occur, the Company may not be able to locate qualified replacement tenants and, as a result, could lose a significant source of revenue while remaining responsible for the payment of its financial obligations. Moreover, the terms of a renewal or new lease, including the amount of rent, may be less favorable to the Company than the current lease terms, or the Company may be forced to provide tenant improvements at its expense or provide other concessions or additional services to maintain or attract tenants. We continually strive to increase our portfolio occupancy, and the amount of vacant space in our portfolio at any given time may impact our willingness to reduce rental rates or provide greater concessions to retain existing tenants and attract new tenants. The Company’s management continually monitors its portfolio on a regional and per property basis to assess market trends, including vacancy, comparable deals and transactions, and other business and economic factors that may influence our leasing decisions. During the three months ended March 31, 2012, the Company had a 52% retention rate, based on square footage, due to several leases that expired at December 31, 2011 as a result of tenants not renewing, which were included in the Company’s calculation of its first quarter retention rate. The Company anticipates that its retention rate will increase during the remainder of 2012 to levels more commensurate with its historical experience of approximately 75%. After reflecting all the renewal leases on a triple-net basis to allow for comparability, the weighted average rental rate on the Company’s renewed leases decreased 3.0% compared with the expiring leases. During the first quarter of 2012, the Company executed new leases for 0.3 million square feet, of which substantially all of the leases (based on square footage) contained rent escalations.

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The following table sets forth a summary schedule of the lease expirations at the Company’s consolidated properties for leases in place as of March 31, 2012 (dollars in thousands):

Year of Lease   Expiration	Number of Leases Expiring		Square Feet		% of Leased Square Feet			Annualized Cash Basis Rent(1)		% of Annualized Cash Basis Rent			Average Base Rent per Square Foot(1)(2)
MTM		9		82,078		0.7	%	$	726		0.5	%	$	8.85
2012		108		750,197		6.6	%		8,630		6.4	%		11.50
2013		137		1,546,278		13.6	%		18,692		13.8	%		10.68
2014		135		1,553,254		13.7	%		15,518		11.5	%		9.99
2015		99		1,017,618		9.1	%		10,262		7.6	%		10.08
2016		93		1,852,946		16.4	%		23,895		17.6	%		12.90
2017		67		1,126,456		9.9	%		13,126		9.7	%		11.65
2018		32		889,506		7.8	%		8,363		6.2	%		9.40
2019		52		559,301		4.9	%		8,105		6.0	%		14.49
2020		22		567,304		5.0	%		8,175		6.0	%		14.41
2021		20		494,959		4.4	%		5,007		3.7	%		10.11
Thereafter		23		897,748		7.9	%		14,950		11.0	%		16.65
Total / Weighted Average		797		11,337,645		100.0	%	$	135,449		100.0	%	$	11.76

⁽¹⁾  Annualized Cash Basis Rent, which is calculated as the contractual rent due under the terms of the lease, without taking into account rent abatements, is reflected on a triple-net equivalent basis, by deducting operating expense reimbursements that are included, along with base rent, in the contractual payments of the Company’s full service leases. The operating expense reimbursements primarily relate to real estate taxes and insurance expenses.

⁽²⁾  Represents Annualized Cash Basis Rent divided by the square footage of the space.

Critical Accounting Policies and Estimates

The Company’s condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) that require the Company to make certain estimates and assumptions. Critical accounting policies and estimates are those that require subjective or complex judgments and are the policies and estimates that the Company deems most important to the portrayal of its financial condition, results of operations and cash flows. It is possible that the use of different reasonable estimates or assumptions in making these judgments could result in materially different amounts being reported in its condensed consolidated financial statements. The Company’s critical accounting policies and estimates relate to revenue recognition, including evaluation of the collectability of accounts and notes receivable, impairment of long-lived assets, purchase accounting for acquisitions of real estate, derivative instruments and share-based compensation.

The following is a summary of certain aspects of these critical accounting policies and estimates.

Revenue Recognition

The Company generates substantially all of its revenue from leases on its office and industrial properties as well as business parks. The Company recognizes rental revenue on a straight-line basis over the term of its leases, which includes fixed-rate renewal periods leased at below market rates at acquisition or inception. Accrued straight-line rents represent the difference between rental revenue recognized on a straight-line basis over the term of the respective lease agreements and the rental payments contractually due for leases that contain abatement or fixed periodic increases. The Company considers current information, credit quality, historical trends, economic conditions and other events regarding the tenants’ ability to pay their obligations in determining if amounts due from tenants, including accrued straight-line rents, are ultimately collectible. The uncollectible portion of the amounts due from tenants, including accrued straight-line rents, is charged to property operating expense in the period in which the determination is made.

37

Tenant leases generally contain provisions under which the tenants reimburse the Company for a portion of property operating expenses and real estate taxes incurred by the Company. Such reimbursements are recognized in the period in which the expenses are incurred. The Company records a provision for losses on estimated uncollectible accounts receivable based on its analysis of risk of loss on specific accounts. Lease termination fees are recognized on the date of termination when the related lease or portion thereof is cancelled, the collectability of the fee is reasonably assured and the Company has possession of the terminated space.

Accounts and Notes Receivable

The Company must make estimates of the collectability of its accounts and notes receivable related to minimum rent, deferred rent, tenant reimbursements, lease termination fees and interest and other income. The Company specifically analyzes accounts receivable and historical bad debt experience, tenant concentrations, tenant creditworthiness and current economic trends when evaluating the adequacy of its allowance for doubtful accounts receivable. These estimates have a direct impact on the Company’s net income as a higher required allowance for doubtful accounts receivable will result in lower net income. The uncollectible portion of the amounts due from tenants, including straight-line rents, is charged to property operating expense in the period in which the determination is made. The Company considers similar criteria in assessing impairment associated with outstanding loans or notes receivable and whether any allowance for anticipated credit loss is appropriate.

Investments in Real Estate and Real Estate Entities

Investments in real estate and real estate entities are initially recorded at fair value if acquired in a business combination or carried at initial cost when constructed or acquired in an asset purchase, less accumulated depreciation and, when appropriate, impairment losses. Improvements and replacements are capitalized at cost when they extend the useful life, increase capacity or improve the efficiency of the asset. Repairs and maintenance are charged to expense when incurred. Depreciation and amortization are recorded on a straight-line basis over the estimated useful lives of the assets. The estimated useful lives of the Company’s assets, by class, are as follows:

Buildings	39 years
Building improvements	5 to 20 years
Furniture, fixtures and equipment	5 to 15 years
Lease related intangible assets	The term of the related lease
Tenant improvements	Shorter of the useful life of the asset or the term of the related lease

The Company regularly reviews market conditions for possible impairment of a property’s carrying value. When circumstances such as adverse market conditions, changes in management’s intended holding period or potential sale to a third party indicate a possible impairment of the fair value of a property, an impairment analysis is performed. The Company assesses potential impairments based on an estimate of the future undiscounted cash flows (excluding interest charges) expected to result from the property’s use and eventual disposition. This estimate is based on projections of future revenues, expenses, capital improvement costs, expected holding periods and capitalization rates. These cash flows consider factors such as expected market trends and leasing prospects, as well as the effects of leasing demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a real estate investment based on forecasted undiscounted cash flows, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property less anticipated selling costs. The Company is required to make estimates as to whether there are impairments in the carrying values of its investments in real estate. Further, the Company will record an impairment loss if it expects to dispose of a property, in the near term, at a price below carrying value. In such an event, the Company will record an impairment loss based on the difference between a property’s carrying value and its projected sales price, less any estimated costs to sell.

The Company will classify a building as held-for-sale in the period in which it has made the decision to dispose of the building, the Company’s Board of Trustees or a designated delegate has approved the sale, there is a high likelihood a binding agreement to purchase the property will be signed under which the buyer will be required to commit a significant amount of nonrefundable cash and no significant financing contingencies will exist that could cause the transaction not to be completed in a timely manner. If these criteria are met, the Company will cease depreciation of the asset. The Company will classify any impairment loss, together with the building’s operating results, as discontinued operations in its consolidated statements of operations for all periods presented and classify the assets and related liabilities as held-for-sale in its consolidated balance sheets in the period the held-for-sale criteria are met. Interest expense is reclassified to discontinued operations only to the extent the held-for-sale property is secured by specific mortgage debt and the mortgage debt will not be assigned to another property owned by the Company after the disposition.

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The Company recognizes the fair value, if sufficient information exists to reasonably estimate the fair value, of any liability for conditional asset retirement obligations when incurred, which is generally upon acquisition, construction, development or redevelopment and/or through the normal operation of the asset.

The Company capitalizes interest costs incurred on qualifying expenditures for real estate assets under development or redevelopment, which include its investment in assets owned through unconsolidated joint ventures that are under development or redevelopment, while being readied for their intended use in accordance with accounting requirements regarding capitalization of interest. The Company will capitalize interest when qualifying expenditures for the asset have been made, activities necessary to get the asset ready for its intended use are in progress and interest costs are being incurred. Capitalized interest also includes interest associated with expenditures incurred to acquire developable land while development activities are in progress and interest on the direct compensation costs of the Company’s construction personnel who manage the development and redevelopment projects, but only to the extent the employee’s time can be allocated to a project. Any portion of construction management costs not directly attributable to a specific project are recognized as general and administrative expense in the period incurred. The Company does not capitalize any other general administrative costs such as office supplies, office rent expense or an overhead allocation to its development or redevelopment projects. Capitalized compensation costs were immaterial for the three months ended March 31, 2012 and 2011. Capitalization of interest will end when the asset is substantially complete and ready for its intended use, but no later than one year from completion of major construction activity, if the property is not occupied. The Company will also place redevelopment and development assets in service at this time and commence depreciation upon the substantial completion of tenant improvements and the recognition of revenue. Capitalized interest is depreciated over the useful life of the underlying assets, commencing when those assets are placed into service.

Purchase Accounting

Acquisitions of rental property, including any associated intangible assets, are measured at fair value at the date of acquisition. Any liabilities assumed or incurred are recorded at their fair value at the time of acquisition. The fair value of the acquired property is allocated between land and building (on an as-if vacant basis) based on management’s estimate of the fair value of those components for each type of property and to tenant improvements based on the depreciated replacement cost of the tenant improvements, which approximates their fair value. The fair value of the in-place leases is recorded as follows:

• the fair value of leases in-place on the date of acquisition is based on absorption costs for the estimated lease-up period in which vacancy and foregone revenue are avoided due to the presence of the acquired leases;

• the fair 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 assumed lease and the estimated market lease rates for the corresponding spaces over the remaining non-cancelable terms of the related leases, which range from one to fifteen years; and

• the fair value of intangible tenant or customer relationships.

The Company’s determination of these fair values requires it to estimate market rents for each of the leases and make certain other assumptions. These estimates and assumptions affect the rental revenue, and depreciation and amortization expense recognized for these leases and associated intangible assets and liabilities.

Derivative Instruments

In the normal course of business, the Company is exposed to the effect of interest rate changes. The Company may enter into derivative agreements to mitigate exposure to unexpected changes in interest rates and may use interest rate protection or cap agreements to reduce the impact of interest rate changes. The Company does not use derivatives for trading or speculative purposes and intends to enter into derivative agreements only with counterparties that it believes have a strong credit rating to mitigate the risk of counterparty default or insolvency.

The Company may designate a derivative as either a hedge of the cash flows from a debt instrument or anticipated transaction (cash flow hedge) or a hedge of the fair value of a debt instrument (fair value hedge). All derivatives are recognized as assets or liabilities at fair value. For effective hedging relationships, the change in the fair value of the assets or liabilities is recorded within equity (cash flow hedge) or through earnings (fair value hedge). Ineffective portions of derivative transactions will result in changes in fair value recognized in earnings. For a cash flow hedge, the Company records its proportionate share of unrealized gains or losses on its derivative instruments associated with its unconsolidated joint ventures within equity and “Investment in affiliates.” The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting any applicable credit enhancements, such as collateral postings, thresholds, mutual inputs and guarantees.

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Share-Based Compensation

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. For options awards, the Company uses a Black-Scholes option-pricing model. Expected volatility is based on an assessment of the Company’s realized volatility over the preceding period that is equivalent to the award’s expected life, which in management’s opinion, gives an accurate indication of future volatility. The expected term represents the period of time the options are anticipated to remain outstanding as well as the Company’s historical experience for groupings of employees that have similar behavior and considered separately for valuation purposes. For non-vested share awards that vest over a predetermined time period, the Company uses the outstanding share price at the date of issuance to fair value the awards. For non-vested shares awards that vest based on performance conditions, the Company uses a Monte Carlo simulation (risk-neutral approach) to determine the value and derived service period of each tranche. The expense associated with the share-based awards will be recognized over the period during which an employee is required to provide services in exchange for the award – the requisite service period (usually the vesting period). The fair value for all share-based payment transactions are recognized as a component of income or loss from continuing operations.

Results of Operations

Comparison of the Three Months Ended March 31, 2012 with the Three Months Ended March 31, 2011

During 2011, the Company acquired the following consolidated properties: Cedar Hill; Merrill Lynch Building; 840 First Street, NE; One Fair Oaks; Greenbrier Towers; 1005 First Street, NE; and Hillside Center for an aggregate purchase cost of $268.6 million. Collectively, the properties are referred to as the “Acquired Properties.”

As of March 31, 2012, the Company had not acquired any properties in 2012.

The term “Existing Portfolio” refers to all consolidated properties owned by the Company for the entirety of the periods presented.

For discussion of the operating results of the Company’s reporting segments, the terms “Washington, D.C.”, “Maryland”, “Northern Virginia” and “Southern Virginia” will be used to describe the respective reporting segments.

Total Revenues

Total revenues are summarized as follows:

	Three Months Ended March 31,						Percent Change
(dollars in thousands)	2012		2011		Increase
Rental	$	37,573	$	31,639	$	5,934		19	%
Tenant reimbursements and other	$	9,199	$	7,902	$	1,297		16	%

Rental Revenue

Rental revenue is comprised of contractual rent, the impact of straight-line revenue and the amortization of deferred market rent assets and liabilities representing above and below market rate leases at acquisition. Rental revenue increased $5.9 million for the three months ended March 31, 2012 compared with the same period in 2011 due primarily to the Acquired Properties contributing $5.4 million of additional rental revenue during the three months ended March 31, 2012 compared with 2011. The Existing Portfolio contributed additional rental revenue of $0.5 million for the three months ended March 31, 2012 compared with the same period in 2011 due to an increase in rental rates associated with new leases. The Company expects aggregate rental revenues to increase throughout 2012 due to a full-year of revenues from the properties acquired in 2011. The increase in rental revenue for the three months ended March 31, 2012 compared with 2011 includes $1.2 million for Maryland, $2.2 million for Washington, D.C., $2.3 million for Northern Virginia and $0.2 million for Southern Virginia.

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Tenant Reimbursements and Other Revenues

Tenant reimbursements and other revenues include operating and common area maintenance costs reimbursed by the Company’s tenants as well as other incidental revenues such as lease termination payments, parking revenue and joint venture and construction related management fees. Tenant reimbursements and other revenues increased $1.3 million for the three months ended March 31, 2012 compared with the same period in 2011. The increase is due to the Acquired Properties, which contributed $2.0 million of additional tenant reimbursements and other revenues for the three months ended March 31, 2012 compared with 2011. For the Existing Portfolio, tenant reimbursements and other revenues decreased $0.7 million for the three months ended March 31, 2012 compared with 2011 due to a reduction in recoverable operating expenses, primarily relating to a decrease in snow and ice removal costs. The Company expects tenant reimbursements and other revenues to increase throughout 2012 due to a full-year of recoverable operating expenses from properties acquired in 2011. The increase in tenant reimbursements and other revenues for the three months ended March 31, 2012 compared with the same period in 2011 includes $0.3 million for Maryland, $1.0 million for Washington, D.C. and $0.5 million for Northern Virginia. For Southern Virginia, tenant reimbursements and other revenues decreased $0.5 million for the three months ended March 31, 2012 compared with 2011.

Total Expenses

Property Operating Expenses

Property operating expenses are summarized as follows:

	Three Months Ended March 31,						Percent Change
(dollars in thousands)	2012		2011		Increase
Property operating	$	11,509	$	10,546	$	963		9	%
Real estate taxes and insurance	$	4,846	$	3,898	$	948		24	%

Property operating expenses increased $1.0 million for the three months ended March 31, 2012 compared with the same period in 2011. The increase is due to the Acquired Properties, which contributed $1.8 million of additional property operating expenses for the three months ended March 31, 2012 compared with 2011. For the Existing Portfolio, property operating expenses decreased $0.8 million for the three months ended March 31, 2012 compared with 2011 primarily due to a decline in snow and ice removal costs. The Company expects property operating expenses to increase throughout 2012 due to a full-year of property operating expenses from properties acquired in 2011. The increase in property operating expenses for the three months ended March 31, 2012 compared with the same period in 2011 includes $0.1 million for Maryland, $0.5 million for Washington, D.C., $0.1 million for Northern Virginia and $0.3 million for Southern Virginia.

Real estate taxes and insurance expense increased $0.9 million for the three months ended March 31, 2012 compared with the same period in 2011. The Acquired Properties contributed an increase in real estate taxes and insurance expense of $0.7 million for the three months ended March 31, 2012 compared with 2011. For the Existing Portfolio, real estate taxes and insurance expense increased $0.2 million for the three months ended March 31, 2012 compared with the same period in 2011 due to higher real estate tax assessments. The increase in real estate taxes and insurance expense for the three months ended March 31, 2012 compared with the same period in 2011 includes $0.1 million for Maryland, $0.5 million for Washington, D.C. and $0.3 million for Northern Virginia. Southern Virginia experienced a slight decrease in real estate taxes and insurance expense for the three months ended March 31, 2012 compared with 2011.

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Other Operating Expenses

General and administrative expenses are summarized as follows:

	Three Months Ended March 31,						Percent Change
(dollars in thousands)	2012		2011		Increase
	$	4,897	$	4,008	$	889		22	%

General and administrative expenses increased $0.9 million for the three months ended March 31, 2012 compared with the same period in 2011 primarily due to an increase in employee compensation costs as the Company had 171 employees at March 31, 2012 compared with 142 employees at March 31, 2011. The increase in general and administrative expenses for the periods presented was also attributed to an increase in professional fees and software expense as the Company implemented its new enterprise accounting software in late 2011. The Company anticipates general and administration expenses will increase throughout 2012 as a result of a larger workforce, the amortization of the costs associated with its new enterprise accounting software, increased legal and consulting fees related to the Internal Investigation and higher office rent as the Company is expanding its corporate offices in the second quarter of 2012.

Acquisition costs are summarized as follows:

	Three Months Ended March 31,						Percent Change
(dollars in thousands)	2012		2011		Decrease
	$	17	$	2,185	$	2,168		99	%

During the first quarter of 2011, the Company incurred acquisition costs of $2.2 million associated with the acquisitions of Cedar Hill, Merrill Lynch Building and 840 First Street, NE. The Company did not acquire any properties during the first quarter of 2012.

Depreciation and amortization expense is summarized as follows:

	Three Months Ended March 31,						Percent Change
(amounts in thousands)	2012		2011		Increase
	$	16,091	$	12,504	$	3,587		29	%

Depreciation and amortization expense includes depreciation of real estate assets and amortization of intangible assets and leasing commissions. Depreciation and amortization expense increased $3.6 million for the three months ended March 31, 2012 compared with the same period in 2011 primarily due to the Acquired Properties, which contributed additional depreciation and amortization expense of $3.1 million for the three months ended March 31, 2012 compared with the same period in 2011 as certain intangible assets acquired in 2011 had short useful lives. Depreciation and amortization expense attributable to the Existing Portfolio increased $0.5 million for the three months ended March 31, 2012 compared with 2011 primarily due to the disposal of assets related to tenants that vacated during the first quarter of 2012 prior to reaching the full term of their lease. The Company anticipates depreciation and amortization expense will increase throughout 2012 due to recognizing a full-year of depreciation and amortization expense for properties acquired in 2011.

Impairment of real estate assets are summarized as follows:

	Three Months Ended March 31,						Percent Change
(dollars in thousands)	2012		2011		Increase
	$	2,751	$	—	$	2,751		—

42

During the first quarter of 2012, the Company reduced its anticipated holding period for its Owings Mills Business Park property, which is located in its Maryland reporting segment. Based on an analysis of the property’s cash flows over the Company’s reduced holding period for the property, the Company recorded an impairment charge of $2.8 million in the first quarter of 2012, which is reflected within continuing operations in the Company’s consolidated statements of operations. The Company recorded impairment charges related to disposed properties, which are reflected within discontinued operations in the Company’s consolidated statements of operations, of $0.2 million and $2.7 million for the three months ended March 31, 2012 and 2011, respectively.

Other Expenses, net

Interest expense is summarized as follows:

	Three Months Ended March 31,						Percent Change
(dollars in thousands)	2012		2011		Increase
	$	11,239	$	8,626	$	2,613		30	%

The Company seeks to employ cost-effective financing methods to fund its acquisitions, development and redevelopment projects and to refinance its existing debt to provide greater balance sheet flexibility or to take advantage of lower interest rates. The methods used to fund the Company’s activities impact the period-over-period comparisons of interest expense.

Interest expense increased $2.6 million for the three months ended March 31, 2012 compared with the same period in 2011. At March 31, 2012, the Company had $910.2 million of debt outstanding with a weighted average interest rate of 4.9% compared with $712.6 million of debt outstanding with a weighted average interest rate of 5.3% at March 31, 2011.

The increase in the Company’s interest expense is primarily attributable to an increase in interest expense related to its unsecured term loan. In July 2011, the Company entered into a three-tranche $175.0 million unsecured term loan, which was subsequently increased to $225.0 million in December 2011 and further increased to $300.0 million in February 2012. The Company used the funds received in 2011 and the first quarter of 2012 to pay down $239.0 million of the outstanding balance on its unsecured revolving credit facility, to repay a $50.0 million secured term loan and for other general corporate purposes. The unsecured term loan contributed additional interest expense of $1.8 million for the three months ended March 31, 2012 compared with the same period in 2011. The repayment of the $50.0 million secured term loan resulted in a $0.5 million reduction in interest expense for the three months ended March 31, 2012 compared with 2011. The increase in the Company’s interest expense is also attributable to an increase in mortgage interest expense, which increased $1.4 million for the three months ended March 31, 2012 compared with the same period in 2011 as the Company assumed mortgage debt with a total fair value of $153.5 million in conjunction with its 2011 property acquisitions, partially offset by the repayment a $21.6 million mortgage loan encumbering Campus at Metro Park North in the first quarter of 2012 and other mortgage debt repayments that occurred subsequent to March 31, 2011.

During the second quarter of 2011, the Company amended and restated its unsecured revolving credit facility, resulting in a lower applicable interest rate, which partially offset the higher average outstanding balance. For the three months ended March 31, 2012, the Company’s weighted average borrowings outstanding on its unsecured revolving credit facility was $161.0 million with a weighted average interest rate of 2.8% compared with weighted average borrowings of $114.6 million with a weighted average interest rate of 3.3% for the same period in 2011. As a result, interest expense relating to the unsecured revolving credit facility increased $0.2 million for the three months ended March 31, 2012 compared with the same period in 2011.

The increase in interest expense for the three months ended March 31, 2012 compared with the same period in 2011 was partially offset by a decrease of $0.4 million in interest expense associated with the Company’s Exchangeable Senior Notes as the remaining balance of $30.4 million was repaid in December 2011. In August 2011, the Company repaid a $20.0 million secured term loan and, in January 2012, made a $10 million principal payment on a secured term loan with a draw under its unsecured revolving credit facility, which resulted in a decrease in interest expense of $0.2 million for the three months ended March 31, 2012 compared with 2011. Also, the Company experienced an increase in capitalized interest, as a result of an increase in construction activities, as it recorded additional capitalized interest of $0.4 million for the three months ended March 31, 2012 compared with the same period in 2011.

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The Company uses derivative financial instruments to manage exposure to interest rate fluctuations on its variable rate debt. At March 31, 2012, the Company had fixed LIBOR on $275.0 million of its variable rate debt through ten interest rate swap agreements compared with it fixing LIBOR on $50.0 million of its variable rate debt through one interest rate swap at March 31, 2011. As a result, interest expense related to the interest rate swap agreements increased $0.7 million for the three months ended March 31, 2012 compared with the same period in 2011.

Interest and other income are summarized as follows:

	Three Months Ended March 31,						Percent Change
(dollars in thousands)	2012		2011		Increase
	$	1,508	$	824	$	684		83	%

In December 2010, the Company provided a $25.0 million subordinated loan to the owners of 950 F Street, NW, a 287,000 square-foot office building in Washington, D.C. The loan has a fixed interest rate of 12.5%. In April 2011, the Company provided a $30.0 million subordinated loan to the owners of America’s Square, a 461,000 square foot, office complex in Washington, D.C. The loan has a fixed interest rate of 9.0%. The Company recorded interest income related to these loans of $1.5 million and $0.8 million during the three months ended March 31, 2012 and 2011, respectively.

Equity in losses of affiliates is summarized as follows:

	Three Months Ended March 31,						Percent Change
(dollars in thousands)	2012		2011		Increase
	$	46	$	32	$	14		44	%

Equity in losses of affiliates reflects the Company’s ownership interest in the operating results of the properties, in which it does not have a controlling interest. The Company acquired two properties through investments in unconsolidated joint ventures in the fourth quarter of 2011, which both contributed losses in the first quarter of 2012.

(Provision) Benefit for Income Taxes

(Provision) benefit for income taxes is summarized as follows:

	Three Months Ended March 31,							Percent Change
(dollars in thousands)	2012			2011		Decrease
	$	(61	)	$	313	$	374		119	%

The Company owns properties in Washington, D.C., that are subject to income-based franchise taxes as a result of conducting business in Washington, D.C. The Company recorded a provision for income taxes of $0.1 million for the quarter ended March 31, 2012 compared to a benefit from income taxes of $0.3 million for the quarter ended March 31, 2011.

Loss from Discontinued Operations

Loss from discontinued operations is summarized as follows:

	Three Months Ended March 31,						Percent Change
(dollars in thousands)	2012		2011		Decrease
	$	297	$	2,771	$	2,474		89	%

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During the first quarter of 2012, the Company sold Airpark Place Business Center, which was located in its Maryland reporting segment, at a capitalization rate of 6.9%. The Company calculated the capitalization rate based on Airpark Place Business Center’s 2011 net operating income divided by the selling price.

Discontinued operations reflect the operating results of Woodlands Business Center (which was sold in May 2012), Airpark Place Business Center (which was sold in March 2012), Aquia Commerce Center I & II and Gateway West (which were both sold in the second quarter of 2011) and Old Courthouse Square (which was sold in the first quarter of 2011). Woodlands Business Center, Airpark Place Business Center, Gateway West and Old Courthouse Square were located in the Company’s Maryland reporting segment and Aquia Commerce Center I & II was located in the Company’s Northern Virginia reporting segment. The operating results of the disposed properties were adversely affected by impairment charges totaling $0.3 million and $2.7 million for the three months ended March 31, 2012 and 2011, respectively. The Company did not recognize any gains on the sale of real estate properties during the three months ended March 31, 2012 and 2011. The Company has had, and will have, no continuing involvement with these properties subsequent to their disposal.

Net loss attributable to noncontrolling interests

Net loss attributable to noncontrolling interests is summarized as follows:

	Three Months Ended March 31,				Increase		Percent Change
(dollars in thousands)	2012		2011
	$	318	$	138	$	180		130	%

Net loss attributable to noncontrolling interests reflects the ownership interests in the Company’s net income or loss attributable to parties other than the Company. During the three months ended March 31, 2012, the Company incurred a net loss of $3.5 million compared with a net loss of $3.9 million in the same period in 2011.

The percentage of the Operating Partnership owned by noncontrolling interests increased due to the issuance of 2.0 million Operating Partnership units on March 25, 2011 to partially fund the acquisition of 840 First Street, NE. The average percentage of the Operating Partnership owned by third parties was 5.5% for the three months ended March 31, 2012 compared with 2.1% for the three months ended March 31, 2011. As of March 31, 2012, the Company consolidated two joint ventures in which it had a controlling interest compared with the consolidation of one joint venture in which it had a controlling interest as of March 31, 2011. The Company consolidates the operating results of its consolidated joint ventures and recognizes its joint venture partner’s percentage of gains or losses within net loss attributable to noncontrolling interests. The joint venture partners’ aggregate share of the net income in the operating results of the Company’s consolidated joint ventures was $16 thousand and $2 thousand during the three months ended March 31, 2012 and 2011, respectively.

Same Property Net Operating Income

Same Property Net Operating Income (“Same Property NOI”), defined as operating revenues (rental, tenant reimbursements and other revenues) less operating expenses (property operating expenses, real estate taxes and insurance) from the properties whose period-over-period operations can be viewed on a comparative basis, is a primary performance measure the Company uses to assess the results of operations at its properties. Same Property NOI is a non-GAAP measure. As an indication of the Company’s operating performance, Same Property NOI should not be considered an alternative to net income calculated in accordance with GAAP. A reconciliation of the Company’s Same Property NOI to net income from its consolidated statements of operations is presented below. The Same Property NOI results exclude corporate-level expenses, as well as certain transactions, such as the collection of termination fees, as these items vary significantly period-over-period and thus impact trends and comparability. Also, the Company eliminates depreciation and amortization expense, which are property level expenses, in computing Same Property NOI because these are non-cash expenses that are based on historical cost accounting assumptions and management believes these expenses do not offer the investor significant insight into the operations of the property. This presentation allows management and investors to distinguish whether growth or declines in net operating income are a result of increases or decreases in property operations or the acquisition of additional properties. While this presentation provides useful information to management and investors, the results below should be read in conjunction with the results from the consolidated statements of operations to provide a complete depiction of total Company performance.

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Comparison of the Three months ended March 31, 2012 with the Three Months Ended March 31, 2011

The following table of selected operating data provides the basis for our discussion of Same Property NOI for the periods presented:

(dollars in thousands)	Three Months Ended March 31,
	2012			2011			$ Change			% Change
Number of buildings(1)		170			170			—			—
Same property revenues
Rental	$	31,491		$	31,031		$	460			1.5
Tenant reimbursements and other		6,534			7,372			(838	)		(11.4	)
Total same property revenues		38,025			38,403			(378	)		(1.0	)
Same property operating expenses
Property		9,136			9,974			(838	)		(8.4	)
Real estate taxes and insurance		3,750			3,790			(40	)		(1.1	)
Total same property operating expenses		12,886			13,764			(878	)		(6.4	)
Same property net operating income	$	25,139		$	24,639		$	500			2.0
Reconciliation to net loss:
Same property net operating income	$	25,139		$	24,639
Non-comparable net operating income(2)		5,278			458
General and administrative expenses		(4,897	)		(4,008	)
Depreciation and amortization		(16,091	)		(12,504	)
Other(3)		(12,606	)		(9,706	)
Discontinued operations		(297	)		(2,771	)
Net loss	$	(3,474	)	$	(3,892	)
	Occupancy at March 31,
	2012			2011
Same Properties		82.1	%		82.1	%

⁽¹⁾ Same-property comparisons are based upon those consolidated properties owned for the entirety of the periods presented. Same-property results exclude the results of the following non same-properties: Three Flint Hill, 440 First Street, NW, Cedar Hill I & III, Merrill Lynch, 840 First Street, NE, One Fair Oaks, Greenbrier Towers I & II, 1005 First Street, NE, Hillside Center, Davis Drive and Woodlands Business Center.

⁽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⁾  Includes acquisition costs, impairment of real estate assets, total other expenses, net and (provision) benefit for income taxes from the Company’s consolidated statement of operations.

Same Property NOI increased $0.5 million, or 2.0%, for the three months ended March 31, 2012 compared with the same period in 2011. Total same property revenues decreased $0.4 million for the three months ended March 31, 2012 primarily due to a decline in tenant reimbursements from recoverable operating expenses. Total same property expenses decreased $0.9 million for the three months ended March 31, 2012 compared with 2011 primarily due to a decline in snow and ice removal costs.

46

Maryland

(dollars in thousands)	Three Months Ended March 31,
	2012			2011			$ Change			% Change
Number of buildings(1)		62			62			—			—
Same property revenues
Rental	$	10,758		$	10,301		$	457			4.4
Tenant reimbursements and other		2,101			2,218			(117	)		(5.3	)
Total same property revenues		12,859			12,519			340			2.7
Same property operating expenses
Property		3,187			3,555			(368	)		(10.4	)
Real estate taxes and insurance		1,042			1,097			(55	)		(5.0	)
Total same property operating expenses		4,229			4,652			(423	)		(9.1	)
Same property net operating income	$	8,630		$	7,867		$	763			9.7
Reconciliation to total property operating income:
Same property net operating income	$	8,630		$	7,867
Non-comparable net operating income(2)		739			142
Total property operating income	$	9,369		$	8,009
	Occupancy at March 31,
	2012			2011
Same Properties		81.6	%		80.7	%

⁽¹⁾ Same-property comparisons are based upon those consolidated properties owned for the entirety of the periods presented. Same-property results exclude the results of the following non same-properties: Merrill Lynch, Hillside Center and Woodlands Business Center.

⁽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.

Same Property NOI for the Maryland properties increased $0.8 million, or 9.7%, for the quarter ended March 31, 2012 compared with the same period in 2011. Total same property revenues increased $0.3 million due to an increase in occupancy. Total same property operating expenses for the Maryland properties decreased $0.4 million primarily due to lower reserves for anticipated bad debt expense and a decline in snow and ice removal costs.

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Northern Virginia

	Three Months Ended March 31,
(dollars in thousands)	2012			2011			$ Change			% Change
Number of buildings(1)		51			51			—			—
Same property revenues
Rental	$	8,628		$	8,114		$	514			6.3
Tenant reimbursements and other		1,764			2,053			(289	)		(14.1	)
Total same property revenues		10,392			10,167			225			2.2
Same property operating expenses
Property		2,311			2,736			(425	)		(15.5	)
Real estate taxes and insurance		1,254			1,141			113			9.9
Total same property operating expenses		3,565			3,877			(312	)		(8.0	)
Same property net operating income	$	6,827		$	6,290		$	537			8.6
Reconciliation to total property operating income
Same property net operating income	$	6,827		$	6,290
Non-comparable net operating income(2)		1,824			71
Total property operating income	$	8,651		$	6,361
	Occupancy at March 31,
	2012			2011
Same Properties		78.8	%		76.9	%

⁽¹⁾ Same-property comparisons are based upon those consolidated properties owned for the entirety of the periods presented. Same-property results exclude the results of the following non same-properties: Three Flint Hill, Cedar Hill I & III, One Fair Oaks and Davis Drive.

⁽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.

Same Property NOI for the Northern Virginia properties increased $0.5 million, or 8.6%, for the three months ended March 31, 2012 compared with the same period in 2011. Total same property revenues increased $0.2 million for the three months ended March 31, 2012 compared with 2011 primarily due to an increase in occupancy. Total same property operating expenses decreased $0.3 million during the first quarter of 2012 compared with the same period in 2011 primarily due to lower reserves for anticipated bad debt expense and a decline in snow and ice removal costs.

48

Southern Virginia

	Three Months Ended March 31,
(dollars in thousands)	2012			2011			$ Change			% Change
Number of buildings(1)		55			55			—			—
Same property revenues
Rental	$	9,420		$	9,947		$	(527	)		(5.3	)
Tenant reimbursements and other		2,034			2,394			(360	)		(15.0	)
Total same property revenues		11,454			12,341			(887	)		(7.2	)
Same property operating expenses
Property		2,916			2,906			10			0.3
Real estate taxes and insurance		986			1,009			(23	)		(2.3	)
Total same property operating expenses		3,902			3,915			(13	)		(0.3	)
Same property net operating income	$	7,552		$	8,426		$	(874	)		(10.4	)
Reconciliation to total property operating income
Same property net operating income	$	7,552		$	8,426
Non-comparable net operating income(2)		249			23
Total property operating income	$	7,801		$	8,449
	Occupancy at March 31,
	2012			2011
Same Properties		83.6	%		85.3	%

⁽¹⁾ Same-property comparisons are based upon those consolidated properties owned for the entirety of the periods presented. Same-property results exclude the results of the following non same-properties: Greenbrier Towers I & II.

⁽²⁾ Non-comparable property net operating income has been adjusted to reflect a normalized management fee percentage in lieu of an administrative overhead allocation for comparative purposes.

Same Property NOI for the Southern Virginia properties decreased $0.9 million, or 10.4%, for the three months ended March 31, 2012 compared with the same period in 2011. Total same property revenues decreased $0.9 million for the three months ended March 31, 2012 compared with 2011 as a result of a decline in occupancy, due in large part to the increase in vacancy at 1434 Crossways Boulevard as the sole tenant vacated in 2011. The Company has released a portion of this space and does not anticipate the comparative declines and negative trending in same property revenues to continue throughout 2012. Total same property operating expense decreased slightly as an increase in property maintenance and improvement expense was partially offset by a decline in snow and ice removal costs.

49

Washington, D.C.

	Three Months Ended March 31,
(dollars in thousands)	2012			2011			$ Change			% Change
Number of buildings(1)		2			2			—			—
Same property revenues
Rental	$	2,685		$	2,669		$	16			0.6
Tenant reimbursements and other		635			707			(72	)		(10.2	)
Total same property revenues		3,320			3,376			(56	)		(1.7	)
Same property operating expenses
Property		722			777			(55	)		(7.1	)
Real estate taxes and insurance		468			543			(75	)		(13.8	)
Total same property operating expenses		1,190			1,320			(130	)		(9.8	)
Same property net operating income	$	2,130		$	2,056		$	74			3.6
Reconciliation to total property operating income
Same property net operating income	$	2,130		$	2,056
Non-comparable net operating income(2)		2,466			222
Total property operating income	$	4,596		$	2,278
	Occupancy at March 31,
	2012			2011
Same Properties		99.1	%		99.4	%

⁽¹⁾ Same-property comparisons are based upon those consolidated properties owned for the entirety of the periods presented. Same-property results exclude the results of the following non same-properties: 440 First Street, NW, 840 First Street, NE and 1005 First Street, NE.

⁽²⁾ Non-comparable property net operating income has been adjusted to reflect a normalized management fee percentage in lieu of an administrative overhead allocation for comparative purposes.

Same Property NOI for the Washington, D.C. properties increased $0.1 million, or 3.6%, for the three months ended March 31, 2012 compared with the same period in 2011. Total same property revenues decreased $0.1 million for the three months ended March 31, 2012 compared with 2011 as a result of a decrease in recoverable property operating expenses, particularly real estate taxes. Total same property operating expense decreased $0.1 million primarily due to a decline in real estate taxes.

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Liquidity and Capital Resources

Overview

The Company seeks to maintain a flexible balance sheet, with an appropriate balance of cash, debt, equity and available funds under its unsecured revolving credit facility, to readily provide access to capital given the volatility of the market and to position itself to take advantage of potential growth opportunities. The Company expects to meet short-term liquidity requirements generally through working capital, net cash provided by operations, and, if necessary, borrowings on its unsecured revolving credit facility. The Company’s short-term obligations consist primarily of the lease for its corporate headquarters, normal recurring operating expenses, regular debt payments, recurring expenditures for corporate and administrative needs, non-recurring expenditures such as capital improvements, tenant improvements and redevelopments, leasing commissions and dividends to preferred and common shareholders.

Over the next twelve months, the Company believes that it will generate sufficient cash flow from operations and have access to the capital resources, through debt and equity markets, necessary to expand and develop its business, to fund its operating and administrative expenses, to continue to meet its debt service obligations and to pay distributions in accordance with REIT requirements. However, the Company’s cash flow from operations and ability to access the debt and equity markets could be adversely affected due to uncertain economic factors and volatility in the financial and credit markets. In particular, the Company cannot assure that its tenants will not default on their leases or fail to make full rental payments if their businesses are challenged due to, among other things, the economic conditions (particularly if the tenants are unable to secure financing to operate their businesses). This may be particularly true for the Company’s tenants that are smaller companies. Further, approximately 9.4% of the Company’s annualized base rent is scheduled to expire during the next twelve months and, if it is unable to renew these leases or re-let the space, its cash flow could be negatively impacted.

In addition, the Company’s ability to access debt and equity markets could be adversely affected if the Company is unable to maintain compliance with the financial and operating covenants included in its debt agreements or remediate the material weakness described in “Item 4 – Controls and Procedures” in a timely manner or as a result of the outcome and potential impact of the ongoing Internal Investigation. Although the amount of unused capacity under the Company’s unsecured revolving credit facility was $148.0 million at March 31, 2012, subsequent to quarter end, the Company borrowed an additional $7.0 million under the unsecured revolving credit facility and, in the second quarter of 2012, the Company intends to draw approximately $88.0 million on the unsecured revolving credit facility to finance the prepayment of its 6.41% Series A Senior Notes and 6.55% Series B Senior Notes (collectively, the “Senior Notes”), discussed below, which includes accrued interest.

The Company’s $52.5 million mortgage loan secured by One Fair Oaks matures in June 2012. The Company intends to refinance the mortgage loan or, if it does not find refinancing terms acceptable, repay the loan with proceeds of additional borrowings under the unsecured revolving credit facility. The failure to repay or refinance the One Fair Oaks loan at maturity would constitute an event of default under the loan and would trigger the cross-default provisions of the unsecured revolving credit facility and the unsecured term loan. In the event of a default under the unsecured revolving credit facility and the unsecured term loan, the lenders could accelerate the timing of payments under the debt obligations and the Company may be required to repay such debt with capital from other sources, which may not be available on attractive terms, or at all, which would have a material adverse effect on the Company’s liquidity, financial condition, results of operations and ability to make distributions to our shareholders. Excluding the mortgage debt secured by One Fair Oaks, the Company has $47.5 million of mortgage debt maturing during the remainder of 2012. The Company is in the process of evaluating whether to refinance the maturing mortgage debt, to repay the mortgage loans with proceeds from the attachment of mortgage debt to an unencumbered property or to repay the mortgage loans with a draw on its unsecured revolving credit facility.

In light of the significant amount of recent or anticipated draws under the unsecured revolving credit facility, the Company may be limited in its ability to pursue additional developments, redevelopments or acquisitions in the near future without accessing capital from other sources, such as additional financings or equity issuances. If the Company is unable to timely file its required reports with the SEC, its ability to effect public debt and equity issuances also may be negatively impacted. See “Item 1A – Risk Factors – We may become unable to remain current with the filing of our periodic reports with the SEC, and our efforts to stay current may require substantial management time and attention as well as significant additional accounting and legal expense.”

51

The Company also believes, based on its historical experience and forecasted operations, that it will have sufficient cash flow or access to capital to meet its obligations over the next five years. The Company intends to meet long-term funding requirements for property acquisitions, development, redevelopment and other non-recurring capital improvements through net cash provided from operations, long-term secured and unsecured indebtedness, including borrowings under its unsecured revolving credit facility, unsecured term loans and secured term loans (collectively, “Bank Debt”), proceeds from disposal of strategically identified assets (outright or through joint ventures) and the issuance of equity and debt securities including common shares through its controlled equity offering program. For example:

• In February 2012, the Company further expanded its unsecured term loan from $225.0 million to $300.0 million and used the proceeds to pay down $73.0 million of the outstanding balance under its unsecured revolving credit facility and for other general corporate purposes; and

• In March 2012, the Company raised net proceeds of approximately $44 million through the issuance of 1.8 million additional Series A Preferred Shares. The Company used the net proceeds from the issuance of the additional Series A Preferred Shares to repay a portion of the outstanding balance on its unsecured revolving credit facility. The offering was a reopening of the Company’s original issuance of the Series A Preferred Shares, which occurred in January 2011.

The Company’s ability to raise funds through sales of debt and equity securities and access other third party sources of capital in the future will be dependent on, among other things, general economic conditions, general market conditions for REITs, rental rates, occupancy levels, market perceptions and the trading price of the Company’s shares. The Company will continue to analyze which sources of capital are most advantageous to it at any particular point in time, but the capital markets may not be consistently available on terms the Company deems attractive, or at all.

Amendments to Unsecured Revolving Credit Facility, Unsecured Term Loan and Secured Term Loan

As part of the Company’s efforts to evaluate the cause and to identify actions to remediate the material weakness described under “Item 4 – Controls and Procedures,” in late March 2012, the Company began conducting a review of all of the financial and other non-financial covenants contained in its Bank Debt agreements and the processes surrounding the monitoring and oversight of compliance with such covenants. As a result of this review, on May 10, 2012, the Company and its bank lenders amended the Company’s unsecured revolving credit facility, unsecured term loan and secured term loan to, among other things, revise certain financial and other covenants to provide additional operating flexibility for the Company to execute its business strategy and clarify the treatment of certain covenant compliance-related definitions. Specifically, the following financial covenants were amended as follows:

• The maximum consolidated total leverage ratio was increased from 60.0% to 65% for each quarter ending on or after March 31, 2012 through the quarter ending December 31, 2012, and then will decrease to 62.5% through the quarter ending June 30, 2013 and to 60.0% for all quarters thereafter;

• The minimum consolidated debt yield was reduced from 11.0% to 10.0% for each quarter ending on or after March 31, 2012 through the quarter ending December 31, 2012, and then will increase to 10.5% through the quarter ending June 30, 2013 and to 11.0% for all quarters thereafter;

• The maximum unencumbered pool leverage ratio was increased from 60.0% to 65% for each quarter ending on or after March 31, 2012 through the quarter ending December 31, 2012, and then will decrease to 62.5% through the quarter ending June 30, 2013 and to 60.0% for all quarters thereafter; and

• The minimum tangible net worth was reduced from $690,289,992 to $650,000,000, in each case plus (i) 80% of the net proceeds of any future equity issuances of the Company and (ii) 80% of the value of partnership units of the Operating Partnership issued in connection with any future asset or stock acquisitions.

In addition, the unsecured revolving credit facility and the unsecured term loan were amended to permit the lenders to record mortgages on substantially all of the Company’s unencumbered properties. The unsecured term loan also was amended to convert the fixed interest margin over LIBOR applicable to each tranche to a margin that varies according to the Company’s leverage ratio, with the interest margin applicable to each of the three tranches ranging (1) from 2.15% to 2.30%, if the leverage ratio is less than or equal to 55%, (2) from 2.40% to 2.55%, if the leverage ratio is less than or equal to 60% but greater than 55%, and (3) from 2.65% to 2.80%, if the leverage ratio is greater than 60%. The effect of this amendment will increase the current pricing of the unsecured term loan by 25 basis points, and could either increase future pricing by an additional 25 basis points or revert the pricing to the prior interest rate margin, depending on the Company’s future leverage ratio.

In connection with these amendments, the Bank Debt lenders waived (i) all financial covenant non-compliance, if any, and any cross-defaults related thereto, that may have existed with respect to periods prior to the date of such amendments and (ii) any claim to increased or additional interest that may have accrued and been owing by the Company as a result of any such default or event of default described in clause (i). Such waivers are effective with respect to such default or event of default, if any, as of the date such default or event of default occurred. The Company paid $1.2 million in financing costs to amend its unsecured revolving credit facility, unsecured term loan and secured term loan.

52

Prepayment of Senior Notes

As a result of the Company’s review of all of the financial and other non-financial covenants contained in its Bank Debt and Senior Notes agreements and the resultant amendment to the Bank Debt agreements, on May 11, 2012, the Company delivered notices regarding its intention to prepay in full the $37.5 million principal amount outstanding under each of its Series A Senior Notes and Series B Senior Notes, for an aggregate principal amount of $75.0 million, plus accrued interest to the prepayment date and an estimated $10.5 million make-whole amount, in accordance with the optional prepayment provisions governing the Senior Notes. The Company intends to draw on its unsecured revolving credit facility to finance the prepayment, which is expected to occur no later than June 11, 2012. The $10.5 million make-whole payment and the extinguishment of unamortized deferred financing costs of $0.1 million will be recorded as a loss on early debt extinguishment in the second quarter of 2012, which is expected to be partially offset by the decrease in interest expense as a result of the lower interest rate on the Company’s unsecured credit facility, compared the interest rate of the Senior Notes.

Financial Covenants

The Company’s outstanding corporate debt agreements contain specific financial covenants that may impact future financing decisions made by the Company or may be impacted by a decline in operations. These covenants differ by debt instrument and relate to the Company’s allowable leverage, minimum tangible net worth, fixed charge coverage and other financial metrics. As of March 31, 2012, after giving effect to the amendments described above, the Company was in compliance with all of the financial covenants of the unsecured revolving credit facility, unsecured term loan and secured term loan. Below is a summary of certain financial covenants associated with these debt agreements at March 31, 2012 (dollars in thousands), each of which reflects the amendments described above:

Unsecured Revolving Credit Facility and Term Loans

	Credit Facility / Unsecured and Secured Term Loans			Covenant(1)
Unencumbered Pool Leverage(2)		57.9	%		£65.0	%
Unencumbered Pool Interest Coverage Ratio(2)		3.03x			³ 1.75x
Consolidated Total Leverage Ratio		56.7	%		£65.0	%
Net Worth	$	762,185			³$650,000
Consolidated Debt Yield		11.5	%		³10.0	%
Maximum Dividend Payout Ratio		75.5	%		£95	%
Fixed Charge Coverage Ratio		1.78x			³ 1.50x
Restricted Investments:
Joint Ventures		8.0	%		£10	%
Real Estate Assets Under Development		11.0	%		£15	%
Undeveloped Land		1.9	%		£5	%
Structured Finance Investments		3.1	%		£5	%
Total Restricted Investments		21.8	%		£25	%
Restricted Indebtedness:
Unhedged Variable Rate Debt		9.0	%		£25	%
Maximum Secured Debt		28.6	%		£40	%
Maximum Secured Recourse Debt		2.0	%		£15	%

⁽¹⁾  Reflects the amendments to the Bank Debt agreements. See Amendments to Unsecured Revolving Credit Facility, Unsecured Term Loan and Secured Term Loan above for more information.

⁽²⁾ Does not apply to secured term loan.

Senior Notes

In connection with the Internal Investigation and the review of the Company’s financial and other non-financial covenants contained in its bank debt and Senior Notes agreements and further clarification provided as a result of such review, the Company determined it would not have been in compliance with certain of the financial covenants under the documents governing the Senior Notes, as of March 31, 2012, and for one or more prior periods, including the fourth quarter of 2010. However, in connection with the amendments to the Bank Debt agreements described above, the lenders under the Bank Debt agreements waived, among other things, any cross-defaults with respect to financial covenant non-compliance under the Senior Notes that may have existed with respect to periods prior to the date of such amendments. As a result, any financial covenant non-compliance under the Senior Notes would not create an event of default under the Company’s Bank Debt agreements. Furthermore, the sole remedy available to the holders of the Senior Notes upon the occurrence of an event of default is to accelerate the maturity thereof and to receive a make-whole amount in connection therewith. The Company already sent notices of prepayment to the holders of the Senior Notes on May 11, 2012, pursuant to which the Senior Notes will be repaid on or prior to June 11, 2012, including the payment of a make-whole amount.

53

Cash Flows

Due to the nature of the Company’s business, it relies on working capital and net cash provided by operations and, if necessary, borrowings under its unsecured revolving credit facility to fund its short-term liquidity needs. Net cash provided by operations is substantially dependent on the continued receipt of rental payments and other expenses reimbursed by the Company’s tenants. The ability of tenants to meet their obligations, including the payment of rent contractually owed to the Company, and the Company’s ability to lease space to new or replacement tenants on favorable terms, could affect the Company’s cash available for short-term liquidity needs. The Company intends to meet short and long term funding requirements for debt maturities, interest payments, dividend distributions and capital expenditures through cash flow provided by operations, long-term secured and unsecured indebtedness, including borrowings under its unsecured revolving credit facility, proceeds from asset disposals and the issuance of equity and debt securities. However, the Company may not be able to obtain capital from such sources on favorable terms, in the time period it desires, or at all. In addition, the Company’s continued ability to borrow under its existing debt instruments is subject to compliance with their financial and operating covenants and a failure to comply with such covenants could cause a default under the applicable debt agreement. In the event of a default, the Company may be required to repay such debt with capital from other sources, which may not be available on attractive terms, or at all.

The Company could also fund building acquisitions, development, redevelopment and other non-recurring capital improvements through additional borrowings, issuance of Operating Partnership units or sales of assets, outright or through joint ventures.

Consolidated cash flow information is summarized as follows:

	Three Months Ended March 31,
(amounts in thousands)	2012			2011			Change
Cash provided by operating activities	$	16,063		$	4,264		$	11,799
Cash used in investing activities		(14,717	)		(19,485	)		4,768
Cash (used in) provided by financing activities		(938	)		622			(1,560	)

Net cash provided by operating activities increased $11.8 million for the three months ended March 31, 2012 compared with 2011 primarily due an increase in net operating income from the Company’s properties, which was due to the additional properties acquired in 2011 that had a full quarter impact on results in 2012. As a result of the new properties acquired in 2011, including the mortgage debt assumed in the property acquisitions, the Company was required to escrow additional funds during the first quarter of 2011, which resulted in a $5.4 million increase in its escrows and reserves for the three months ended March 31, 2011 compared with a $0.5 million decrease in escrows and reserves for the three months ended March 31, 2012. The increase in cash provided by operating activities during the first quarter of 2012 compared with 2011 was also the result of an increase in accounts payable and accrued expenses and a decrease in accounts and other receivables. The increase in cash provided by operating activities was partially offset by an increase in the Company’s deferred costs and accrued straight-line rents.

Net cash used in investing activities decreased $4.8 million for the three months ended March 31, 2012 compared with the same period in 2011. The decrease in cash used in investing activities is primarily due to the use of $17.5 million in cash to acquire three properties and a parcel of land during the first quarter of 2011 compared with no property acquisitions during the first quarter of 2012. Also, for the three months ended March 31, 2011, the Company had paid $3.5 million in deposits on potential acquisitions compared with no deposits paid on property acquisitions during the three months ended March 31, 2012. The decrease in cash used in investing activities was partially offset by a $9.9 million increase in additions to rental property and construction in progress during the first quarter of 2012 compared with 2011. Also, the decrease in cash used in investing activities was partially offset by a reduction in proceeds received from the sale of real estate assets as the Company sold one property for net proceeds of $5.2 million during the three months ended March 31, 2012 compared with the sale of a property for $10.8 million of net proceeds for the three months ended March 31, 2011.

54

Net cash used in financing activities was $0.9 million for the three months ended March 31, 2012 compared with cash provided by financing activities of $0.6 million for the three months ended March 31, 2011. During the first quarter of 2012, the Company issued 1.8 million Series A Preferred Shares for net proceeds of $43.6 million compared with the issuance of 4.6 million Series A Preferred Shares for net proceeds of $111.0 million during the first quarter of 2011. The proceeds from the preferred share issuances during the first quarters of 2012 and 2011 were used to pay down a portion of the Company’s outstanding balance on its unsecured revolving credit facility. Also, during the three months ended March 31, 2012, the Company issued 0.2 million common shares through its controlled equity offering program for net proceeds of $3.6 million. The Company did not issue any common shares during the three months ended March 31, 2011. The Company repaid outstanding debt of $153.6 million during the first quarter of 2012 compared with the repayment of $128.7 million of outstanding debt during the first quarter of 2011. During the first quarter of 2012, the Company borrowed $44.0 million under its unsecured revolving credit facility and increased its borrowings under an unsecured term loan by $75.0 million compared with borrowings of $30.0 million under its unsecured revolving credit facility during the first quarter of 2011. As a result of the Company’s preferred stock issuance during 2011, its cash paid for dividends on its common and preferred shares increased $1.7 million for the three months ended March 31, 2012 compared with the same period in 2011. Also, during 2011, the Company acquired a property that was partially funded through the issuance of 2.0 million Operating Partnership units, which resulted in a $0.4 million increase in distributions to noncontrolling interests in 2012 compared with 2011.

Contractual Obligations

As of March 31, 2012, the Company had development and redevelopment contractual obligations, which include amounts accrued at March 31, 2012, of $1.9 million outstanding, primarily related to development activities at 440 First Street, NW, located in the Company’s Washington, D.C. reporting segment and redevelopment activities at Three Flint Hill, located in the Company’s Northern Virginia reporting segment, which underwent a complete redevelopment that was substantially completed during the third quarter of 2011. As of March 31, 2012, the Company had capital improvement obligations of $3.6 million outstanding. Capital improvement obligations represent commitments for roof, asphalt, HVAC and common area replacements contractually obligated as of March 31, 2012. Also, as of March 31, 2012, the Company had $8.1 million of tenant improvement obligations, primarily related to a tenant at Redland Corporate Center, which is located in the Company’s Maryland reporting segment and a tenant at Crossways Commerce Center, which is located in the Company’s Southern Virginia reporting segment. The Company anticipates meeting its contractual obligations related to its construction activities with cash from its operating activities. In the event cash from the Company’s operating activities is not sufficient to meet its contractual obligations, the Company can access additional capital through its unsecured revolving credit facility. At March 31, 2012, the Company had $148.0 million available under its unsecured revolving credit facility.

The Company has various obligations to certain local municipalities associated with its development projects that will require completion of specified site improvements, such as sewer and road maintenance, grading and other general landscaping work. As of March 31, 2012, the Company remained liable to those local municipalities for $2.2 million in the event that it does not complete the specified work. The Company intends to complete the improvements in satisfaction of these obligations.

On August 4, 2011, the Company formed a joint venture with an affiliate of Perseus Realty, LLC to acquire 1005 First Street, NE in Washington, D.C. for $46.8 million, of which, $38.4 million was paid at closing and the remaining $8.4 million will be paid in August 2013. The Company recorded the $8.4 million deferred purchase price obligation at its fair value at the time of acquisition within “Accounts payable and other liabilities” in its consolidated balance sheets. The Company determined the fair value of the deferred purchase price by calculating the present value of the obligation that is due in 2013 using a discount rate for comparable transactions.

On March 25, 2011, the Company acquired 840 First Street, NE, in Washington, D.C. for an aggregate purchase price of $90.0 million, with up to $10.0 million of additional consideration payable in Operating Partnership units upon the terms of a lease renewal by the building’s sole tenant or the re-tenanting of the property through November 2013. Based on an assessment of the probability of renewal and anticipated lease rates, the Company recorded a contingent consideration obligation of $9.4 million at acquisition. In July 2011, the building’s sole tenant renewed its lease through August 2023 on the entire building with the exception of two floors. As a result, the Company issued 544,673 Operating Partnership units to satisfy $7.1 million of its contingent consideration obligation. The Company recognized a $1.5 million gain associated with the issuance of the additional units, which represented the difference between the contractual value of the units and the fair value of the units at the date of issuance. At March 31, 2012, the remaining contingent consideration obligation was $0.7 million, which may result in the issuance of additional units depending upon the leasing of any of the vacant space.

In connection with the Company’s 2009 acquisition of Corporate Campus at Ashburn Center, the Company entered into a contingent consideration fee agreement with the seller under which the Company will be obligated to pay additional consideration upon the property achieving stabilization per specified terms of the agreement. During the first quarter of 2010, the Company leased the remaining vacant space at the property and recorded a contingent consideration charge of $0.7 million, which reflected an increase in the anticipated fee to the seller. As of March 31, 2012, the Company’s total contingent consideration obligation to the former owner of Corporate Campus at Ashburn Center was approximately $1.4 million.

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On December 29, 2010, the Company entered into an unconsolidated joint venture with AEW Capital Management, L.P. and acquired Aviation Business Park, a three-building, single-story, office park totaling 121,000 square feet in Glen Burnie, Maryland. During the third quarter of 2010, the Company used available cash to acquire a $10.6 million first mortgage loan collateralized by the property for $8.0 million. The property was acquired by the joint venture through a deed-in-lieu of foreclosure in return for additional consideration to the owner if certain future leasing hurdles are met. As of March 31, 2012, the Company’s total contingent consideration obligation to the former owner of Aviation Business Park was considered inconsequential and is not reflected in the Company’s condensed consolidated financial statements.

The Company had no other material contractual obligations as of March 31, 2012.

Distributions

The Company is required to distribute to its shareholders at least 90% of its REIT taxable income in order to qualify as a REIT, including some types of taxable income it recognizes for tax purposes but with regard to which it does not receive corresponding cash. In addition, the Company must distribute to its shareholders 100% of its taxable income to eliminate its U.S. federal income tax liability. Funds used by the Company to pay dividends on its common shares are provided through distributions from the Operating Partnership. For every common share of the Company, the Operating Partnership has issued to the Company a corresponding common unit. The Company is the sole general partner of and, as of March 31, 2012, owned 94.6% interest in, the Operating Partnership’s units. The remaining interests in the Operating Partnership are limited partnership interests, some of which are owned by several of the Company’s executive officers and trustees who contributed properties and other assets to the Company upon its formation, and other unrelated parties. The Operating Partnership is required to make cash distributions to the Company in an amount sufficient to meet its distribution requirements. The cash distributions by the Operating Partnership reduce the amount of cash that is available for general corporate purposes, which includes repayment of debt, funding acquisitions or construction activities, and for other corporate operating activities. On a quarterly basis, the Company’s management team recommends a distribution amount that is approved by the Company’s Board of Trustees. The amount of future distributions will be based on taxable income, cash from operating activities and available cash and will be at the discretion of the Company’s Board of Trustees. The Company’s ability to make cash distributions will also be limited by the covenants contained in our Operating Partnership agreement and our financing arrangements as well as limitations imposed by state law and the agreements governing any future indebtedness. See “Risk Factors – Risks Related to Our Business and Properties – Covenants in our debt agreements could adversely affect our liquidity and financial condition” in Part I, Item 1A in our Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2011 for additional information regarding the financial covenants.

Dividends

On April 24, 2012, the Company declared a dividend of $0.20 per common share, equating to an annualized dividend of $0.80 per common share. The dividend was paid on May 11, 2012 to common shareholders of record as of May 4, 2012. The Company also declared a dividend of $0.484375 per share on its Series A Preferred Shares. The dividend was paid on May 15, 2012 to preferred shareholders of record as of May 4, 2012.

Funds From Operations

Funds from operations (“FFO”) is a non-GAAP measure used by many investors and analysts that follow the real estate industry. The Company considers FFO a useful measure of performance for an equity REIT because it facilitates an understanding of the operating performance of its properties without giving effect to real estate depreciation and amortization, which assume that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, the Company believes that FFO provides a meaningful indication of its performance. The Company also considers FFO an appropriate supplemental performance measure given its wide use by and relevance to investors and analysts. FFO, reflecting the assumption that real estate asset values rise or fall with market conditions, principally adjusts for the effects of GAAP depreciation and amortization of real estate assets, which assume that the value of real estate diminishes predictably over time.

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FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), represents net income (computed in accordance with GAAP), excluding gains (losses) on sales of real estate and impairments of real estate assets, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. The Company computes FFO in accordance with NAREIT’s definition, which may differ from the methodology for calculating FFO, or similarly titled measures, used by other companies and this may not be comparable to those presentations. Historically, the Company did not exclude impairments in its computation of FFO. However, on October 31, 2011, NAREIT clarified that the exclusion of impairment write-downs of depreciable assets in reported FFO was always intended and appropriate. As a result, the Company began excluding impairments from FFO in the fourth quarter of 2011 and has restated FFO from prior periods to exclude such charges consistent with NAREIT’s guidance. In addition, the Company’s methodology for computing FFO adds back noncontrolling interests in the income from its Operating Partnership in determining FFO. The Company believes this is appropriate as Operating Partnership units are presented on an as-converted, one-for-one basis for shares of stock in determining FFO per diluted share.

FFO does not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments and uncertainties, nor is it indicative of funds available to fund the Company’s cash needs, including its ability to make distributions. The Company presents FFO per diluted share calculations that are based on the outstanding dilutive common shares plus the outstanding Operating Partnership units for the periods presented. The Company’s presentation of FFO in accordance with NAREIT, or as adjusted by the Company, should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of the Company’s financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of its liquidity.

The following table presents a reconciliation of net loss attributable to common shareholders to FFO available to common shareholders and unitholders (amounts in thousands):

	Three Months Ended March 31,
	2012			2011
Net loss available to common shareholders	$	(5,820	)	$	(5,537	)
Add: Depreciation and amortization:
Real estate assets		16,091			12,504
Discontinued operations		30			395
Unconsolidated joint ventures		1,484			524
Consolidated joint ventures		(38	)		(19	)
Impairment of real estate assets(1)(2)		3,021			2,711
Net loss attributable to noncontrolling interests in the Operating Partnership		(335	)		(136	)
FFO available to common shareholders and unitholders		14,433			10,442
Dividends on preferred shares		2,664			1,783
FFO	$	17,097		$	12,225
Weighted average common shares and Operating Partnership units outstanding – diluted		52,805			50,506

⁽¹⁾  Prior to the fourth quarter of 2011, the Company included impairments of real estate in its calculation of FFO, which resulted in previously reported FFO of $9.5 million for the three months ended March 31, 2011.

⁽²⁾  For the three months ended March 31, 2012, $2.8 million of impairment charges were included in the Company’s continuing operations in the Company’s consolidated statements of operations. The remaining impairment charges for the three months ended March 31, 2012 and the impairments charges for the three months ended March 31, 2011 are included in discontinued operations in the Company’s consolidated statements of operations.

Off-Balance Sheet Arrangements

On January 1, 2010 and March 17, 2009, the Company deconsolidated the joint ventures that own RiversPark I and II, respectively, and removed all their related assets and liabilities from its consolidated balance sheets as of the date of deconsolidation. The Company remains liable for $7.0 million of mortgage debt, which represents its proportionate share. The fair value of the potential obligation is inconsequential as the likelihood of the debt being called is remote. During the fourth quarter 2010, the Company entered into separate unconsolidated joint ventures with a third party to acquire 1750 H Street, NW and Aviation Business Park. During the fourth quarter of 2011, the Company entered into separate unconsolidated joint ventures to acquire Metro Place III & IV and 1200 17^th Street, NW. See footnote 6, Investment in Affiliates, in the notes to the Company’s condensed consolidated financial statements for more information.

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Forward Looking Statements

This report contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Certain factors that could cause actual results to differ materially from the Company’s expectations include changes in general or regional economic conditions; the Company’s ability to timely lease or re-lease space at current or anticipated rents; changes in interest rates; changes in operating costs; the Company’s ability to complete current and future acquisitions; the Company’s ability to obtain additional financing; the Company’s ability to manage its current debt levels and repay or refinance its indebtedness upon maturity or other required payment dates; the Company’s ability to maintain financial covenant compliance under its debt agreements; the Company’s ability to remediate the material weakness in its internal controls over financial reporting described in “Item 4 – Controls and Procedures” and to re-establish and maintain effective internal controls over financial reporting and disclosure controls and procedures; the outcome and potential impact of the ongoing Internal Investigation, including any remedial actions that may be required as a result of the Internal Investigation; the Company’s ability to obtain debt and/or financing on attractive terms, or at all; and other risks detailed under “Risk Factors” in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2011 and in the other documents the Company files with the SEC. Many of these factors are beyond the Company’s ability to control or predict. Forward-looking statements are not guarantees of performance. For forward-looking statements herein, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. We have no duty to, and do not intend to, update or revise the forward-looking statements in this discussion after the date hereof, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that any forward-looking statement made in this discussion, or elsewhere, might not occur.

ITEM 3: QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. In the normal course of business, the Company is exposed to the effect of interest rate changes. The Company has historically entered into derivative agreements to mitigate exposure to unexpected changes in interest. Market risk refers to the risk of loss from adverse changes in market interest rates. The Company periodically uses derivative financial instruments to seek to manage, or hedge, interest rate risks related to its borrowings. The Company does not use derivatives for trading or speculative purposes and only enters into contracts with major financial institutions based on their credit rating and other factors. The Company intends to enter into derivative agreements only with counterparties that it believes have a strong credit rating to mitigate the risk of counterparty default or insolvency.

The Company had $910.2 million of debt outstanding at March 31, 2012. Of the total debt outstanding, $483.2 million was fixed rate debt and $275.0 million was variable rate debt that had been swapped to a fixed interest rate. The balance of the Company’s debt, $152.0 million, was variable rate debt consisting of borrowings under unsecured and secured term loans and its unsecured revolving credit facility. A change in interest rates of 1% would result in an increase or decrease of $1.5 million in interest expense on its unhedged variable rate debt on an annualized basis. The table below summarizes the Company’s interest rate swap agreements as of March 31, 2012 (dollars in thousands):

Effective Date	Maturity Date	Amount		Interest Rate Contractual Component		Fixed LIBOR Interest Rate
January 2011	January 2014	$	50,000		LIBOR		1.474	%
July 2011	July 2016		35,000		LIBOR		1.754	%
July 2011	July 2016		25,000		LIBOR		1.7625	%
July 2011	July 2017		30,000		LIBOR		2.093	%
July 2011	July 2017		30,000		LIBOR		2.093	%
September 2011	July 2018		30,000		LIBOR		1.660	%
January 2012	July 2018		25,000		LIBOR		1.394	%
March 2012	July 2017		25,000		LIBOR		1.129	%
March 2012	July 2017		12,500		LIBOR		1.129	%
March 2012	July 2018		12,500		LIBOR		1.383	%
		$	275,000

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For fixed rate debt, changes in interest rates generally affect the fair value of debt but not the earnings or cash flow of the Company. See footnote 11, Fair Value Measurements, in the notes to the Company’s condensed consolidated financial statements for more information on the fair value of the Company’s debt.

ITEM 4: CONTROLS AND PROCEDURES

1) Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosure.

The Company carried out an evaluation, under the supervision and with the participation of our management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a – 15(e) as of the end of the period covered by this report. Based upon this evaluation and as a result of the unremediated material weakness described below, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

Notwithstanding the unremediated material weakness described below, management believes that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly presented in all material respects in accordance with GAAP for interim financial statements, and the Company’s Chief Executive Officer and Chief Accounting Officer have certified that, based on their knowledge, the condensed consolidated financial statements included in this report fairly present in all material respects the Company’s financial condition, results of operations and cash flows for each of the periods presented in this report. In light of the ongoing Internal Investigation described below, Michael H. Comer, the Company’s Chief Accounting Officer, has been performing the functions of the Company’s principal financial officer in connection with this Quarterly Report on Form 10-Q and, as such, has provided the certifications included as Exhibits 31.2 and 32.2 to this Form 10-Q. Barry H. Bass continues to serve as the Company’s Chief Financial Officer.

2) Background

As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 (the “Form 10-K”), management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011 based on the framework established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). During this assessment and in connection with the preparation of the Form 10-K and the consolidated financial statements and related disclosures contained therein, management identified a material weakness in the Company’s internal control over financial reporting as of December 31, 2011 relating to the monitoring and oversight of compliance with financial covenants under its debt agreements. Specifically, management determined that the Company did not effectively maintain and operate controls over the monitoring and oversight of compliance with financial covenants under its debt agreements, including the communication of financial covenant compliance matters with the Board of Trustees and the Audit Committee, which resulted in the Company failing to identify potential exceptions to covenant compliance and to provide related financial statement disclosures regarding potential financial covenant risks or violations under our debt agreements.

In response to this material weakness, in late March, the Company’s Board of Trustees appointed a special committee of independent trustees to review the facts and circumstances relating to the material weakness determination and the Company’s processes surrounding the monitoring and oversight of compliance with Company’s financial covenants. Prior to the completion of the special committee’s work, the Board of Trustees determined in late April that a more detailed, Internal Investigation of these matters should be undertaken by the Audit Committee, with the assistance of independent outside professionals. This investigation is ongoing and the Company is unable to predict the ultimate outcome of the investigation, or the timing of its completion.

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3) Remediation of Material Weakness

Beginning in the first quarter of 2012, management began taking the following steps to remediate the underlying causes of the material weakness described above:

• Evaluated the processes surrounding the monitoring and oversight of the Company’s compliance with financial covenants under its debt agreements;

• Instituted an additional level of review and analysis of covenant compliance calculations involving additional members of senior management;

• Enhanced ongoing monitoring and forecasting of covenant compliance through more detailed analytics and modeling;

• Enhanced procedures regarding the reporting by management to the Board of Trustees and the Audit Committee regarding financial covenant calculation and compliance;

• Engaged in a thorough review of all debt agreements and provided additional tools for key personnel to track covenant compliance requirements; and

• Increased and accelerated outside counsel’s participation in our periodic reporting process.

As a result of the review of Company’s debt agreements, the Company and its bank lenders amended the Company’s unsecured revolving credit facility, unsecured term loan and secured term loan to, among other things, revise certain financial and other covenants to provide additional operating flexibility for the Company to execute its business strategy and clarify the treatment of certain covenant compliance-related definitions. In connection with these amendments, the lenders under those loan agreements waived all financial covenant non-compliance, if any, and any cross-defaults under other indebtedness related thereto, that may have existed with respect to periods prior to the date of such amendments. See “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

Management believes that these remedial actions have strengthened the Company’s internal control over financial reporting and that they will, over time, remediate the material weakness that was identified as of December 31, 2011. However, because some of the remedial steps will take place on a quarterly basis, management believes that it needs to continue to monitor the successful implementation of those steps before management is able to conclude that the material weakness has been remediated. The remediation and ultimate resolution of the Company’s material weakness will be reviewed with the Audit Committee of the Company’s Board of Trustees. The Company cannot provide any assurance that these remediation efforts will be successful or that the Company’s internal control over financial reporting will be effective as a result of these efforts.

4) Changes in Internal Control Over Financial Reporting

Other than the remediation steps described above, there were no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. There may be additional changes and enhancements to the Company’s internal control processes subsequent to March 31, 2012 as a result of the ongoing Internal Investigation.

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PART II: OTHER INFORMATION

Item 1. Legal Proceedings

As of March 31, 2012, the Company was not subject to any material pending legal proceedings.

Item 1A. Risk Factors

In addition to the risk factors previously disclosed in Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, the Company is subject to the following additional risks:

The Audit Committee of the Board of Trustees currently is conducting an internal investigation to review the facts and circumstances relating to management’s identification of a material weakness in our internal control over financial reporting as of December 31, 2011, and the processes surrounding the monitoring and oversight of compliance with our financial covenants. We are unable to predict the ultimate outcome and potential impact of the investigation, or the timing of its completion. In addition, we may be required to incur substantial costs and divert management resources in connection with the internal investigation and any related remedial measures, which could have a material adverse effect on our business, financial condition and results of operations.

As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, management identified a material weakness in our internal control over financial reporting as of December 31, 2011 relating to our monitoring and oversight of compliance with financial covenants under our debt agreements, as more fully described in our Annual Report on Form 10-K for the year ended December 31, 2011 under “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” and “Item 9A – Controls and Procedures.” In response to this material weakness, in late March, the Company’s Board of Trustees appointed a special committee of independent trustees to review the facts and circumstances relating to the material weakness determination and the processes surrounding the monitoring and oversight of compliance with Company’s financial covenants. Prior to the completion of the special committee’s review, the Board of Trustees determined in late April that a more detailed, internal investigation of these matters should be undertaken by the Audit Committee of the Board of Trustees (the “Internal Investigation”), with the assistance of independent outside professionals, which Internal Investigation is ongoing. We are unable to predict the timing or outcome of the Internal Investigation, or how it will impact the Company or its employees. Our management, Board of Trustees and employees already have expended a substantial amount of time in connection with matters related to the Internal Investigation, diverting a significant amount of resources and attention that would otherwise be directed toward our operations and implementation of our business strategy. In addition, we may be required to incur substantial costs and further divert management resources in connection with the Internal Investigation and any related remedial measures, which could have a material adverse effect on our business, financial condition and results of operations.

Furthermore, in addition to the risks associated with our ability to remediate this material weakness, as described in our Annual Report on Form 10-K for the year ended December 31, 2011, it is possible that additional control deficiencies may be identified pursuant to the Internal Investigation. These control deficiencies may represent one or more material weaknesses. Our inability to remedy any additional deficiencies or material weaknesses that may be identified in the Internal Investigation could, among other things, cause us to fail to file timely our periodic reports with the SEC, prevent us from providing reliable and accurate financial information and forecasts, or require us to hire additional employees, incur additional costs or divert management resources to remediate such deficiencies or material weaknesses.

We may become unable to remain current with the filing of our periodic reports with the SEC, and our efforts to stay current may require substantial management time and attention as well as significant additional accounting and legal expense.

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As a result of the Internal Investigation we may experience significant delays with the filing of our periodic reports with the SEC, as a result of which we may face several adverse consequences. If we are unable to remain current with our filings with the SEC, investors in our securities will not have information regarding our business and financial condition with which to make decisions regarding investment in our securities. In addition, we will not be able to have a registration statement under the Securities Act of 1933, covering a public offering of securities, declared effective by the SEC, and may not be able to make offerings pursuant to certain “private placement” rules of the SEC under Regulation D to any purchasers not qualifying as “accredited investors.” We also will not be eligible to use a “short form” registration statement on Form S-3 for certain periods of time during the 12-month period after the time we become current in our filings. These restrictions could adversely affect our business, financial condition and results of operations.

Amendments to the unsecured revolving credit facility and unsecured term loan may limit the Company’s ability to raise additional capital through mortgage loans and expose the Company to the possibility of foreclosure, which could result in the loss of its investment in a property or group of properties.

As described in “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources,” the unsecured revolving credit facility and the unsecured term loan were amended to provide the lenders with the right, in their sole discretion, to record mortgages on substantially all of the Company’s unencumbered properties. These amendments may limit the Company’s ability to raise additional capital through loans secured by mortgages on those properties. As a result, the Company may be forced to raise capital through other sources that may not be available on attractive terms, or at all, which would have a material adverse effect on the Company’s liquidity, financial condition, results of operations and ability to make distributions to its shareholders. Moreover, incurring mortgage and other secured debt obligations increases the Company’s risk of property losses because defaults on indebtedness secured by properties may result in foreclosure actions initiated by lenders and ultimately the Company’s loss of the property securing any loans for which the Company is in default. Any foreclosure on a mortgaged property or group of properties could adversely affect the overall value of the property or portfolio of properties. For tax purposes, a foreclosure on any of the Company’s properties that is subject to a nonrecourse mortgage loan would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds the Company’s tax basis in the property, the Company would recognize taxable income on foreclosure, but would not receive any cash proceeds, which could hinder the Company’s ability to meet the REIT distribution requirements imposed by the Internal Revenue Code.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

No.	Description
3.1	Articles Supplementary Establishing Additional 7.750% Series A Cumulative Redeemable Perpetual Preferred Shares (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on March 14, 2012).
4.1*	Amendment No. 15 to Amended and Restated Limited Partnership Agreement of First Potomac Realty Investment Limited Partnership.
4.2*	Amendment No. 16 to Amended and Restated Limited Partnership Agreement of First Potomac Realty Investment Limited Partnership.
4.3*	Amendment No. 17 to Amended and Restated Limited Partnership Agreement of First Potomac Realty Investment Limited Partnership.

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4.4	Amendment No. 18 to Amended and Restated Limited Partnership Agreement of First Potomac Realty Investment Limited Partnership (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 14, 2012).
10.1	Amendment No.1, dated as of January 27, 2012, to the Term Loan Agreement, dated as of July 18, 2011, by and among First Potomac Realty Investment Limited Partnership, certain of its subsidiaries party thereto, KeyBank National Association, as a lender and administrative agent, and the other lenders and agents party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 2, 2012).
31.1*	Section 302 Certification of Chief Executive Officer.
31.2*	Section 302 Certification of Chief Accounting Officer.
32.1*	Section 906 Certification of Chief Executive Officer.
32.2*	Section 906 Certification of Chief Accounting Officer.
101	XBRL (Extensible Business Reporting Language). The following materials from the First Potomac Realty Trust’s Quarterly Report on Form 10-Q for the period ended March 31, 2012, formatted in XBRL: (i) Consolidated balance sheets as of March 31, 2012 (unaudited) and December 31, 2011; (ii) Consolidated statements of operations (unaudited) for the three months ended March 31, 2012 and 2011; (iii) Consolidated statements of comprehensive loss (unaudited) for the three months ended March 31, 2012 and 2011; (iv) Consolidated statements of cash flows (unaudited) for the three months ended March 31, 2012 and 2011; and (v) Notes to condensed consolidated financial statements (unaudited). As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purpose of Sections 11 and 12 of the Securities Act and Section 18 of the Exchange Act.

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FIRST POTOMAC REALTY TRUST
Date: May 15, 2012	/s/ Douglas J. Donatelli
	Douglas J. Donatelli
	Chairman of the Board and Chief Executive Officer
Date: May 15, 2012	/s/ Michael H. Comer
	Michael H. Comer
	Senior Vice President and Chief Accounting Officer

64

EXHIBIT INDEX

No.	Description
3.1	Articles Supplementary Establishing Additional 7.750% Series A Cumulative Redeemable Perpetual Preferred Shares (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on March 14, 2012).
4.1*	Amendment No. 15 to Amended and Restated Limited Partnership Agreement of First Potomac Realty Investment Limited Partnership.
4.2*	Amendment No. 16 to Amended and Restated Limited Partnership Agreement of First Potomac Realty Investment Limited Partnership.
4.3*	Amendment No. 17 to Amended and Restated Limited Partnership Agreement of First Potomac Realty Investment Limited Partnership.
4.4	Amendment No. 18 to Amended and Restated Limited Partnership Agreement of First Potomac Realty Investment Limited Partnership (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 14, 2012).
10.1	Amendment No.1, dated as of January 27, 2012, to the Term Loan Agreement, dated as of July 18, 2011, by and among First Potomac Realty Investment Limited Partnership, certain of its subsidiaries party thereto, KeyBank National Association, as a lender and administrative agent, and the other lenders and agents party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 2, 2012).
31.1*	Section 302 Certification of Chief Executive Officer.
31.2*	Section 302 Certification of Chief Accounting Officer.
32.1*	Section 906 Certification of Chief Executive Officer.
32.2*	Section 906 Certification of Chief Accounting Officer.
101	XBRL (Extensible Business Reporting Language). The following materials from the First Potomac Realty Trust’s Quarterly Report on Form 10-Q for the period ended March 31, 2012, formatted in XBRL: (i) Consolidated balance sheets as of March 31, 2012 (unaudited) and December 31, 2011; (ii) Consolidated statements of operations (unaudited) for the three months ended March 31, 2012 and 2011; (iii) Consolidated statements of comprehensive loss (unaudited) for the three months ended March 31, 2012 and 2011; (iv) Consolidated statements of cash flows (unaudited) for the three months ended March 31, 2012 and 2011; and (v) Notes to condensed consolidated financial statements (unaudited). As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purpose of Sections 11 and 12 of the Securities Act and Section 18 of the Exchange Act.

* Filed herewith.

EX-4.1

Exhibit 4.1

AMENDMENT NO. 15

TO THE

AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF

FIRST POTOMAC REALTY INVESTMENT LIMITED PARTNERSHIP

This Amendment No. 15 (the “Fifteenth Amendment”) to the Amended and Restated Limited Partnership Agreement of First Potomac Realty Investment Limited Partnership (the “Partnership”) dated September 15, 2003 (the “Partnership Agreement”), is entered into as of March 25, 2011, by First Potomac Realty Trust, the general partner (the “General Partner”) of the Partnership, and the Members of 840 First Street LLC, Stephen A. Goldberg, Brian L. Goldberg Generational Trust, Lauren B. Goldberg Generational Trust and Stuart W. Goldberg Generational Trust (collectively, the “Contributors”). All capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Partnership Agreement.

WHEREAS, pursuant to the terms of that certain Contribution Agreement, dated as of November 2, 2010 by and among 840 First Street LLC and the Partnership (the “Contribution Agreement”), the Contributors have agreed to contribute to the Partnership the property commonly known as 840 First Street, NE located in Washington, DC, in exchange for limited partnership operating units in the Partnership;

WHEREAS, it is desirable to amend Exhibit A to the Partnership Agreement to reflect the Contributors’ admission to the Partnership;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Partnership Agreement is hereby amended as follows:

Exhibit A to the Partnership Agreement is hereby amended by substituting for the current version of such exhibit, a version in the form attached hereto as Exhibit A reflecting the admission of the Contributors to the Partnership, subject to the provisions contained in the Contribution Agreement.

IN WITNESS WHEREOF, the foregoing Fifteenth Amendment has been signed and delivered as of this 25th day of March, 2011, by the parties set forth above.

FIRST POTOMAC REALTY TRUST, General Partner
By:	/s/ Joel F. Bonder
	Joel F. Bonder     Executive Vice President

Limited Partner Acceptance

March 25, 2011

This Limited Partner Acceptance (the “Acceptance”) to the Amended and Restated Agreement of Limited Partnership, as amended to the date hereof, of First Potomac Realty Investment Limited Partnership, L.P. (the “Partnership Agreement”), which Acceptance is entered into in connection with the Partnership Agreement, is executed and delivered by the undersigned. As of the date hereof, the undersigned General Partner hereby admits the undersigned Limited Partner as a Limited Partner of the Partnership, and by said undersigned Limited Partner’s execution and delivery hereof, said undersigned Limited Partner agrees to be bound by the terms and provisions of the Partnership Agreement, including the power of attorney set forth in Section 8.02 of the Partnership Agreement. The number of units of limited partnership interest (“Units”) issued as of the date hereof to the undersigned Limited Partner is set forth below. All terms used herein and not otherwise defined shall have the meanings given them in the Partnership Agreement.

Number of Units: 993,102

[Signature Page follows]

ADDITIONAL LIMITED PARTNER:

/s/ Stephen A. Goldberg

Stephen A. Goldberg

[End of Signatures]

Limited Partner Acceptance – Stephen A. Goldberg

Limited Partner Acceptance

March 25, 2011

This Limited Partner Acceptance (the “Acceptance”) to the Amended and Restated Agreement of Limited Partnership, as amended to the date hereof, of First Potomac Realty Investment Limited Partnership, L.P. (the “Partnership Agreement”), which Acceptance is entered into in connection with the Partnership Agreement, is executed and delivered by the undersigned. As of the date hereof, the undersigned General Partner hereby admits the undersigned Limited Partner as a Limited Partner of the Partnership, and by said undersigned Limited Partner’s execution and delivery hereof, said undersigned Limited Partner agrees to be bound by the terms and provisions of the Partnership Agreement, including the power of attorney set forth in Section 8.02 of the Partnership Agreement. The number of units of limited partnership interest (“Units”) issued as of the date hereof to the undersigned Limited Partner is set forth below. All terms used herein and not otherwise defined shall have the meanings given them in the Partnership Agreement.

Number of Units: 141,871

[Signature Page follows]

ADDITIONAL LIMITED PARTNER:

BRIAN L. GOLDBERG GENERATIONAL TRUST

/s/ Diana L. Goldberg

Diana L. Goldberg, Trustee

U/A dated January 2, 2002 for the

Brian L. Goldberg Generational Trust

/s/ Martin J. Kirsch

Martin J. Kirsch, Trustee

U/A dated January 2, 2002 for the

Brian L. Goldberg Generational Trust

[End of Signatures]

Limited Partner Acceptance – Brian L. Goldberg Generational Trust

Limited Partner Acceptance

March 25, 2011

This Limited Partner Acceptance (the “Acceptance”) to the Amended and Restated Agreement of Limited Partnership, as amended to the date hereof, of First Potomac Realty Investment Limited Partnership, L.P. (the “Partnership Agreement”), which Acceptance is entered into in connection with the Partnership Agreement, is executed and delivered by the undersigned. As of the date hereof, the undersigned General Partner hereby admits the undersigned Limited Partner as a Limited Partner of the Partnership, and by said undersigned Limited Partner’s execution and delivery hereof, said undersigned Limited Partner agrees to be bound by the terms and provisions of the Partnership Agreement, including the power of attorney set forth in Section 8.02 of the Partnership Agreement. The number of units of limited partnership interest (“Units”) issued as of the date hereof to the undersigned Limited Partner is set forth below. All terms used herein and not otherwise defined shall have the meanings given them in the Partnership Agreement.

Number of Units: 141,871

[Signature Page follows]

ADDITIONAL LIMITED PARTNER:

LAUREN B. GOLDBERG GENERATIONAL TRUST

/s/ Diana L. Goldberg

Diana L. Goldberg, Trustee

U/A dated January 2, 2002 for the

Lauren B. Goldberg Generational Trust

/s/ Martin J. Kirsch

Martin. J. Kirsch, Trustee

U/A dated January 2, 2002 for the

Lauren B. Goldberg Generational Trust

[End of Signatures]

Limited Partner Acceptance – Lauren B. Goldberg Generational Trust

Limited Partner Acceptance

March 25, 2011

This Limited Partner Acceptance (the “Acceptance”) to the Amended and Restated Agreement of Limited Partnership, as amended to the date hereof, of First Potomac Realty Investment Limited Partnership, L.P. (the “Partnership Agreement”), which Acceptance is entered into in connection with the Partnership Agreement, is executed and delivered by the undersigned. As of the date hereof, the undersigned General Partner hereby admits the undersigned Limited Partner as a Limited Partner of the Partnership, and by said undersigned Limited Partner’s execution and delivery hereof, said undersigned Limited Partner agrees to be bound by the terms and provisions of the Partnership Agreement, including the power of attorney set forth in Section 8.02 of the Partnership Agreement. The number of units of limited partnership interest (“Units”) issued as of the date hereof to the undersigned Limited Partner is set forth below. All terms used herein and not otherwise defined shall have the meanings given them in the Partnership Agreement.

Number of Units: 141,871

[Signature Page follows]

ADDITIONAL LIMITED PARTNER:

STUART W. GOLDBERG GENERATIONAL TRUST

/s/ Diana L. Goldberg

Diana L. Goldberg, Trustee

U/A dated January 2, 2002 for the

Stuart W. Goldberg Generational Trust

/s/ Martin J. Kirsch

Martin. J. Kirsch, Trustee

U/A dated January 2, 2002 for the

Stuart W. Goldberg Generational Trust

[End of Signatures]

Limited Partner Acceptance – Stuart W. Goldberg Generational Trust

EX-4.2

Exhibit 4.2

AMENDMENT NO. 16

TO THE

AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF

FIRST POTOMAC REALTY INVESTMENT LIMITED PARTNERSHIP

This Amendment No. 16 (the “Sixteenth Amendment”) to the Amended and Restated Limited Partnership Agreement of First Potomac Realty Investment Limited Partnership (the “Partnership”) dated September 15, 2003 (the “Partnership Agreement”), is entered into as of March 25, 2011, by First Potomac Realty Trust, the general partner (the “General Partner”) of the Partnership, and the Members of 840 First Street LLC, Stephen A. Goldberg, Brian L. Goldberg Generational Trust, Lauren B. Goldberg Generational Trust and Stuart W. Goldberg Generational Trust (collectively, the “Contributors”). All capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Partnership Agreement.

WHEREAS, pursuant to the terms of that certain Contribution Agreement, dated as of November 2, 2010 by and among 840 First Street LLC and the Partnership (the “Contribution Agreement”), on March 25, 2011 the Contributors contributed to the Partnership the property commonly known as 840 First Street, NE located in Washington, DC, in exchange for limited partnership operating units in the Partnership;

WHEREAS, pursuant to the terms of the Contribution Agreement, the Contributors are entitled to receive certain additional consideration in the form of additional limited partnership operating units in the Partnership;

WHEREAS, it is desirable to amend Exhibit A to the Partnership Agreement to reflect the additional consideration to the Contributors;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Partnership Agreement is hereby amended as follows:

Exhibit A to the Partnership Agreement is hereby amended by substituting for the current version of such exhibit, a version in the form attached hereto as Exhibit A reflecting the additional consideration received by the Contributors.

IN WITNESS WHEREOF, the foregoing Sixteenth Amendment has been signed and delivered as of this 26th day of September, 2011, by the parties set forth above.

FIRST POTOMAC REALTY TRUST, General Partner
By:	/s/ Joel F. Bonder
	Joel F. Bonder
	Executive Vice President

EX-4.3

Exhibit 4.3

AMENDMENT NO. 17

TO THE

AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF

FIRST POTOMAC REALTY INVESTMENT LIMITED PARTNERSHIP

This Amendment No. 17 (the “Seventeenth Amendment”) to the Amended and Restated Limited Partnership Agreement of First Potomac Realty Investment Limited Partnership (the “Partnership”) dated September 15, 2003 (the “Partnership Agreement”), is entered into as of January 6, 2012, by and among First Potomac Realty Trust, the general partner (the “General Partner”) of the Partnership, Hugo A. Schiattareggia (“Transferor”) and Nancy P. Schiattareggia (“Surviving Spouse” or “Transferee”). All capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Partnership Agreement.

WHEREAS, Transferor is a Limited Partner of the Partnership and the owner of 500 Partnership Units;

WHEREAS, the General Partner has received notice and evidence from the administrators of Transferor’s estate that the Transferor died on January 6, 2011, and that the Transferor’s estate wishes to transfer Transferor’s Partnership Units to his Surviving Spouse;

WHEREAS, pursuant to Section 9.01 of the Partnership Agreement Transferor wishes to transfer 500 Partnership Units to Transferee and Transferor has requested the General Partner’s consent to the Transfer;

WHEREAS, Transferee accepts and agrees to be bound by the terms and provisions of the Partnership Agreement, as amended; and

WHEREAS, it is desirable to amend Exhibit A to the Partnership Agreement to reflect the Transfer.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Partnership Agreement is hereby amended as follows:

1. Transferee herby accepts and agrees to be bound by the terms and provisions of the Partnership Agreement, as amended.

2. The General Partner hereby consents to the transfer of 500 Partnership Units from Transferor to Transferee and Transferee is hereby admitted as a Limited Partner of the Partnership. The General Partner hereby waives with respect to the Transferee the one-year holding period contained in Section 8.04(a) of the Partnership Agreement.

3. Exhibit A to the Partnership Agreement is hereby amended by substituting for the current version of such exhibit, a version in the form attached hereto as Exhibit A reflecting the transfer of 500 Partnership Units from Transferor to Transferee.

IN WITNESS WHEREOF, the foregoing Seventh Amendment has been signed and delivered as of this 6th day of January, 2012, by the parties thereto.

GENERAL PARTNER AND LIMITED PARTNERS, pursuant to Power of Attorney
By:	FIRST POTOMAC REALTY TRUST
By:	/s/ Joel F. Bonder
	Joel F. Bonder
	Executive Vice President
TRANSFEROR
By:	/s/ Gena S. Conte
	Gena S. Conte, Administrator
By:	/s/ Dominic J. Schiattareggia
	Dominic J. Schiattareggia, Administrator
TRANSFEREE
	/s/ Nancy P. Schiattareggia
	Nancy P. Schiattareggia

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Douglas J. Donatelli, certify that:

1. I have reviewed this quarterly report on Form 10-Q of First Potomac Realty Trust;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2012	/s/ Douglas J. Donatelli
	Douglas J. Donatelli
	Chairman of the Board and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Michael H. Comer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of First Potomac Realty Trust;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2012	/s/Michael H. Comer
	Michael H. Comer
	Senior Vice President and Chief Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of First Potomac Realty Trust (the “Company”) on Form 10-Q for the quarter ended March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Douglas J. Donatelli, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 15, 2012	/s/ Douglas J. Donatelli
	Douglas J. Donatelli
	Chairman of the Board and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of First Potomac Realty Trust (the “Company”) on Form 10-Q for the quarter ended March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael H. Comer, Chief Accounting Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 15, 2012	/s/ Michael H. Comer
	Michael H. Comer
	Senior Vice President and Chief Accounting Officer

XML

Summary of Significant Accounting Policies (Details)	3 Months Ended
	Mar. 31, 2012
Estimated useful lives of Company's assets, by class
Lease related intangible assets, Useful Life	The term of the related lease
Tenant improvements, Useful Life	Shorter of the useful life of the asset or the term of the related lease
Buildings [Member]
Estimated useful lives of Company's assets, by class
Property, Plant and Equipment, Useful Life, Average	39
Building improvements [Member]
Estimated useful lives of Company's assets, by class
Estimated useful lives of the assets, minimum	5
Estimated useful lives of the assets, maximum	20
Furniture, fixtures and equipment [Member]
Estimated useful lives of Company's assets, by class
Estimated useful lives of the assets, minimum	5
Estimated useful lives of the assets, maximum	15

XML

Debt (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Feb. 29, 2012	Dec. 31, 2011
Summary of borrowings of long term debt
Mortgage loans, effective interest rates ranging from 4.40% to 7.29%, maturing at various dates through June 2021	$ 408,241		$ 432,023
Senior notes	75,000		75,000
Secured term loans	20,000		30,000
Unsecured term loan, effective interest rates ranging from LIBOR plus 2.15% to LIBOR plus 2.30%, with staggered maturity dates ranging from July 2016 to July 2018		300,000
Unsecured revolving credit facility, effective interest rate of LIBOR plus 2.50%, maturing January 2015	107,000		183,000
Long-term Debt, Total	910,241		945,023
Series A senior notes, effective interest rate of 6.41%, maturing June 2013 [Member]
Summary of borrowings of long term debt
Senior notes	37,500		37,500
Series B senior notes, effective interest rate of 6.55%, maturing June 2016 [Member]
Summary of borrowings of long term debt
Senior notes	37,500		37,500
Secured term loan, effective interest rate of LIBOR plus 4.50%, with maturity dates in January 2013 and 2014 [Member]
Summary of borrowings of long term debt
Secured term loans	20,000		30,000
Unsecured term loan, effective interest rates ranging from LIBOR plus 2.15% to LIBOR plus 2.30%, with staggered maturity dates ranging from July 2016 to July 2018 [Member]
Summary of borrowings of long term debt
Unsecured term loan, effective interest rates ranging from LIBOR plus 2.15% to LIBOR plus 2.30%, with staggered maturity dates ranging from July 2016 to July 2018	$ 300,000		$ 225,000

XML

Investment in Affiliates (Details 1) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011	Mar. 31, 2011	Dec. 31, 2010
Assets:
Rental property, net	$ 1,437,847	$ 1,439,661
Cash and cash equivalents	17,157	16,749	18,681	33,280
Total assets	1,738,610	1,739,752	1,521,016
Liabilities:
Balance borrowing amount under unsecured revolving facility	20,000	30,000
Total liabilities	990,593	1,023,280
Unconsolidated joint ventures [Member]
Assets:
Rental property, net	242,311	242,767
Cash and cash equivalents	6,465	4,009
Other assets	21,194	22,734
Total assets	269,970	269,510
Liabilities:
Balance borrowing amount under unsecured revolving facility	131,639	132,370
Other liabilities	7,786	7,207
Total liabilities	139,425	139,577
Net Assets	$ 130,545	$ 129,933

XML

Share-Based Compensation (Details 1)	3 Months Ended
	Mar. 31, 2012 Y
Non-Officer Stock Option Award [Member]
Assumptions used in the fair value determination of stock options granted
Risk-free interest rate	0.83%
Expected volatility	50.70%
Expected dividend yield	5.71%
Weighted average expected life of options	5
Officer Stock Option Award [Member]
Assumptions used in the fair value determination of stock options granted
Risk-free interest rate	1.39%
Expected volatility	44.30%
Expected dividend yield	5.71%
Weighted average expected life of options	7

XML

Debt (Details 1) (USD $) In Thousands, unless otherwise specified				3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended
	Mar. 31, 2012	Dec. 31, 2011	Mar. 31, 2011	Mar. 31, 2012 Campus at Metro Park North [Member]	Dec. 31, 2011 Campus at Metro Park North [Member]	Mar. 31, 2012 One Fair Oaks [Member]	Dec. 31, 2011 One Fair Oaks [Member]	Mar. 31, 2012 1434 Crossways Blvd Building II [Member]	Dec. 31, 2011 1434 Crossways Blvd Building II [Member]	Mar. 31, 2012 Crossways Commerce Center [Member]	Dec. 31, 2011 Crossways Commerce Center [Member]	Mar. 31, 2012 Newington Business Park Center [Member]	Dec. 31, 2011 Newington Business Park Center [Member]	Mar. 31, 2012 Prosperity business center [Member]	Dec. 31, 2011 Prosperity business center [Member]	Mar. 31, 2012 Cedar Hills [Member]	Dec. 31, 2011 Cedar Hills [Member]	Mar. 31, 2012 Merrill Lynch Building [Member]	Dec. 31, 2011 Merrill Lynch Building [Member]	Mar. 31, 2012 1434 Crossways Blvd Building I [Member]	Dec. 31, 2011 1434 Crossways Blvd Building I [Member]	Mar. 31, 2012 Linden Business Center [Member]	Dec. 31, 2011 Linden Business Center [Member]	Mar. 31, 2012 840 First Street, NE [Member]	Dec. 31, 2011 840 First Street, NE [Member]	Mar. 31, 2012 Owings Mills Commerce Center [Member]	Dec. 31, 2011 Owings Mills Commerce Center [Member]	Mar. 31, 2012 Annapolis Business Center [Member]	Dec. 31, 2011 Annapolis Business Center [Member]	Mar. 31, 2012 Cloverleaf Center [Member]	Dec. 31, 2011 Cloverleaf Center [Member]	Mar. 31, 2012 Plaza 500, Van Buren office Park, Rumsey Center, Snowden Center, Greenbrier Technology Center II, Norfolk Business Center, Northridge and 15395 John Marshall Highway [Member]	Dec. 31, 2011 Plaza 500, Van Buren office Park, Rumsey Center, Snowden Center, Greenbrier Technology Center II, Norfolk Business Center, Northridge and 15395 John Marshall Highway [Member]	Mar. 31, 2012 Building D [Member]	Dec. 31, 2011 Building D [Member]	Mar. 31, 2012 Building C [Member]	Dec. 31, 2011 Building C [Member]	Mar. 31, 2012 Buildings C, D, G and H [Member]	Dec. 31, 2011 Buildings C, D, G and H [Member]	Mar. 31, 2012 Buildings A,B, E and F [Member]	Dec. 31, 2011 Buildings A,B, E and F [Member]	Mar. 31, 2012 Mercedes Center - Note 1 [Member]	Dec. 31, 2011 Mercedes Center - Note 1 [Member]	Mar. 31, 2012 Mercedes Center - Note 2 [Member]	Dec. 31, 2011 Mercedes Center - Note 2 [Member]	Mar. 31, 2012 Gateway Centre, Building I [Member]	Dec. 31, 2011 Gateway Centre, Building I [Member]	Mar. 31, 2012 Hillside Center [Member]	Dec. 31, 2011 Hillside Center [Member]	Mar. 31, 2012 500 First Street, NW [Member]	Dec. 31, 2011 500 First Street, NW [Member]	Mar. 31, 2012 Battlefield Corporate Center [Member]	Dec. 31, 2011 Battlefield Corporate Center [Member]	Mar. 31, 2012 Airpark Business Center [Member]	Dec. 31, 2011 Airpark Business Center [Member]
Summary of mortgage debt
Contractual interest rate				7.11%		6.31%		7.05%		6.70%		6.70%		6.25%		6.00%		6.00%		6.25%		6.01%		5.18%		5.85%		5.74%		6.75%		5.19%		8.88%		7.88%		8.50%		7.45%		4.67%		6.57%		7.35%		5.75%		5.72%		4.26%		7.45%
Effective Interest Rate	5.97%			5.25%		6.72%		5.38%		6.70%		6.70%		5.75%		6.58%		7.29%		5.38%		5.58%		6.05%		5.75%		6.25%		6.75%		5.19%		6.63%		6.63%		6.63%		6.63%		6.04%		6.30%		5.88%		4.62%		5.79%		4.40%		6.63%
Maturity date of senior notes				Feb. 12, 2012		Jun. 12, 2012		Aug. 12, 2012		Oct. 12, 2012		Oct. 12, 2012		Jan. 13, 2012		Feb. 13, 2012		Feb. 13, 2012		Mar. 13, 2012		Oct. 13, 2012		Oct. 13, 2012		Mar. 14, 2012		Jun. 14, 2012		Oct. 14, 2012		Aug. 15, 2012		Aug. 15, 2012		Dec. 17, 2012		Aug. 15, 2012		Jun. 21, 2012		Jan. 16, 2012		Jan. 16, 2012		Nov. 16, 2012		Dec. 16, 2012		Jul. 20, 2012		Nov. 20, 2012		Jun. 21, 2012
Total Mortgage Debt	$ 408,241	$ 432,023			$ 21,692	$ 52,502	$ 52,604	$ 8,999	$ 9,099	$ 23,600	$ 23,720	$ 14,886	$ 14,963	$ 3,346	$ 3,381	$ 15,731	$ 15,838	$ 13,502	$ 13,571	$ 7,871	$ 7,943	$ 6,875	$ 6,918	$ 55,486	$ 55,745	$ 5,310	$ 5,338	$ 8,326	$ 8,360	$ 16,829	$ 16,908	$ 97,301	$ 97,681	$ 489	$ 520	$ 889	$ 920	$ 1,288	$ 1,369	$ 2,192	$ 2,235	$ 4,704	$ 4,713	$ 9,666	$ 9,722	$ 971	$ 1,016	$ 14,026	$ 14,122	$ 38,143	$ 38,277	$ 4,113	$ 4,149	$ 1,196	$ 1,219
Unamortized fair value adjustments	(932)		(1,147)
Mortgage loans principal, net	$ 407,309		$ 430,876

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Notes Receivable (Details) (USD $)	3 Months Ended			3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Dec. 31, 2011	Mar. 31, 2012 Notes receivables issued on December 2010 [Member]	Dec. 31, 2011 Notes receivables issued on December 2010 [Member]	Mar. 31, 2012 Notes receivables issued on April 2011 [Member]	Dec. 31, 2011 Notes receivables issued on April 2011 [Member]
Summary of receivables with imputed interest
Notes receivables issued date				Dec. 01, 2010	Dec. 01, 2010	Apr. 01, 2011	Apr. 01, 2011
Face Amount	$ 55,000,000		$ 55,000,000	$ 25,000,000	$ 25,000,000	$ 30,000,000	$ 30,000,000
Unamortized Origination Costs	(321,000)		(321,000)	(200,000)	(211,000)	(121,000)	(128,000)
Carrying value of notes receivable	54,679,000		54,661,000	24,800,000	24,789,000	29,879,000	29,872,000
Interest rate				12.50%	12.50%	9.00%	9.00%
Secured Property				950 F Street, NW	950 F Street, NW	America's Square	America's Square
Notes Receivable (Textual) [Abstract]
Interest income	1,500,000	800,000
Income from amortization of origination costs	$ 17,000	$ 10,000

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Fair Value Measurements (Tables)	3 Months Ended
	Mar. 31, 2012
Fair Value Measurements [Abstract]
Fair Value of assets and liabilities	Fair value of assets and liabilities
Summary of the Company's interest rate derivative assets	Summary of the Company’s interest rate derivative assets
Summary of the Company's interest rate derivative liabilities	Summary of the Company's interest rate derivative liabilities
Fair value of the debt instruments	Fair value of the debt instruments

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Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2012 sqft Building	Mar. 31, 2011 sqft Building	Dec. 31, 2011
Summary of Segment Information
Number of buildings	182	187
Square feet	13,860,021	13,493,552
Total revenues	$ 46,772	$ 39,541
Property operating expense	(11,509)	(10,546)
Real estate taxes and insurance	(4,846)	(3,898)
Total property operating income	30,417	25,097
Depreciation and amortization expense	(16,091)	(12,504)
General and administrative	(4,897)	(4,008)
Acquisition costs	(17)	(2,185)
Impairment of real estate assets	2,751		400
Other expenses, net	(9,777)	(7,834)
(Provision) benefit for income taxes	(61)	313
Loss from discontinued operations	(297)	(2,771)
Net loss	(3,474)	(3,892)
Total assets	1,738,610	1,521,016	1,739,752
Capital expenditures	18,989	9,110
Segment Information (Textual) [Abstract]
Corporate assets not allocated to any reportable segments	84,473	64,349
Capital expenditure for corporate assets not allocated to any reportable segments	604	688
Maryland [Member]
Summary of Segment Information
Number of buildings	66	71
Square feet	3,878,306	3,986,034
Total revenues	14,406	12,874
Property operating expense	(3,828)	3,745
Real estate taxes and insurance	(1,209)	1,120
Total property operating income	9,369	8,009
Total assets	497,880	482,565
Capital expenditures	8,052	2,799
Washington D.C. [Member]
Summary of Segment Information
Number of buildings	4	4
Square feet	666,714	633,452
Total revenues	6,826	3,572
Property operating expense	(1,188)	(721)
Real estate taxes and insurance	(1,042)	(573)
Total property operating income	4,596	2,278
Total assets	331,971	265,313
Capital expenditures	863	260
Northern Virginia [Member]
Summary of Segment Information
Number of buildings	55	57
Square feet	3,665,510	3,512,734
Total revenues	13,315	10,527
Property operating expense	(3,113)	(2,978)
Real estate taxes and insurance	(1,551)	(1,188)
Total property operating income	8,651	6,361
Total assets	458,094	367,836
Capital expenditures	6,458	3,608
Southern Virginia [Member]
Summary of Segment Information
Number of buildings	57	55
Square feet	5,649,491	5,361,332
Total revenues	12,225	12,568
Property operating expense	(3,380)	(3,102)
Real estate taxes and insurance	(1,044)	(1,017)
Total property operating income	7,801	8,449
Total assets	366,192	340,953
Capital expenditures	$ 3,012	$ 1,755

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Debt (Details Textual) (USD $)	1 Months Ended		3 Months Ended								3 Months Ended		3 Months Ended								1 Months Ended
	Jan. 31, 2012	Dec. 31, 2009	Mar. 31, 2012	Mar. 31, 2011	Feb. 29, 2012	Dec. 31, 2011	Jan. 18, 2011	Mar. 31, 2012 Interest Rate Swap [Member]	Mar. 31, 2012 Line of Credit [Member]	Jan. 31, 2011 Secured term loan maturing January 2014 [Member]	Mar. 31, 2012 Secured term loan maturing in February 2011 [Member]	Mar. 31, 2012 Unsecured Debt [Member]	Mar. 31, 2012 Mortgages [Member]	Mar. 31, 2012 Series A senior notes [Member]	Mar. 31, 2012 Series B senior notes [Member]	Mar. 31, 2012 Secured term loan, effective interest rate of LIBOR plus 4.50%, with maturity dates in January 2013 and 2014 [Member]	Dec. 31, 2011 Secured term loan, effective interest rate of LIBOR plus 4.50%, with maturity dates in January 2013 and 2014 [Member]	Mar. 31, 2012 Unsecured term loan, effective interest rates ranging from LIBOR plus 2.15% to LIBOR plus 2.30%, with staggered maturity dates ranging from July 2016 to July 2018 [Member]	Dec. 31, 2011 Unsecured term loan, effective interest rates ranging from LIBOR plus 2.15% to LIBOR plus 2.30%, with staggered maturity dates ranging from July 2016 to July 2018 [Member]	Mar. 31, 2012 Secured term loan, effective interest rate of LIBOR plus 2.50%, maturing May 2011 [Member]	Feb. 29, 2012 Term Loan [Member]	Jan. 31, 2012 Term Loan [Member]	Mar. 31, 2012 Term Loan [Member]
Debt (Textual) [Abstract]
Acquisition in Maryland reporting segment				$ 131,500,000		$ 90,000,000
Unsecured revolving credit facility			107,000,000			183,000,000															300,000,000
Amount of each installments																							10,000,000
Debt instrument second annual principal payment																							10,000,000
Debt instrument, interest rate, effective percentage rate range, minimum													4.40%
Debt instrument, interest rate, effective percentage rate range, maximum													7.29%
Effective interest rate on the notes			5.97%											6.41%	6.55%	4.50%				2.50%
Debt instrument basis spread on variable rate minimum																		2.15%
Maturity date of senior notes											Feb. 14, 2012
Debt instrument, basis spread on variable rate											0.24%
Debt instrument basis spread on variable rate annual increase										4.50%
Debt instrument basis spread on variable rate maximum											5.50%							2.30%
Weighted average interest rate									2.70%
Additional borrowing term loan																						225,000,000
Amount pay down for term loan																					73,000,000
Outstanding balance of three tranches			300,000,000			225,000,000																	300,000,000
Maximum outstanding borrowing			198,000,000	191,000,000
Fixed Effective Interest Rate			1.6328%					1.6328%
Weighted average rate amount on variable rate debt			275,000,000				75,000,000	275,000,000
Balance borrowing amount under unsecured revolving facility			20,000,000			30,000,000						20,000,000				20,000,000	30,000,000
Debt (Additional Textual) [Abstract]
Repayments of secured debt	10,000,000	10,000,000
Annual commitment fee			0.25%
Available capacity on the unsecured revolving credit facility			148,000,000
Unsecured revolving credit facility			107,000,000
Weighted average borrowings outstanding on unsecured revolving credit facility			161,000,000	114,600,000
Weighted average interest rate			2.80%	3.30%
Variable rate mortgage			75,000,000
Repayment of Outstanding Revolving credit facility			120,000,000
Company borrowed on its unsecured revolving credit facility to partially fund the acquisition			44,000,000
Unsecured revolving credit facility					300,000,000													300,000,000	225,000,000
Unsecured long term debt previously outstanding			75,000,000		75,000,000
Outstanding balance on mortgage loan			$ 10,000,000

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Share-Based Compensation (Details 2) (Non-vested share awards [Member], USD $)	3 Months Ended
	Mar. 31, 2012
Non-vested share awards [Member]
Summary of the Company's non-vested share awards
Non-vested Shares, Beginning Balance	748,968
Weighted Average Grant Date Fair Value, Beginning Balance	$ 12.67
Non-vested shares, Granted	249,654
Non-vested Shares, Vested	(109,282)
Non-vested Shares, Expired	(61,932)
Weighted average grant date fair value of shares issued, granted	$ 14.32
Weighted Average Grant Date Fair Value, Vested	$ 16.00
Weighted Average Grant Date Fair Value, Expired	$ 11.36
Weighted Average Grant Date Fair Value, Ending Balance	$ 12.83
Non-vested Shares, Ending Balance	827,408

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Summary of Significant Accounting Policies (Tables)	3 Months Ended
	Mar. 31, 2012
Summary of Significant Accounting Policies [Abstract]
Estimated useful lives of Company's assets, by class	Estimated useful lives of Company’s assets, by class

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Investment In Affiliates (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Investment In Affiliates (Textual) [Abstract]
Mortgage debt, aggregate fair value		$ 86,500,000
Fees from Joint Ventures	79,000	48,000
Unconsolidated Entities [Member]
Investment In Affiliates (Textual) [Abstract]
Mortgage debt, aggregate fair value	$ 7,000,000
1750 H Street, NW [Member]
Investment In Affiliates (Textual) [Abstract]
Ownership Interest	50.00%
Rivers Park I and II [Member]
Investment In Affiliates (Textual) [Abstract]
Ownership Interest	25.00%

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Earnings Per Share (Details Textual) (USD $)	1 Months Ended	3 Months Ended
	Dec. 31, 2011	Mar. 31, 2011	Mar. 31, 2012
Earnings Per Share (Textual) [Abstract]
Specified number of shares for each $1,000 principal of exchangeable senior notes		$ 1,000
Principal amount of exchangeable senior notes convertible to 28.039 shares		28.039
Repayment of Outstanding Balance on Exchangeable Senior Notes	30,400,000
Series A Preferred stock, shares issued	6,400,000		6,400,000
Series A Preferred Shares, liquidation preference amount			$ 25,000

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Segment Information (Tables)	3 Months Ended
	Mar. 31, 2012
Segment Information [Abstract]
Summary of Segment Information	Summary of Segment Information

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Discontinued Operations (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Components of net loss from discontinued operations
Revenues	$ 208	$ 974
Net loss, before taxes	$ (297)	$ (2,771)

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Noncontrolling Interests (Details)	3 Months Ended
	Mar. 31, 2012 sqft
1005 First Street, NE [Member]
Business Acquisition [Line Items]
Business Acquisition, Effective Date of Acquisition	40756
Reporting Segment	Washington, D.C.
Square Footage	30,414
Business Combination, Step Acquisition, Equity Interest in Acquiree, Percentage	97.00%
Redland Corporate Center [Member]
Business Acquisition [Line Items]
Business Acquisition, Effective Date of Acquisition	40483
Reporting Segment	Maryland
Square Footage	348,469
Business Combination, Step Acquisition, Equity Interest in Acquiree, Percentage	97.00%

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2011	Mar. 25, 2011 840 First Street, NE [Member]	Mar. 31, 2012 Fair Value, Measurements, Nonrecurring [Member]	Dec. 31, 2011 Fair Value, Measurements, Nonrecurring [Member]	Mar. 31, 2012 Fair Value, Measurements, Recurring [Member]	Dec. 31, 2011 Fair Value, Measurements, Recurring [Member]	Mar. 31, 2012 Fair Value, Measurements, Recurring [Member] Corporate Campus at Ashburn Center [Member]	Dec. 31, 2011 Fair Value, Measurements, Recurring [Member] Corporate Campus at Ashburn Center [Member]	Mar. 31, 2012 Fair Value, Measurements, Recurring [Member] 840 First Street, NE [Member]	Dec. 31, 2011 Fair Value, Measurements, Recurring [Member] 840 First Street, NE [Member]	Mar. 31, 2012 Fair Value, Inputs, Level 1 [Member] Fair Value, Measurements, Nonrecurring [Member]	Dec. 31, 2011 Fair Value, Inputs, Level 1 [Member] Fair Value, Measurements, Nonrecurring [Member]	Mar. 31, 2012 Fair Value, Inputs, Level 1 [Member] Fair Value, Measurements, Recurring [Member]	Dec. 31, 2011 Fair Value, Inputs, Level 1 [Member] Fair Value, Measurements, Recurring [Member]	Mar. 31, 2012 Fair Value, Inputs, Level 1 [Member] Fair Value, Measurements, Recurring [Member] Corporate Campus at Ashburn Center [Member]	Dec. 31, 2011 Fair Value, Inputs, Level 1 [Member] Fair Value, Measurements, Recurring [Member] Corporate Campus at Ashburn Center [Member]	Mar. 31, 2012 Fair Value, Inputs, Level 1 [Member] Fair Value, Measurements, Recurring [Member] 840 First Street, NE [Member]	Dec. 31, 2011 Fair Value, Inputs, Level 1 [Member] Fair Value, Measurements, Recurring [Member] 840 First Street, NE [Member]	Mar. 31, 2012 Fair Value, Inputs, Level 2 [Member] Fair Value, Measurements, Nonrecurring [Member]	Dec. 31, 2011 Fair Value, Inputs, Level 2 [Member] Fair Value, Measurements, Nonrecurring [Member]	Mar. 31, 2012 Fair Value, Inputs, Level 2 [Member] Fair Value, Measurements, Recurring [Member]	Dec. 31, 2011 Fair Value, Inputs, Level 2 [Member] Fair Value, Measurements, Recurring [Member]	Mar. 31, 2012 Fair Value, Inputs, Level 2 [Member] Fair Value, Measurements, Recurring [Member] Corporate Campus at Ashburn Center [Member]	Dec. 31, 2011 Fair Value, Inputs, Level 2 [Member] Fair Value, Measurements, Recurring [Member] Corporate Campus at Ashburn Center [Member]	Mar. 31, 2012 Fair Value, Inputs, Level 2 [Member] Fair Value, Measurements, Recurring [Member] 840 First Street, NE [Member]	Dec. 31, 2011 Fair Value, Inputs, Level 2 [Member] Fair Value, Measurements, Recurring [Member] 840 First Street, NE [Member]	Mar. 31, 2012 Fair Value, Inputs, Level 3 [Member] Fair Value, Measurements, Nonrecurring [Member]	Dec. 31, 2011 Fair Value, Inputs, Level 3 [Member] Fair Value, Measurements, Nonrecurring [Member]	Mar. 31, 2012 Fair Value, Inputs, Level 3 [Member] Fair Value, Measurements, Recurring [Member]	Mar. 31, 2012 Fair Value, Inputs, Level 3 [Member] Fair Value, Measurements, Recurring [Member] Corporate Campus at Ashburn Center [Member]	Dec. 31, 2011 Fair Value, Inputs, Level 3 [Member] Fair Value, Measurements, Recurring [Member] Corporate Campus at Ashburn Center [Member]	Mar. 31, 2012 Fair Value, Inputs, Level 3 [Member] Fair Value, Measurements, Recurring [Member] 840 First Street, NE [Member]	Dec. 31, 2011 Fair Value, Inputs, Level 3 [Member] Fair Value, Measurements, Recurring [Member] 840 First Street, NE [Member]
Non-recurring Measurements:
Impaired real estate and intangible assets at fair value			$ 18,156	$ 10,583															$ 2,929	$ 5,250							$ 15,587	$ 5,333
Recurring Measurements:
Derivative instrument-swap agreement					344																344
Derivative instrument-swap liabilities					5,746	6,129															5,746	6,129
Contingent consideration recorded at acquisition	$ 9,356	$ 9,400					$ 1,448	$ 1,448	$ 745	$ 745																				$ 1,448	$ 1,448	$ 745	$ 745

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Investment in Affiliates (Details) (USD $) In Thousands, unless otherwise specified			3 Months Ended
	Mar. 31, 2012	Dec. 31, 2011	Mar. 31, 2012 1200 17th Street, NW [Member]	Mar. 31, 2012 Metro Place III & IV [Member]	Mar. 31, 2012 1750 H Street, NW [Member]	Mar. 31, 2012 Aviation Business Park [Member]	Mar. 31, 2012 Rivers Park I and II [Member]
Components of investments in affiliates
Reporting Segment			Washington, D.C.	Northern Virginia	Washington, D.C.	Maryland	Maryland
Ownership Interest			95.00%	51.00%	50.00%	50.00%	25.00%
Company Investment	$ 73,300	$ 72,518	$ 21,279	$ 27,926	$ 16,573	$ 4,658	$ 2,864

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Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2012
Summary of Significant Accounting Policies [Abstract]
Summary of Significant Accounting Policies	Summary of Significant Accounting Policies

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Fair Value Measurements (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Prepaid expenses and other assets [Member]
Summary of the Company's interest rate derivative assets
Beginning balance at January 1, 2012
Unrealized loss (gain)	344
Ending balance at March 31, 2012	344
Accounts payable and other liabilities [Member]
Summary of the Company's interest rate derivative liabilities
Beginning balance at December 31,	6,129	396
Unrealized gain on derivative instruments	(398)	(203)
Unrealized loss on derivative instruments	15
Ending balance at March 31,	$ 5,746	$ 193

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Rental Property (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Rental Property [Abstract]
Land and land improvements	$ 387,227	$ 384,409
Buildings and improvements	1,061,005	1,052,341
Construction in process	57,081	70,362
Tenant improvements	125,705	116,148
Furniture, fixtures and equipment	5,415	5,400
Rental property, Gross	1,636,433	1,628,660
Less: accumulated depreciation	(198,586)	(188,999)
Rental Property, Net	$ 1,437,847	$ 1,439,661

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Investment in Affiliates (Tables)	3 Months Ended
	Mar. 31, 2012
Investment in Affiliates [Abstract]
Component of investment in affiliates	Component of investment in affiliates
Net assets of Company's unconsolidated joint ventures	Net assets of Company’s unconsolidated joint ventures
Results of operations of Company's unconsolidated joint ventures	Results of operations of Company’s unconsolidated joint ventures

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Note Receivable (Tables)	3 Months Ended
	Mar. 31, 2012
Notes Receivable [Abstract]
Summary of notes receivable	Summary of notes receivable

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Debt (Details 2) (USD $) In Thousands, unless otherwise specified			3 Months Ended
	Mar. 31, 2012	Dec. 31, 2011	Mar. 31, 2012 Tranche A [Member]	Mar. 31, 2012 Tranche B [Member]	Mar. 31, 2012 Tranche C [Member]
Outstanding balances of unsecured term loans
Maturity date of senior notes			Jul. 16, 2012	Jul. 17, 2012	Jul. 18, 2012
Unsecured term loan	$ 300,000	$ 225,000	$ 60,000	$ 147,500	$ 92,500
Interest on loan in LIBOR			LIBOR, plus 215 basis points	LIBOR, plus 225 basis points	LIBOR, plus 230 basis points

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Rental Property (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012 sqft
Current development and redevelopment activity
Developable Square Feet	2,372
Square Feet Under Development	166
Cost to Date of Development Activities	$ 582
Square Feet Under Redevelopment	344
Cost to Date of Redevelopment Activities	14,799
Washington D.C. [Member]
Current development and redevelopment activity
Developable Square Feet	713
Square Feet Under Redevelopment	135
Cost to Date of Redevelopment Activities	2,755
Maryland [Member]
Current development and redevelopment activity
Developable Square Feet	250
Northern Virginia [Member]
Current development and redevelopment activity
Developable Square Feet	568
Square Feet Under Redevelopment	209
Cost to Date of Redevelopment Activities	12,044
Southern Virginia [Member]
Current development and redevelopment activity
Developable Square Feet	841
Square Feet Under Development	166
Cost to Date of Development Activities	$ 582

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Discontinued Operations (Tables)	3 Months Ended
	Mar. 31, 2012
Discontinued Operations [Abstract]
Summary of property dispositions	Summary of property dispositions
Net (loss) income from discontinued operations	Net (loss) income from discontinued operations

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Debt (Tables)	3 Months Ended
	Mar. 31, 2012
Debt [Abstract]
Schedule of Borrowings	Schedule of Borrowings
Summary of the Company's mortgage debt	Summary of the Companys mortgage debt
Unsecured Term Loan	Unsecured Term Loan

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Description of Business	3 Months Ended
	Mar. 31, 2012
Description of Business [Abstract]
Description of Business	Description of Business

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Derivative Instruments (Tables)	3 Months Ended
	Mar. 31, 2012
Derivative Instruments [Abstract]
Summary of Interest rate swap agreements	Summary of Interest rate swap agreements

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Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Numerator for basic and diluted earnings per share:
Loss from continuing operations	$ (3,177)	$ (1,121)
Loss from discontinued operations	(297)	(2,771)
Net loss	(3,474)	(3,892)
Less: Net loss from continuing operations attributable to noncontrolling interests	302	70
Less: Net loss from discontinued operations attributable to noncontrolling interests	16	68
Net loss attributable to First Potomac Realty Trust	(3,156)	(3,754)
Less: Dividends on preferred shares	(2,664)	(1,783)
Net loss available to common shareholders	(5,820)	(5,537)
Less: Allocation to participating securities	(141)	(137)
Net loss attributable to common shareholders	$ (5,820)	$ (5,537)
Denominator for basic and diluted earnings per share:
Basic and Diluted	49,781	49,234
Basic and diluted earnings per share:
Loss from continuing operations	$ (0.11)	$ (0.07)
Loss from discontinued operations	$ (0.01)	$ (0.05)
Net loss	$ (0.12)	$ (0.12)

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Discontinued Operations (Details Textual) (USD $)	3 Months Ended		12 Months Ended	1 Months Ended	3 Months Ended		12 Months Ended	3 Months Ended		12 Months Ended	3 Months Ended
	Mar. 31, 2012 sqft	Mar. 31, 2011 sqft	Dec. 31, 2011	Mar. 31, 2012 Airpark Place Business Center [Member] sqft	Sep. 30, 2012 Airpark Place Business Center [Member]	Mar. 31, 2012 Airpark Place Business Center [Member] sqft	Dec. 31, 2011 Airpark Place Business Center [Member]	Mar. 31, 2012 Woodlands Business Center [Member] sqft	Dec. 31, 2011 Woodlands Business Center [Member]	Dec. 31, 2011 Woodlands Business Center [Member]	Mar. 31, 2012 Gateway West [Member] sqft	Mar. 31, 2011 Gateway West [Member]
Discontinued Operations Discontinued Operations (Textual) [Abstract]
Area of land parcel	13,860,021	13,493,552		82,400		82,429		37,887			111,481
Proceeds from sale of Properties	$ 5,206,000	$ 10,824,000		$ 5,206,000
Property sold								2,900,000
Impairment charge on the contractual sale price	$ 2,751,000		$ 400,000		$ 3,100,000		$ 3,600,000	$ 200,000	$ 1,600,000	$ 1,600,000		$ 2,700,000

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Share-Based Compensation (Details Textual) (USD $)	1 Months Ended	3 Months Ended
	Feb. 29, 2012 Y	Mar. 31, 2012	Mar. 31, 2011	Dec. 31, 2011
Benefit Plans (Textual) [Abstract]
Stock options awarded		627,500
Vesting period of first award	5
Number of common shares issued to independent non-employee trustees		50,722,000		50,722,000
Compensation expense associated with trustee share based awards		$ 130,000	$ 65,000
Stock options, exercised		907
Benefit Plans (Additional Textual) [Abstract]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Date		P10Y
Outstanding stock options awarded		1,505,792		887,168
Weighted average grant date fair value of the stock options issued		$ 3.27
Amount received from the exercise of stock options		9,000	18,000
Total intrinsic value of options exercised		3,000	10,000
Non-vested share awards [Member]
Benefit Plans (Textual) [Abstract]
Restricted common shares, granted		249,654
Benefit Plans (Additional Textual) [Abstract]
Weighted average grant date fair value of shares issued		$ 14.32
Stock Options [Member]
Benefit Plans (Textual) [Abstract]
Unrecognized compensation cost related to non vested shares		2,400,000
Weighted average period for recognition of non vested shares		6.1
Restricted Stock Units (RSUs) [Member]
Benefit Plans (Textual) [Abstract]
Restricted common shares, granted	249,654
Unrecognized compensation cost related to non vested shares		6,700,000
Weighted average period for recognition of non vested shares		4.0
Compensation expense associated with trustee share based awards		$ 600,000	$ 600,000
Officer Stock Option Award [Member]
Benefit Plans (Textual) [Abstract]
Stock options awarded		500,000
Percentage of options to be vested on the first anniversary of the grant date		12.50%
Percentage of options to be vested after the date of grant in each subsequent quarter		3.125%
Stock options issued during vesting period		8 years
Non-Officer Stock Option Award [Member]
Benefit Plans (Textual) [Abstract]
Stock options awarded		127,500
Percentage of options to be vested on the first anniversary of the grant date		25.00%
Percentage of options to be vested after the date of grant in each subsequent quarter		6.25%
Stock options issued during vesting period		4 years

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Assets:
Rental property, net	$ 1,437,847	$ 1,439,661
Assets held for sale	2,933	5,297
Cash and cash equivalents	17,157	16,749
Escrows and reserves	18,097	18,455
Accounts and other receivables, net of allowance for doubtful accounts of $2,991 and $3,065 respectively	10,701	11,404
Accrued straight-line rents, net of allowance for doubtful accounts of $299 and $369, respectively	19,814	18,028
Notes receivable, net	54,679	54,661
Investment in affiliates	73,300	72,518
Deferred costs, net	37,241	34,683
Prepaid expenses and other assets	10,821	9,275
Intangible assets, net	56,020	59,021
Total assets	1,738,610	1,739,752
Liabilities:
Mortgage loans	408,241	432,023
Senior notes	75,000	75,000
Secured term loans	20,000	30,000
Unsecured term loan	300,000	225,000
Unsecured revolving credit facility	107,000	183,000
Accounts payable and other liabilities	54,984	53,507
Accrued interest	3,765	2,782
Rents received in advance	11,326	11,550
Tenant security deposits	5,740	5,603
Deferred market rent, net	4,537	4,815
Total liabilities	990,593	1,023,280
Noncontrolling interests in the Operating Partnership (redemption value of $35,310 and $38,113, respectively)	40,044	39,981
Equity:
Series A Preferred Shares, $25 liquidation preference,6,400 and 4,600 shares issued and outstanding, respectively	160,000	115,000
Common shares, $0.001 par value, 150,000 shares authorized: 50,722 and 50,321 shares issued and outstanding, respectively	51	50
Additional paid-in capital	799,605	798,171
Noncontrolling interests in consolidated partnerships	4,270	4,245
Accumulated other comprehensive loss	(5,161)	(5,849)
Dividends in excess of accumulated earnings	(250,792)	(235,126)
Total equity	707,973	676,491
Total liabilities, noncontrolling interests and equity	$ 1,738,610	$ 1,739,752

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Rental Property (Details Textual) (USD $)	3 Months Ended				3 Months Ended
	Mar. 31, 2012 sqft	Mar. 31, 2011 sqft	Dec. 31, 2011	Mar. 25, 2011 840 First Street, NE [Member]	Mar. 31, 2012 Northern Virginia [Member] sqft	Mar. 31, 2011 Northern Virginia [Member] sqft	Mar. 31, 2012 Washington D.C. [Member] sqft	Mar. 31, 2011 Washington D.C. [Member] sqft
Rental Property (Additional Textual) [Abstract]
Area of completed development and redevelopment activities					209,000
Completed development and redevelopment activities at cost					$ 12,000,000
Completed development and redevelopment activities to be placed in service		93,000
Completed development and redevelopment activities to be placed in service cost		7,200,000
Area of land parcel	13,860,021	13,493,552			3,665,510	3,512,734	666,714	633,452
Aggregate purchase price		131,500,000	90,000,000
Contingent consideration recorded at acquisition		$ 9,356,000		$ 9,400,000
Rental Property (Textual) [Abstract]
Developable land that can accommodate additional building space	2,400,000
Area of land parcel	13,860,021	13,493,552			3,665,510	3,512,734	666,714	633,452

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Cash flows from operating activities:
Net loss	$ (3,474)	$ (3,892)
Discontinued operations:
Depreciation and amortization	30	395
Impairment of real estate assets	270	2,711
Depreciation and amortization	16,337	12,710
Stock based compensation	696	691
Bad debt expense	69	330
Deferred income taxes	(100)	(313)
Amortization of deferred market rent	(20)	172
Amortization of financing costs and discounts	1,277	566
Equity in losses of affiliates	46	32
Distributions from investments in affiliates	122	9
Impairment of real estate assets	2,751
Changes in assets and liabilities:
Escrows and reserves	451	(5,434)
Accounts and other receivables	877	(1,630)
Accrued straight-line rents	(2,596)	(1,416)
Prepaid expenses and other assets	(213)	126
Tenant security deposits	162	230
Accounts payable and accrued expenses	2,635	140
Accrued interest	983	1,564
Rents received in advance	(253)	184
Deferred costs	(3,987)	(2,911)
Total adjustments	19,537	8,156
Net cash provided by operating activities	16,063	4,264
Cash flows from investing activities:
Purchase deposit on future acquisitions		(3,465)
Proceeds from sale of real estate assets	5,206	10,824
Change in escrow and reserve accounts	15
Acquisition of rental property and associated intangible assets		(9,974)
Additions to rental property	(17,207)	(6,303)
Acquisition of land parcel		(7,500)
Additions to construction in progress	(1,782)	(2,807)
Investment in affiliates	(949)	(260)
Net cash used in investing activities	(14,717)	(19,485)
Cash flows from financing activities:
Financing costs	(621)	(920)
Issuance of preferred shares, net	43,562	111,016
Issuance of common shares, net	3,599
Issuance of debt	119,000	30,000
Repayments of debt	(153,567)	(128,652)
Dividends to common shareholders	(10,108)	(10,649)
Dividends to preferred shareholders	(2,228)
Distributions to noncontrolling interests	(584)	(191)
Stock option exercises	9	18
Net cash (used in) provided by financing activities	(938)	622
Net increase (decrease) in cash and cash equivalents	408	(14,599)
Cash and cash equivalents, beginning of period	16,749	33,280
Cash and cash equivalents, end of period	17,157	18,681
Supplemental disclosure of cash flow information (amounts in thousands):
Cash paid for interest, net	9,480	6,452
Non-cash investing and financing activities:
Debt assumed in connection with acquisitions of real estate		86,464
Contingent consideration recorded at acquisition		9,356
Conversion of Operating Partnership units into common shares		19
Issuance of Operating Partnership units associated with the acquisition of real estate		$ 21,721

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Derivative Instruments (Details) (USD $) In Thousands, unless otherwise specified			3 Months Ended
	Mar. 31, 2012	Jan. 18, 2011	Mar. 31, 2012 Interest Rate Swap One [Member]	Mar. 31, 2012 Interest Rate Swap Two [Member]	Mar. 31, 2012 Interest Rate Swap Three [Member]	Mar. 31, 2012 Interest Rate Swap Four [Member]	Mar. 31, 2012 Interest Rate Swap Five [Member]	Mar. 31, 2012 Interest Rate Swap Six [Member]	Mar. 31, 2012 Interest Rate Swap Seven [Member]	Mar. 31, 2012 Interest Rate Swap Eight [Member]	Mar. 31, 2012 Interest Rate Swap Nine [Member]	Mar. 31, 2012 Interest Rate Swap Ten [Member]
Summary of Interest rate swap agreements
Effective Date			Jan. 11, 2012	Jul. 11, 2012	Jul. 11, 2012	Jul. 11, 2012	Jul. 11, 2012	Sep. 11, 2012	Jan. 12, 2012	Mar. 12, 2012	Mar. 12, 2012	Mar. 12, 2012
Maturity Date			Jan. 14, 2012	Jul. 16, 2012	Jul. 16, 2012	Jul. 17, 2012	Jul. 17, 2012	Jul. 18, 2012	Jul. 18, 2012	Jul. 17, 2012	Jul. 17, 2012	Jul. 18, 2012
Amount	$ 275,000	$ 75,000	$ 50,000	$ 35,000	$ 25,000	$ 30,000	$ 30,000	$ 30,000	$ 25,000	$ 25,000	$ 12,500	$ 12,500
Interest Rate Contractual Component			LIBOR	LIBOR	LIBOR	LIBOR	LIBOR	LIBOR	LIBOR	LIBOR	LIBOR	LIBOR
Fixed Effective Interest Rate	1.6328%		1.474%	1.754%	1.7625%	2.093%	2.093%	1.66%	1.394%	1.129%	1.129%	1.383%

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Noncontrolling Interests (Tables)	3 Months Ended
	Mar. 31, 2012
Noncontrolling Interests [Abstract]
Property owned under consolidated joint ventures	Property owned under consolidated joint ventures

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Equity (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Company's allocation between noncontrolling interests
Beginning balance	$ 676,491	$ 618,060
Redeemable noncontrolling interests, Beginning Balance	39,981	16,122
Net (loss) income	(3,139)	(3,756)
Net loss, Redeemable noncontrolling interests	(335)	(136)
Changes in ownership, net	46,270	110,424
Change in ownership, net, Redeemable noncontrolling interests	942	21,620
Distributions to owners	(12,336)	(10,641)
Distributions to owners, Redeemable noncontrolling interests	(584)	(191)
Other comprehensive income	687	252
Other comprehensive income, Redeemable noncontrolling interests	40	5
Redeemable noncontrolling interests, Ending Balance	40,044	37,420
Ending balance	707,973	714,339
Parent Company [Member]
Company's allocation between noncontrolling interests
Beginning balance	672,246	614,983
Net (loss) income	(3,156)	(3,754)
Changes in ownership, net	46,262	110,430
Distributions to owners	(12,336)	(10,649)
Other comprehensive income	687	252
Ending balance	703,703	711,262
Non Redeemable Noncontrolling Interests [Member]
Company's allocation between noncontrolling interests
Beginning balance	4,245	3,077
Net (loss) income	17	(2)
Changes in ownership, net	8	2
Ending balance	$ 4,270	$ 3,077

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Segment Information	3 Months Ended
	Mar. 31, 2012
Segment Information [Abstract]
Segment Information	Segment Information

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Share-Based Compensation (Tables)	3 Months Ended
	Mar. 31, 2012
Share-Based Compensation [Abstract]
Compensation Plans Option Activity	Compensation Plans Option Activity
Assumption Used in Fair Value Determination Of Stock Option Granted	Assumption Used in Fair Value Determination Of Stock Option Granted
Summary of the Company's non-vested share awards	Summary of the Company’s non-vested share awards

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Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2012
Summary of Significant Accounting Policies [Abstract]
Principles of Consolidation	Principles of Consolidation
Use of Estimates	Use of Estimates
Rental Property	Rental Property
Notes Receivable	Notes Receivable
Reclassifications	Reclassifications
Application of New Accounting Standards	Application of New Accounting Standards

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Noncontrolling Interests (Details Textual) (USD $) In Millions, except Share data, unless otherwise specified				3 Months Ended
	Mar. 31, 2012	Mar. 31, 2012 Battlefield Corporate Center [Member]	Dec. 31, 2011 Battlefield Corporate Center [Member]	Mar. 31, 2012 840 First Street, NE [Member]
Noncontrolling Interests in Operating Partnerships (Additional Textual) [Abstract]
Operating partnership units fair valued				$ 3.1
Operating partnership units		2,920,561	2,920,561
Noncontrolling Interests in Operating Partnerships (Textual) [Abstract]
Cost to acquire all of the outstanding operating partnership units not owned by the company	$ 35.3

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Consolidated Statements of Cash Flows (Parenthetical) (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011 Property OperatingPartnershipUnits
Consolidated Statements of Cash Flows [Abstract]
Mortgage debt, aggregate fair value		$ 86,500,000
Number of operating partnership units redeemed		1,300
Capitalized interest on indebtedness paid in cash	800,000	400,000
Cash paid for franchise taxes	0	0
Consolidated properties and a land parcel, acquired		3
Issuance of operating partnership units in connection with acquisition		1,418,715
Operating partnership units, value		21,700,000
Aggregate purchase price		131,500,000
Contingent consideration recorded at acquisition		9,356,000
Operating partnership units	544,673
Contingent consideration obliigation	$ 7,100,000

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Consolidated Balance Sheets [Abstract]
Allowance for doubtful accounts, accounts receivable and other	$ 2,991	$ 3,065
Allowance for doubtful accounts, Accrued straight-line rents	299	369
Preferred stock, par value	$ 0.001	$ 0.001
Series A Preferred stock, shares authorized	50,000	50,000
Series A Preferred Shares, liquidation preference amount	$ 25
Series A Preferred stock, shares issued	6,400	6,400
Series A Preferred stock, outstanding	4,600	4,600
Common Shares Par Value	$ 0.001	$ 0.001
Common stock, shares authorized	150,000	150,000
Common Stock, shares issued	50,722	50,722
Common stock, shares outstanding	50,321	50,321

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Derivative Instruments	3 Months Ended
	Mar. 31, 2012
Derivative Instruments [Abstract]
Derivative Instruments and Comprehensive Loss	Derivative Instruments

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Document and Entity Information	3 Months Ended
	Mar. 31, 2012	May 14, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	FIRST POTOMAC REALTY TRUST
Entity Central Index Key	0001254595
Document Type	10-Q
Document Period End Date	Mar. 31, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		50,967,635

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Fair Value Measurements	3 Months Ended
	Mar. 31, 2012
Fair Value Measurements [Abstract]
Fair Value Measurements	Fair Value Measurements

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Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Revenues:
Rental	$ 37,573	$ 31,639
Tenant reimbursements and other	9,199	7,902
Total revenues	46,772	39,541
Operating expenses:
Property operating	11,509	10,546
Real estate taxes and insurance	4,846	3,898
General and administrative	4,897	4,008
Acquisition costs	17	2,185
Depreciation and amortization	16,091	12,504
Impairment of real estate assets	2,751
Total operating expenses	40,111	33,141
Operating income	6,661	6,400
Other expenses, net:
Interest expense	11,239	8,626
Interest and other income	(1,508)	(824)
Equity in losses of affiliates	46	32
Total other expenses, net	9,777	7,834
Loss from continuing operations before income taxes	(3,116)	(1,434)
(Provision) benefit for income taxes	(61)	313
Loss from continuing operations	(3,177)	(1,121)
Loss from discontinued operations	(297)	(2,771)
Net loss	(3,474)	(3,892)
Less: Net loss attributable to noncontrolling interests	318	138
Net loss attributable to First Potomac Realty Trust	(3,156)	(3,754)
Less: Dividends on preferred shares	(2,664)	(1,783)
Net loss attributable to common shareholders	$ (5,820)	$ (5,537)
Basic and diluted earnings per share:
Loss from continuing operations	$ (0.11)	$ (0.07)
Loss from discontinued operations	$ (0.01)	$ (0.05)
Net loss	$ (0.12)	$ (0.12)
Weighted average common shares outstanding:
Basic and Diluted	49,781	49,234

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Notes Receivable	3 Months Ended
	Mar. 31, 2012
Notes Receivable [Abstract]
Notes Receivable	Notes Receivable

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Rental Property	3 Months Ended
	Mar. 31, 2012
Rental Property [Abstract]
Rental Property	Rental Property

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Subsequent Events	3 Months Ended
	Mar. 31, 2012
Subsequent Events [Abstract]
Subsequent Events	Subsequent Events

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Equity	3 Months Ended
	Mar. 31, 2012
Equity [Abstract]
Equity	Equity

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Debt	3 Months Ended
	Mar. 31, 2012
Debt [Abstract]
Debt	Debt

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Derivative Instruments (Details Textual) (USD $)	Mar. 31, 2012	Jan. 18, 2011
Derivative Instruments (Textual) [Abstract]
Variable rate mortgage	$ 75,000,000
Amount	$ 275,000,000	$ 75,000,000
Fixed Effective Interest Rate	1.6328%

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Investment in Affiliates	3 Months Ended
	Mar. 31, 2012
Investment in Affiliates [Abstract]
Investment in Affiliates	Investment in Affiliates

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Discontinued Operations	3 Months Ended
	Mar. 31, 2012
Discontinued Operations [Abstract]
Discontinued Operations	Discontinued Operations

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Income Taxes	3 Months Ended
	Mar. 31, 2012
Income Taxes [Abstract]
Income Taxes	Income Taxes

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Fair Value Measurements (Details Textual) (USD $)	1 Months Ended	3 Months Ended		12 Months Ended		3 Months Ended		12 Months Ended	3 Months Ended			12 Months Ended	3 Months Ended			1 Months Ended
	Jul. 31, 2011 Floor	Mar. 31, 2012 Interest_Rate_Swap	Mar. 31, 2011	Dec. 31, 2011	Feb. 29, 2012	Mar. 31, 2012 Interest Rate Swap [Member] Rates	Sep. 30, 2012 Airpark Place Business Center [Member]	Dec. 31, 2011 Airpark Place Business Center [Member]	Mar. 31, 2012 Owings Mills Business Park [Member]	Mar. 31, 2012 Woodlands Business Center [Member]	Dec. 31, 2011 Woodlands Business Center [Member]	Dec. 31, 2011 Woodlands Business Center [Member]	Dec. 31, 2011 Goldenrod Lane [Member]	Mar. 31, 2011 Gateway West [Member]	Mar. 31, 2012 Corporate Campus at Ashburn Center [Member]	Jul. 31, 2011 840 First Street, NE [Member]	Mar. 31, 2012 840 First Street, NE [Member]	Mar. 25, 2011 840 First Street, NE [Member]
Fair Value Measurements (Textual) [Abstract]
Variable rate debt						$ 75,000,000
LIBOR fixed interest rate on swap agreement		1.6328%				1.6328%
Number of interest rate swap agreements						275,000,000
Minimum number of daily snapshot used for valuation of interest rate swap agreements						7,500
Impairment of real estate assets		2,751,000		400,000			3,100,000	3,600,000	2,800,000	200,000	1,600,000	1,600,000	900,000	2,700,000
Purchase price for acquisition of first street																		90,000,000
Additional contingent consideration for purchase of property																		10,000,000
Contingent consideration obligation			9,356,000															9,400,000
Payment for settlement contingent consideration obligation																7,100,000
Recognized gain associated with the issuance of additional units																1,500,000
Contingent consideration remaining															1,400,000		700,000
Fair Value Measurements (Additional Textual) [Abstract]
Number of interest rate agreements		10
Number of interest rate swap entered during the period		4
Number of floors	2
Additional impairment of real assets		3,000,000	2,700,000
Fair value of notes receivable		55,000,000		55,000,000
Principal payment of remaining secured term loan		10,000,000
Number of Operating Partnership Units Issued	544,673
Unsecured long term debt previously outstanding		$ 75,000,000			$ 75,000,000

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Equity (Details Textual) (USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended		3 Months Ended				1 Months Ended	3 Months Ended
	Feb. 29, 2012	Apr. 30, 2011	Mar. 31, 2012	Mar. 31, 2011	Apr. 24, 2012	Dec. 31, 2011	May 31, 2012 Series A Preferred Shares [Member]	Mar. 31, 2012 Series A Preferred Shares [Member]
Equity (Additional Textual) [Abstract]
Secured term loans			$ 20,000			$ 30,000
Preferred shares issued during the period								1,800,000
Dividend rate percentage							7.75%
Issued price per share of preferred shares								$ 25.00
Proceeds from issuance of preferred stock and preference stock			43,562	111,016				44,000
Dividends declared on Series A Preferred Shares							$ 0.484375
Equity (Textual) [Abstract]
Common stock dividend per share declared					$ 0.20
Common stock, dividends, per share, declared		$ 0.80
Dividends Paid Per Preferred Shares	$ 0.20
Dividends Paid Per Preferred Shares	$ 0.484375
Number of common shares sold			245,000
Weighted average offering price			$ 14.83
Proceeds from issuance of common shares			$ 3,599
Number of common shares available for issuance			4,300,000

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Fair Value Measurements (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Carrying value of notes receivable	$ 54,679	$ 54,661
Fair value of notes receivable	55,000	55,000
Carrying Value [Member]
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Carrying value of notes receivable	54,679	54,661
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Carrying value of the debt instruments	910,241	945,023
Carrying Value [Member] | Mortgage debt [Member]
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Carrying value of the debt instruments	408,241	432,023
Carrying Value [Member] | Series A senior notes [Member]
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Carrying value of the debt instruments	37,500	37,500
Carrying Value [Member] | Series B senior notes [Member]
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Carrying value of the debt instruments	37,500	37,500
Carrying Value [Member] | Secured term loans [Member]
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Carrying value of the debt instruments	20,000	30,000
Carrying Value [Member] | Unsecured term loan [Member]
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Carrying value of the debt instruments	300,000	225,000
Carrying Value [Member] | Unsecured revolving credit facility [Member]
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Carrying value of the debt instruments	107,000	183,000
Fair Value [Member]
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Fair value of notes receivable	55,000	55,000
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Fair value of the debt instruments	926,103	955,222
Fair Value [Member] | Mortgage debt [Member]
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Fair value of the debt instruments	416,942	437,593
Fair Value [Member] | Series A senior notes [Member]
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Fair value of the debt instruments	39,098	39,128
Fair Value [Member] | Series B senior notes [Member]
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Fair value of the debt instruments	41,904	41,383
Fair Value [Member] | Secured term loans [Member]
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Fair value of the debt instruments	20,265	29,990
Fair Value [Member] | Unsecured term loan [Member]
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Fair value of the debt instruments	300,376	224,388
Fair Value [Member] | Unsecured revolving credit facility [Member]
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Fair value of the debt instruments	$ 107,518	$ 182,740

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Equity (Tables)	3 Months Ended
	Mar. 31, 2012
Equity [Abstract]
Company's allocation between noncontrolling interests	Company’s allocation between noncontrolling interests
Company?s accumulated other comprehensive loss	Company’s accumulated other comprehensive loss

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Discontinued Operations (Details)	3 Months Ended			1 Months Ended	3 Months Ended
	Mar. 31, 2012 sqft	Mar. 31, 2011 sqft	Mar. 31, 2012 Woodlands Business Center [Member] sqft	Mar. 31, 2012 Airpark Place Business Center [Member] sqft	Mar. 31, 2012 Airpark Place Business Center [Member] sqft	Mar. 31, 2012 Aquia Commerce Center I & II [Member] sqft	Mar. 31, 2012 Gateway West [Member] sqft	Mar. 31, 2012 Old Courthouse Square [Member] sqft
Summary of property dispositions
Reporting Segment			Maryland		Maryland	Northern Virginia	Maryland	Maryland
Disposition date of property			May 08, 2012		Mar. 22, 2012	Jun. 22, 2011	May 27, 2011	Feb. 18, 2011
Real estate and accumulated depreciation property type			Office		Business Park	Office	Office	Retail
Area of land parcel	13,860,021	13,493,552	37,887	82,400	82,429	64,488	111,481	201,208

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Share-Based Compensation	3 Months Ended
	Mar. 31, 2012
Share-Based Compensation [Abstract]
Share-Based Compensation	Share-Based Compensation

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Earnings Per Share (Tables)	3 Months Ended
	Mar. 31, 2012
Earnings Per Share [Abstract]
Computation of Company's basic and diluted earnings per share	Computation of Company’s basic and diluted earnings per share
Anti-dilutive shares not included in calculation of diluted earnings per share	Anti-dilutive shares not included in calculation of diluted earnings per share

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Investment in Affiliates (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Results of operations of Company's unconsolidated joint ventures
Total revenues	$ 46,772	$ 39,541
Total operating expenses	(40,111)	(33,141)
Operating income	6,661	6,400
Depreciation and amortization	(16,337)	(12,710)
Other expenses, net	9,777	7,834
Net income (loss)	(46)	(32)
Unconsolidated joint ventures [Member]
Results of operations of Company's unconsolidated joint ventures
Total revenues	6,080	3,078
Total operating expenses	(1,768)	(1,136)
Operating income	4,312	1,942
Depreciation and amortization	(3,168)	(1,302)
Other expenses, net	(1,082)	(723)
Net income (loss)	$ 62	$ (83)

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Earnings Per Share (Details 1) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Anti-dilutive shares not included in calculation of diluted earnings per share
Antidilutive Securities Excluded From Computation of Earnings Per Share Amount	11,201	9,479
Stock Option Awards [Member]
Anti-dilutive shares not included in calculation of diluted earnings per share
Antidilutive Securities Excluded From Computation of Earnings Per Share Amount	1,462	902
Non-vested Share Awards [Member]
Anti-dilutive shares not included in calculation of diluted earnings per share
Antidilutive Securities Excluded From Computation of Earnings Per Share Amount	521	421
Conversion of Exchangeable Senior Notes [Member]
Anti-dilutive shares not included in calculation of diluted earnings per share
Antidilutive Securities Excluded From Computation of Earnings Per Share Amount		854
Series A Preferred Shares [Member]
Anti-dilutive shares not included in calculation of diluted earnings per share
Antidilutive Securities Excluded From Computation of Earnings Per Share Amount	9,218	7,302

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Consolidated Statements of Comprehensive Loss (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Consolidated Statements of Comprehensive Loss [Abstract]
Net loss	$ (3,474)	$ (3,892)
Unrealized gain on derivative instruments	742	257
Unrealized loss on derivative instruments	(15)
Total comprehensive loss	(2,747)	(3,635)
Comprehensive loss attributable to noncontrolling interests	318	138
Net gain from derivative instruments attributable to noncontrolling interests	(39)	(5)
Comprehensive loss attributable to First Potomac Realty Trust	$ (2,468)	$ (3,502)

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Earnings Per Share	3 Months Ended
	Mar. 31, 2012
Earnings Per Share [Abstract]
Earnings Per Share	Earnings Per Share

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Income Taxes (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2012 Y	Mar. 31, 2011	Dec. 31, 2011
Income Taxes (Additional Textual) [Abstract]
Income taxes benefit	$ 61,000	$ (313,000)
Deferred tax assets	2,100,000		1,400,000
Deferred tax liabilities	$ 5,500,000		$ 5,000,000
Amortization of deferred tax assets over life	39
Washington D.C. [Member]
Income Taxes (Textual) [Abstract]
Franchise taxes effective rate	9.975%

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Share-Based Compensation (Details) (USD $)	3 Months Ended
	Mar. 31, 2012 Y	Dec. 31, 2011 Y
Compensation Plans Option Activity
Weighted Average Exercise Price - Ending Balance	$ 15.90	$ 16.76
Stock options, Granted	627,500
Stock options, Exercised	(907)
Stock options, Forfeited	(7,969)
Share, Beginning Balance	887,168
Weighted Average Exercise Price - Granted	$ 14.70
Weighted Average Exercise Price - Exercised	$ 10.43
Weighted Average Exercise Price - Forfeited	$ 17.89
Share, Ending Balance	1,505,792
Weighted Average Remaining Contractual Term	6.5	4.4
Aggregate Intrinsic Value	$ 188,026	$ 293,930
Exercisable - Shares	734,146
Weighted Average Exercise Price - Exercisable	$ 17.17
Weighted Average Remaining Contractual Term - Exercisable	3.3
Aggregate Intrinsic Value - Exercisable	135,865
Options expected to vest, subsequent to - Share	736,991
Options expected to vest - Weighted Average Exercise Price	$ 14.71
Options expected to vest - Weighted Average Remaining Contractual Term	9.5
Options expected to vest - Aggregate Intrinsic Value	$ 49,031

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Rental Property (Tables)	3 Months Ended
	Mar. 31, 2012
Rental Property [Abstract]
Rental property	Rental property
Current development and redevelopment activity	Current development and redevelopment activity

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Description of Business (Details)	3 Months Ended
	Mar. 31, 2012 Project sqft Property Person	Mar. 31, 2011 sqft
Real Estate Properties [Line Items]
Area of land parcel	13,860,021	13,493,552
Description of Business (Textual) [Abstract]
Number of separate segments its properties	4
Interest in Operating Partnership	94.60%
Unconsolidated joint ventures	6
Square footage of land for additional development	2,400,000
Occupancy rate in the company's consolidated properties	83.00%
Number of tenants representing the 83.0% occupancy rate	610
Square footage in development or redevelopment not included on occupancy calculation	500,000
Share of U.S. Government along with government contractors in Company's total annualized rental revenue	25.00%
Percentage of outstanding account receivables accounted by government	11.00%
Wholly Owned Properties [Member]
Real Estate Properties [Line Items]
Area of land parcel	13,900,000
Unconsolidated Properties [Member]
Real Estate Properties [Line Items]
Area of land parcel	1,000,000

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Noncontrolling Interests	3 Months Ended
	Mar. 31, 2012
Noncontrolling Interests [Abstract]
Noncontrolling Interests in Operating Partnership	Noncontrolling Interests