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 June 30, 2014.

¨ 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, 11th 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):

Large Accelerated Filer	x	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 July 24, 2014, there were 58,809,350 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 June 30, 2014 (unaudited) and December 31, 2013	4
	Consolidated statements of operations (unaudited) for the three and six months ended June 30, 2014 and 2013	5
	Consolidated statements of comprehensive income (unaudited) for the three and six months ended June 30, 2014 and 2013	6
	Consolidated statements of cash flows (unaudited) for the six months ended June 30, 2014 and 2013	7
	Notes to condensed consolidated financial statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	56
Item 4.	Controls and Procedures	57
Part II:	Other Information
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	59
	Signatures	60

2

SPECIAL NOTE ABOUT 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 acquisitions and, if applicable, dispositions on acceptable terms; 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 maintain effective internal controls over financial reporting and disclosure controls and procedures; any impact of the informal inquiry initiated by the U.S. Securities and Exchange Commission (the “SEC”); 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, 2013 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.

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FIRST POTOMAC REALTY TRUST

Consolidated Balance Sheets

(Amounts in thousands, except per share amounts)

	June 30, 2014			December 31, 2013
	(unaudited)
Assets:
Rental property, net	$	1,258,646		$	1,203,299
Assets held-for-sale	13,093			45,861
Cash and cash equivalents	13,398			8,740
Escrows and reserves	4,753			7,673
Accounts and other receivables, net of allowance for doubtful accounts of $1,104 and $1,181, respectively	10,050			12,384
Accrued straight-line rents, net of allowance for doubtful accounts of $199 and $92, respectively	29,820			30,332
Notes receivable, net	63,751			54,696
Investment in affiliates	49,278			49,150
Deferred costs, net	42,750			43,198
Prepaid expenses and other assets	6,466			8,279
Intangible assets, net	46,261			38,848
Total assets	$	1,538,266		$	1,502,460
Liabilities:
Mortgage loans	$	302,909		$	274,648
Unsecured term loan	300,000			300,000
Unsecured revolving credit facility	116,000			99,000
Accounts payable and other liabilities	37,604			41,296
Accrued interest	1,701			1,663
Rents received in advance	5,734			6,118
Tenant security deposits	6,125			5,666
Deferred market rent, net	2,532			1,557
Total liabilities	772,605			729,948
Noncontrolling interests in the Operating Partnership	35,214			33,221
Equity:
Preferred Shares, $0.001 par value, 50,000 shares authorized;
Series A Preferred Shares, $25 per share liquidation preference, 6,400 shares issued and outstanding	160,000			160,000
Common shares, $0.001 par value, 150,000 shares authorized; 58,808 and 58,704 shares issued and outstanding, respectively	59			59
Additional paid-in capital	910,680			911,533
Noncontrolling interests in the consolidated partnership	942			781
Accumulated other comprehensive loss	(4,603		)	(3,836		)
Dividends in excess of accumulated earnings	(336,631		)	(329,246		)
Total equity	730,447			739,291
Total liabilities, noncontrolling interests and equity	$	1,538,266		$	1,502,460

See accompanying notes to condensed consolidated financial statements.

4

FIRST POTOMAC REALTY TRUST

Consolidated Statements of Operations

(unaudited)

(Amounts in thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenues:
Rental	$	33,130		$	31,087		$	65,070		$	61,780
Tenant reimbursements and other	8,060			7,745			17,534			16,211
Total revenues	41,190			38,832			82,604			77,991
Operating expenses:
Property operating	10,869			9,432			23,767			19,743
Real estate taxes and insurance	4,372			3,975			8,641			8,487
General and administrative	5,218			4,985			10,414			10,252
Acquisition costs	1,111			—			1,179			—
Depreciation and amortization	15,610			14,208			30,714			28,195
Impairment of rental property	3,956			—			3,956			—
Contingent consideration related to property acquisition	—			75			—			75
Total operating expenses	41,136			32,675			78,671			66,752
Operating income	54			6,157			3,933			11,239
Other (income) expenses
Interest expense	6,102			9,353			11,914			19,310
Interest and other income	(1,670		)	(1,574		)	(3,429		)	(3,103		)
Equity in (earnings) losses of affiliates	(199		)	(7		)	28			(35		)
Gain on sale of rental property	(21,230		)	—			(21,230		)	—
Loss on debt extinguishment	—			201			—			201
Total other (income) expenses	(16,997		)	7,973			(12,717		)	16,373
Income (loss) from continuing operations	17,051			(1,816		)	16,650			(5,134		)
Discontinued operations:
(Loss) income from operations	(1		)	1,759			(1,096		)	7,040
Loss on debt extinguishment	—			(4,414		)	—			(4,414		)
Gain on sale of rental property	1,284			18,947			1,338			18,947
Income from discontinued operations	1,283			16,292			242			21,573
Net income	18,334			14,476			16,892			16,439
Less: Net income attributable to noncontrolling interests	(652		)	(466		)	(458		)	(406		)
Net income attributable to First Potomac Realty Trust	17,682			14,010			16,434			16,033
Less: Dividends on preferred shares	(3,100		)	(3,100		)	(6,200		)	(6,200		)
Net income attributable to common shareholders	$	14,582		$	10,910		$	10,234		$	9,833
Basic and diluted earnings per common share:
Income (loss) from continuing operations	$	0.23		$	(0.09	)	$	0.17		$	(0.21	)
Income from discontinued operations	0.02			0.29			—			0.40
Net income	$	0.25		$	0.20		$	0.17		$	0.19
Weighted average common shares outstanding:
Basic	58,146			53,586			58,122			52,004
Diluted	58,220			53,586			58,190			52,004

See accompanying notes to condensed consolidated financial statements.

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FIRST POTOMAC REALTY TRUST

Consolidated Statements of Comprehensive Income

(unaudited)

(Amounts in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net income	$	18,334		$	14,476		$	16,892		$	16,439
Unrealized gain on derivative instruments	99			5,965			416			7,058
Unrealized loss on derivative instruments	(1,079		)	—			(1,217		)	—
Total comprehensive income	17,354			20,441			16,091			23,497
Net income attributable to noncontrolling interests	(652		)	(466		)	(458		)	(406		)
Net loss (gain) from derivative instruments attributable to noncontrolling interests	42			(274		)	34			(327		)
Comprehensive income attributable to First Potomac Realty Trust	$	16,744		$	19,701		$	15,667		$	22,764

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)

	Six Months Ended June 30,
	2014			2013
Cash flows from operating activities:
Net income	$	16,892		$	16,439
Adjustments to reconcile net income to net cash provided by operating activities:
Discontinued operations:
Gain on sale of rental property	(1,338		)	(18,947		)
Loss on debt extinguishment	—			4,414
Depreciation and amortization	496			4,708
Depreciation and amortization	31,250			28,577
Share based compensation	1,689			1,663
Bad debt expense	481			388
Amortization of deferred market rent, net	(55		)	(21		)
Amortization of financing costs and discounts	674			1,470
Equity in losses (earnings) of affiliates	28			(35		)
Distributions from investments in affiliates	435			1,277
Contingent consideration related to acquisition of property	—			75
Gain on sale of rental property	(21,230		)	—
Loss on debt extinguishment	—			201
Impairment of rental property	3,956			1,446
Changes in assets and liabilities:
Escrows and reserves	2,925			2,894
Accounts and other receivables	1,904			1,172
Accrued straight-line rents	(2,918		)	(4,319		)
Prepaid expenses and other assets	1,802			2,999
Tenant security deposits	240			367
Accounts payable and accrued expenses	(431		)	(587		)
Accrued interest	38			(747		)
Rents received in advance	(436		)	(3,699		)
Deferred costs	(5,546		)	(6,034		)
Total adjustments	13,964			17,262
Net cash provided by operating activities	30,856			33,701
Cash flows from investing activities:
Investment in note receivable	(9,000		)	—
Proceeds from sale of rental property	85,284			207,203
Principal payments from note receivable	90			25
Change in escrow and reserve accounts	—			(28,175		)
Additions to rental property and furniture, fixtures and equipment	(16,639		)	(23,670		)
Additions to development and redevelopment	(7,003		)	(11,450		)
Acquisition of rental property and associated intangible assets	(61,731		)	—
Investment in affiliates	(590		)	(297		)
Net cash (used in) provided by investing activities	(9,589		)	143,636
Cash flows from financing activities:
Financing costs	(405		)	(1,795		)
Issuance of common shares, net	—			105,085
Issuance of debt	104,794			99,157
Repayments of debt	(96,697		)	(302,237		)
Dividends to common shareholders	(17,586		)	(15,329		)
Dividends to preferred shareholders	(6,200		)	(6,200		)
Contributions from consolidated joint venture partners	161			—
Distributions to noncontrolling interests	(789		)	(780		)
Operating partnership unit redemption	—			(84		)
Stock option exercises	113			121
Net cash used in financing activities	(16,609		)	(122,062		)
Net increase in cash and cash equivalents	4,658			55,275
Cash and cash equivalents, beginning of period	8,740			9,374
Cash and cash equivalents, end of period	$	13,398		$	64,649

See accompanying notes to condensed consolidated financial statements.

7

FIRST POTOMAC REALTY TRUST

Consolidated Statements of Cash Flows – Continued

(unaudited)

Supplemental disclosure of cash flow information for the six months ended June 30 is as follows (dollars in thousands):

	2014			2013
Cash paid for interest, net	$	10,946		$	19,452
Non-cash investing and financing activities:
Debt assumed in connection with the acquisition of rental property	37,269			—
Value of common shares retired to settle employee income tax obligations	383			537
Change in fair value of the outstanding common Operating Partnership units	2,318			498
Issuance of common Operating Partnership units in connection with the acquisition of rental property	40			—
Changes in accruals:
Additions to rental property and furniture, fixtures and equipment	(1,571		)	(5,135		)
Additions to development and redevelopment	(426		)	(3,885		)

Cash paid for interest on indebtedness is net of capitalized interest of $1.8 million and $0.7 million for the six months ended June 30, 2014 and 2013, respectively.

During the six months ended June 30, 2014, we acquired two properties at an aggregate purchase price of $99.0 million, including the assumption of a $37.3 million mortgage loan.

Certain of our employees surrendered common shares owned by them valued at $0.4 million and $0.5 million during the six months ended June 30, 2014 and 2013, respectively, to satisfy their statutory minimum federal income tax obligations associated with the vesting of restricted common shares of beneficial interest.

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. We account for issuances of common Operating Partnership units individually, which could result in some portion of our noncontrolling interests being carried at fair value with the remainder being carried at historical cost. At June 30, 2014 and 2013, we recorded adjustments of $5.6 million and $4.0 million, respectively, to present certain common Operating Partnership units at the greater of their carrying value or redemption value.

During the six months ended June 30, 2014, we issued 3,125 common Operating Partnership units at a fair value of $40 thousand to the seller of 840 First Street, NE to satisfy our contingent consideration obligation related to the acquisition of the property. No common Operating Partnership units were required to be issued to satisfy our contingent consideration obligation during the six months ended June 30, 2013.

During the six months ended June 30, 2014 and 2013, we accrued $6.6 million and $7.3 million, respectively, of capital expenditures related to rental property and furniture, fixtures and equipment in accounts payable. During the six months ended June 30, 2014 and 2013, we accrued $1.0 million and $0.7 million, respectively, of capital expenditures related to development and redevelopment in accounts payable.

8

FIRST POTOMAC REALTY TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1) Description of Business

First Potomac Realty Trust (the “Company”) is a leader in the ownership, management, development and redevelopment of office and business park properties in the greater Washington, D.C. region. The Company separates its properties into four distinct reporting 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, leasing expertise, market knowledge and established relationships, and seeks to reposition these properties to increase their profitability and value. The Company’s portfolio primarily contains a mix of single-tenant and multi-tenant office properties and business parks. Office properties are single-story and multi-story buildings that are primarily for office use; and business parks contain buildings with office features combined with some industrial property space.

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

We conduct our business through First Potomac Realty Investment Limited Partnership, our operating partnership (the “Operating Partnership”). We are the sole general partner of, and, as of June 30, 2014, owned 100% of the preferred interest and 95.7% of the common interest in the Operating Partnership. The remaining common 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 two of our executive officers who contributed properties and other assets to us upon our formation, and the remainder of which are owned by other unrelated parties.

At June 30, 2014, we wholly-owned or had a controlling interest in properties totaling 8.7 million square feet and had a noncontrolling ownership interest in properties totaling an additional 0.9 million square feet through five unconsolidated joint ventures. We also owned land that can support approximately 1.5 million square feet of additional development. Our consolidated properties were 86.0% occupied by 558 tenants at June 30, 2014. We did not include square footage that was in development or redevelopment, which totaled 0.1 million square feet at June 30, 2014, in our occupancy calculation. We derive substantially all of our revenue from leases of space within our properties. As of June 30, 2014, our largest tenant was the U.S. Government, which along with government contractors, accounted for 27% of our total annualized cash basis rent. We operate 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

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

We have condensed or omitted certain information and note 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. We believe 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 our annual report on Form 10-K for the year ended December 31, 2013 and as updated from time to time in other filings with the U.S. Securities and Exchange Commission (the “SEC”).

In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments and accruals necessary to present fairly our financial position as of June 30, 2014 and the results of our operations and our comprehensive income for the three and six months ended June 30, 2014 and 2013 and our cash flows for the six months ended June 30, 2014 and 2013. 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 utilities expense and snow and ice removal costs.

9

(b) Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires our management team 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) Application of New Accounting Standards

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”), which states that a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations only if the disposal represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results. ASU 2014-08 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2014. Early adoption is permitted, but only for a disposal (or classification as held-for-sale) that has not been reported in financial statements previously issued or available for issuance. ASU 2014-08 must be applied prospectively. We adopted ASU 2014-08 in the second quarter of 2014. The adoption of ASU 2014-08 did not have a material impact on our condensed consolidated financial statements, though it did and will continue to impact the extent and frequency of presenting discontinued operations within our consolidated statements of operations and note disclosures. The operations of all properties that were sold prior to the adoption of ASU 2014-08 and two other properties, West Park and Patrick Center, which were classified as held-for-sale in previously published financial statements prior to our adoption of ASU 2014-08 and were subsequently sold, are reflected within discontinued operations in our consolidated statements of operations for all periods presented. For more information, see note 8, Dispositions. All property operations that have been classified as discontinued operations will remain classified within discontinued operations in any future presentation of our consolidated statements of operations.

In May 2014, FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers, (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance when it becomes effective on January 1, 2017. Early adoption is not permitted. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. We have not yet selected a transition method and are evaluating the impact that ASU 2014-09 will have on our consolidated financial statements and related disclosures.

(d) 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 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 our 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

We regularly review 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 carrying value of a property, an impairment analysis is performed. We assess 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 to maintain the operating capacity, 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

10

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. We are required to make estimates as to whether there are impairments in the carrying values of our investments in real estate. Further, we will record an impairment loss if we expect to dispose of a property, in the near term, at a price below carrying value. In such an event, we will record an impairment loss based on the difference between a property’s carrying value and our projected sales price less any estimated costs to sell.

We will classify a building as held-for-sale in accordance with GAAP in the period in which we have made the decision to dispose of the building, our 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 exist that could cause the transaction not to be completed in a timely manner. We will cease recording depreciation on a building once it has been classified as held-for-sale. In the second quarter of 2014, we prospectively adopted ASU 2014-08, which impacts the presentation of operations and gains or losses from disposed properties and properties classified as held-for-sale. For more information, see note 2(c), Summary of Significant Accounting Policies - Application of New Accounting Standards.

If the building does not qualify as a discontinued operation under ASU 2014-08, we will classify the building’s operating results, together with any impairment charges and any gains or losses on the sale of the building, in continuing operations for all periods presented in our consolidated statements of operations. We will classify the assets and liabilities related to the building as held-for-sale in our consolidated balance sheet for the period the held-for-sale criteria was met.

If the building does qualify as a discontinued operation under ASU 2014-08, we will classify the building’s operating results, together with any impairment charges and any gains or losses on the sale of the building, in discontinued operations in our consolidated statements of operations for all periods presented and classify the assets and related liabilities related to the building as held-for-sale in our consolidated balance sheets for the periods presented. 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 us after the disposition.

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

We capitalize interest costs incurred on qualifying expenditures for real estate assets under development or redevelopment, which include our 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. We 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. We also capitalize direct compensation costs of our 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. We do not capitalize any other general and administrative costs such as office supplies, office rent expense or an overhead allocation to our development or redevelopment projects. Capitalized compensation costs were immaterial for the three and six months ended June 30, 2014 and 2013. 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. We will also place redevelopment and development assets into 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.

(e) Notes Receivable

We provide loans to the owners of real estate properties, which can be collateralized by interest in the real estate property. We record these loans as “Notes receivable, net” in our consolidated balance sheets. The loans 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. We record interest earned from notes receivable and amortization of any discount or issuance costs within “Interest and other income” in our consolidated statements of operations.

We will establish a provision for anticipated credit losses associated with our notes receivable when we anticipate that we 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. Our collectability of our notes receivable may be adversely impacted by the financial stability of the Washington, D.C. region and the ability of the 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

11

we estimate to be adequate based on these factors. Based on the review of the above criteria, we did not record an allowance for credit losses for our notes receivable during the three and six months ended June 30, 2014 and 2013.

(f) 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 as discontinued operations. For more information, see note 8, Dispositions. In the second quarter of 2014, we prospectively adopted the requirements under ASU 2014-08, which impacts the presentation of operations and gains or losses from disposed properties. For more information, see note 2(c), Summary of Significant Accounting Policies - Application of New Accounting Standards.

(3) Earnings Per Common Share

Basic earnings or loss per common 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 and preferred shares. We apply the two-class method for determining EPS as our outstanding unvested shares with non-forfeitable dividend rights are considered participating securities. Our excess of distributions over earnings related to participating securities is shown as a reduction in total earnings attributable to common shareholders in our computation of EPS.

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Numerator for basic and diluted earnings per common share:
Income (loss) from continuing operations	$	17,051		$	(1,816	)	$	16,650		$	(5,134	)
Income from discontinued operations	1,283			16,292			242			21,573
Net income	18,334			14,476			16,892			16,439
Less: Net (income) loss from continuing operations attributable to noncontrolling interests	(593		)	223			(448		)	538
Less: Net income from discontinued operations attributable to noncontrolling interests	(59		)	(689		)	(10		)	(944		)
Net income attributable to First Potomac Realty Trust	17,682			14,010			16,434			16,033
Less: Dividends on preferred shares	(3,100		)	(3,100		)	(6,200		)	(6,200		)
Net income attributable to common shareholders	14,582			10,910			10,234			9,833
Less: Allocation to participating securities	(77		)	(106		)	(155		)	(206		)
Net income attributable to common shareholders	$	14,505		$	10,804		$	10,079		$	9,627
Denominator for basic and diluted earnings per common share:
Weighted average common shares outstanding:
Basic	58,146			53,586			58,122			52,004
Diluted	58,220			53,586			58,190			52,004
Basic and diluted earnings per common share:
Income (loss) from continuing operations	$	0.23		$	(0.09	)	$	0.17		$	(0.21	)
Income from discontinued operations	0.02			0.29			—			0.40
Net income	$	0.25		$	0.20		$	0.17		$	0.19

In accordance with GAAP regarding earnings per common share, we did not include the following potential weighted average common shares in our calculation of diluted earnings per common share as they are anti-dilutive for the periods presented (amounts in thousands):

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	Three Months Ended June 30,		Six Months Ended June 30,
	2014	2013	2014	2013
Stock option awards	1,145	1,473	1,170	1,484
Non-vested share awards	400	510	419	533
Series A Preferred Shares(1)	12,296	11,015	12,480	11,319
	13,841	12,998	14,069	13,336

⁽¹⁾  Our Series A Preferred Shares are only convertible into our common shares upon certain changes in control of our 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.

(4) Rental Property

Rental property represents buildings and related improvements, net of accumulated depreciation, and developable land that are wholly-owned or owned by an entity in which we have a controlling interest. All of our rental properties are located within the greater Washington, D.C. region. Rental property, excluding properties classified as held-for-sale, consists of the following (dollars in thousands):

	June 30, 2014			December 31, 2013
Land and land improvements	$	321,774		$	294,753
Buildings and improvements	896,142			868,027
Construction in process	103,293			93,269
Tenant improvements	151,517			146,176
Furniture, fixtures and equipment	5,127			5,047
	1,477,853			1,407,272
Less: accumulated depreciation	(219,207		)	(203,973		)
	$	1,258,646		$	1,203,299

Development and Redevelopment Activity

We construct office buildings and business parks on a build-to-suit basis or with the intent to lease upon completion of construction. We own developable land that can accommodate 1.5 million square feet of additional building space, of which, 0.7 million is located in the Washington, D.C. reporting segment, 0.1 million in the Maryland reporting segment, 0.6 million in the Northern Virginia reporting segment and 0.1 million in the Southern Virginia reporting segment.

On August 4, 2011, we formed a joint venture, in which we have a 97% interest, with an affiliate of Perseus Realty, LLC to acquire Storey Park in our Washington, D.C. reporting segment. At the time, the site was leased to Greyhound Lines, Inc. (“Greyhound”), which subsequently relocated its operations. Greyhound’s lease expired on August 31, 2013, at which time the property was placed into development. The joint venture anticipates developing a mixed-use project on the 1.6 acre site, which can accommodate up to 712,000 square feet of office space. At June 30, 2014, the total investment in the development project was $53.5 million, which included the original cost basis of the property of $43.3 million. The majority of the costs in excess of the original cost basis relate to capitalized architectural fees and site preparation costs. We are currently exploring our options related to this property; however, until a definitive plan for the property has been reached and we begin significant development activities, we cannot determine the total cost of the project or the anticipated completion date.

On December 28, 2010, we acquired 440 First Street, NW, a vacant eight-story office building in our Washington, D.C. reporting segment. In October 2013, we substantially completed the redevelopment of the 139,000 square foot property. At June 30, 2014, we had placed in-service 25,000 square feet of the redeveloped space at the property. At June 30, 2014, our total investment in the redevelopment project was $55.0 million, which included the original cost basis of the property of $23.6 million.

We will place completed construction activities in service upon the earlier of a tenant taking occupancy or twelve months from substantial completion. At June 30, 2014, we had 114,000 square feet of redevelopment at 440 First Street, NW that had yet to be placed-in service. At June 30, 2014, we had no completed development that had yet to be placed in service.

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(5) Acquisitions

On April 8, 2014, we acquired 1401 K Street, NW, a 117,000 square foot, twelve-story, office building in downtown Washington, D.C. for $58.0 million. The acquisition was funded with the assumption of a $37.3 million mortgage loan, a $20.0 million draw under our unsecured revolving credit facility and available cash.

On June 25, 2014, we acquired 1775 Wiehle Avenue, a 130,000 square foot, five-story, office building in Reston, Virginia for $41.0 million. The acquisition was funded with the net proceeds from the sale of Corporate Campus at Ashburn Center, which totaled $39.9 million and available cash.

For both the three and six months ended June 30, 2014, we included $1.3 million of revenues and $0.7 million of net loss in our consolidated statements of operations related to the acquisition of the two properties. We incurred $1.1 million and $1.2 million of acquisition-related due diligence and closing costs during the three and six months ended June 30, 2014, respectively, and we did not record any acquisition costs during either the three or six months ended June 30, 2013, as we did not acquire any properties during those periods.

The fair values of the assets acquired and liabilities assumed in the second quarter of 2014 are as follows (dollars in thousands):

	June 30, 2014
Land	$	33,048
Acquired tenant improvements	7,503
Building and improvements	46,341
In-place leases	8,573
Acquired leasing commissions	3,012
Legal leasing fees	281
Above-market leases acquired	1,523
Total assets acquired	100,281
Below-market leases assumed	(1,281		)
Debt assumed	(37,269		)
Net assets acquired	$	61,731

The fair values of the assets acquired and liabilities assumed in 2014 are preliminary as we continue to finalize their acquisition date fair value determination.

At June 30, 2014, our consolidated intangible assets acquired in 2014 were comprised of the following categories: acquired tenant improvements; in-place leases; acquired leasing commissions; legal expenses; and above-market leases, which had an aggregate weighted average amortization period of 3.2 years.

Pro Forma Financial Information (unaudited)

The unaudited pro forma financial information set forth below presents results for the six months ended June 30 as if the acquisitions of 1401 K Street, NW and 1775 Wiehle Avenue had occurred on January 1, 2013. The pro forma information is not necessarily indicative of the results that actually would have occurred nor does it intend to indicate future operating results (dollars in thousands, except per share amounts):

	2014		2013
Pro forma total revenues	$	86,293	$	83,021
Pro forma net income	$	18,649	$	14,832
Pro forma net income per share:
Basic	$	0.21	$	0.16
Diluted	$	0.20	$	0.16

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(6) Notes Receivable

Below is a summary of our notes receivable (dollars in thousands):

Balance at June 30, 2014
Face Amount		Unamortized Origination Fees			Balance		Interest Rate		Property
$	34,000	$	—		$	34,000	9.75	%	950 F Street, NW
29,806		(55		)	29,751		9.0	%	America’s Square
$	63,806	$	(55	)	$	63,751

Balance at December 31, 2013
Face Amount		Unamortized Origination Fees			Balance		Interest Rate		Property
$	25,000	$	(130	)	$	24,870	12.5	%	950 F Street, NW
29,896		(70		)	29,826		9.0	%	America’s Square
$	54,896	$	(200	)	$	54,696

In April 2011, we provided a $30.0 million mezzanine loan to the owners of America’s Square, a 461,000 square-foot office complex located in Washington, D.C. that is secured by a portion of the owners’ interest in the property. The loan is repayable in full at any time, subject to yield maintenance. The loan matures on May 1, 2016 and required monthly interest-only payments until May 2013, at which time the loan began requiring monthly principal and interest payments through its maturity date. The interest rate on the loan is constant throughout the life of the loan.

In December 2010, we provided a $25.0 million mezzanine loan to the owners of 950 F Street, NW, a ten-story, 287,000 square-foot office/retail building located in Washington, D.C. that is secured by a portion of the owners’ interest in the property. The loan requires monthly interest-only payments with a constant interest rate over the life of the loan. On January 10, 2014, we amended the loan to increase the outstanding balance to $34.0 million and reduce the fixed interest rate from 12.5% to 9.75%. The amended mezzanine loan matures on April 1, 2017 and is repayable in full on or after December 21, 2015.

We recorded interest income of $1.5 million and $3.0 million related to our note receivable for the three and six months ended June 30, 2014, respectively, and $1.5 million and $2.9 million for the three and six months ended June 30, 2013, respectively, which is included within “Interest and other income” in our consolidated statements of operations.

We recorded income from the amortization of origination fees of $7 thousand and $18 thousand for the three and six months ended June 30, 2014, respectively, and $17 thousand and $35 thousand for the three and six months ended June 30, 2013, respectively. During the first quarter of 2014, we wrote-off $0.1 million of unamortized fees related to the original 950 F Street, NW mezzanine loan. The amortization and write-off of unamortized fees are recorded within “Interest and other income” in our consolidated statements of operations.

(7) Investment in Affiliates

We own an interest in several joint ventures that own properties. We do not control the activities that are most significant to the joint ventures. As a result, the assets, the liabilities and the operating results of these noncontrolled joint ventures are not consolidated within our unaudited condensed consolidated financial statements. Our investments in these joint ventures are recorded as “Investment in affiliates” in our consolidated balance sheets. Our investment in affiliates consisted of the following (dollars in thousands):

	Reporting Segment	Ownership Interest		June 30, 2014		December 31, 2013
Prosperity Metro Plaza	Northern Virginia	51	%	$	24,666	$	24,735
1750 H Street, NW	Washington, D.C.	50	%	17,307		16,780
Aviation Business Park	Maryland	50	%	4,947		5,008
RiversPark I and II(1)	Maryland	25	%	2,358		2,627
				$	49,278	$	49,150

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⁽¹⁾RiversPark I and RiversPark II are owned through two separate joint ventures.

The net assets of our unconsolidated joint ventures consisted of the following (dollars in thousands):

	June 30, 2014		December 31, 2013
Assets:
Rental property, net	$	193,011	$	194,240
Cash and cash equivalents	4,336		3,680
Other assets	16,058		15,585
Total assets	213,405		213,505
Liabilities:
Mortgage loans(1)(2)	104,814		106,384
Other liabilities	6,641		5,046
Total liabilities	111,455		111,430
Net assets	$	101,950	$	102,075

⁽¹⁾  Of the total mortgage debt that encumbers our unconsolidated properties, $7.0 million is recourse to us. The recourse mortgage loan was scheduled to mature in March 2014; however, the joint venture extended the loan’s maturity date to September 2014. We believe the fair value of the potential liability to us under this guaranty is inconsequential as the likelihood of our need to perform under the debt agreement is remote.

⁽²⁾  Includes the unamortized fair value adjustments recorded at acquisition upon the assumption of mortgage loans.

On July 10, 2014, our 50% owned unconsolidated joint venture repaid a $27.9 million mortgage loan that encumbered 1750 H Street, NW, a 113,000 square-foot, ten-story, office building located in Washington, D.C. Simultaneously with the repayment, the joint venture entered into a new $32.0 million mortgage loan that has a fixed interest rate of 3.92%, a maturity date of August 1, 2024 and is repayable in full without penalty on or after August 1, 2021. The new loan requires monthly interest-only payments with a constant interest rate over the life of the loan.

Our share of earnings or losses related to our unconsolidated joint ventures is recorded in our consolidated statements of operations as “Equity in (earnings) losses of affiliates.”

The following table summarizes the results of operations of our unconsolidated joint ventures, which due to our 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 our consolidated statements of operations (dollars in thousands):

	Three Months Ended   June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Total revenues	$	5,780		$	5,959		$	11,531		$	12,011
Total operating expenses	(1,694		)	(1,905		)	(3,920		)	(3,770		)
Net operating income	4,086			4,054			7,611			8,241
Depreciation and amortization	(2,264		)	(2,854		)	(5,067		)	(5,793		)
Other expenses, net	(1,077		)	(1,090		)	(2,087		)	(2,164		)
Net income	$	745		$	110		$	457		$	284

We earn various fees from several of our joint ventures, which include management fees, leasing commissions and construction management fees. We recognize fees only to the extent of the third party ownership interest in our unconsolidated joint ventures. We recognized fees from our unconsolidated joint ventures of $0.2 million and $0.3 million for both the three and six months ended June 30, 2014 and 2013, respectively, which are reflected within “Tenant reimbursements and other revenues” in our consolidated statements of operations.

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(8) Dispositions

During the second quarter of 2014, we prospectively adopted ASU 2014-08, which states that a component of an entity or a group of components of an entity is required to be reported in discontinued operations only if the disposal represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results. For more information, see note 2(c), Summary of Significant Accounting Policies - Application of New Accounting Standards.

(a) Disposed or Held-for-Sale Properties within Continuing Operations

On June 26, 2014, we sold Corporate Campus at Ashburn Center, a three-building, 194,000 square foot single-story business park, which is located in our Northern Virginia reporting segment, for net proceeds of $39.9 million. We recorded a gain on the sale of the property of $21.2 million in the second quarter of 2014 and used the net proceeds from the sale to acquire 1775 Wiehle Avenue.

On June 23, 2014, we entered into a non-binding contract to sell Owings Mills Business Park, a four-building, 180,500 square foot business park, which is located in our Maryland reporting segment. Based on the anticipated sales price, less costs to sell, we recorded an impairment charge of $4.0 million in the second quarter of 2014. The sale is expected to be completed in the third or fourth quarter of 2014. However, we can provide no assurances regarding the timing or pricing of the sale, or that such sale will occur at all. At June 30, 2014, the four buildings at Owings Mills Business Park met our held-for-sale criteria and, therefore, the assets of the buildings were classified within “Assets held-for-sale” and the liabilities of the buildings, which totaled $0.2 million, were classified within “Accounts payable and other liabilities” in our consolidated balance sheet. The majority of the assets classified within “Assets held-for sale” as of June 30, 2014, consisted of $2.7 million in land,  $11.8 million in building, $1.5 million in tenant improvements and accumulated depreciation of $3.5 million.  The remaining $0.6 million classified within “Assets held-for sale” consisted of accrued straight-line rents, net of allowance for doubtful accounts, deferred costs, net of accumulated amortization, and prepaid expenses and other assets.

In accordance with ASU 2014-08, Corporate Campus at Ashburn Center and Owings Mills Business Park did not meet the criteria to be classified as discontinued operations. As a result, the operating results and gain on sale of Corporate Campus at Ashburn Center and the operating results and impairment of Owings Mills Business Park are reflected in continuing operations in our consolidated statements of operations for each of the periods presented. The following table summarizes the aggregate results of operations for two properties that are included in continuing operations for the periods presented (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenues	$	1,329		$	1,322		$	2,794		$	2,642
Property operating expenses	(400		)	(365		)	(948		)	(773		)
Depreciation and amortization	(402		)	(350		)	(768		)	(701		)
Impairment of rental property	(3,956		)	—			(3,956		)	—
(Loss) income from operations of disposed property	(3,429		)	607			(2,878		)	1,168
Gain on sale of rental property	21,230			—			21,230			—
Net income from continuing operations	$	17,801		$	607		$	18,352		$	1,168

(b) Discontinued Operations

All properties classified within discontinued operations were sold prior to our adoption of ASU 2014-08 or classified as held-for-sale in previously published financial statements prior to our adoption of ASU 2014-08.

In April 2014, we sold West Park, a 29,000 square foot, four-story office building, and Patrick Center, a 66,000 square foot, seven-story office building, which are both located in Frederick, Maryland, for aggregate net proceeds of $13.8 million. Proceeds from the sale of West Park and Patrick Center were used to pay down outstanding debt. We reported a gain on the sale of Patrick Center of $1.4 million in our second quarter results. The operating results of the properties and the gain on the sale of Patrick Center are reflected as discontinued operations in our consolidated statements of operations for the periods presented.

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

	Reporting Segment	Disposition Date	Property Type	Square Feet
Patrick Center	Maryland	4/16/2014	Office	66,269
West Park	Maryland	4/2/2014	Office	28,333
Girard Business Center and Gateway Center	Maryland	1/29/2014	Business Park and Office	341,973
Worman’s Mill Court	Maryland	11/19/2013	Office	40,099
Triangle Business Center	Maryland	9/27/2013	Business Park	74,429
4200 Tech Court	Northern Virginia	8/15/2013	Office	33,875
Industrial Portfolio(1)	Various	May/June 2013	Industrial	4,280,985
4212 Tech Court	Northern Virginia	6/5/2013	Office	32,055

⁽¹⁾  During the second quarter of 2013, we sold 24 industrial properties, which consisted of two separate transactions. On May 7, 2013, we sold I-66 Commerce Center, a 236,000 square foot industrial property in Haymarket, Virginia. On June 18, 2013, we completed the sale of the remaining 23 industrial properties.

We have had, and will have, no continuing involvement with any of our disposed properties subsequent to their disposal. The operations of the disposed properties were not subject to any income based taxes. We did not dispose of or enter into any binding agreements to sell any other properties during the six months ended June 30, 2014 and 2013.

The following table summarizes the results of operations of properties included in discontinued operations (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenues	$	65		$	7,875		$	867		$	20,174
Net (loss) income, before taxes(1)	(1		)	(2,655		)	(1,096		)	2,626
Gain on sale of rental property	1,284			18,947			1,338			18,947

⁽¹⁾  During the first quarter of 2014, we accelerated $1.0 million of unamortized straight-line rent and deferred abatement costs related to the sale of Girard Business Center and Gateway Center.

(9) Debt

Our borrowings consisted of the following (dollars in thousands):

	June 30, 2014		December 31, 2013
Mortgage loans, effective interest rates ranging from 4.40% to 6.63%, maturing at various dates through June 2023(1)	$	302,909	$	274,648
Unsecured term loan, effective interest rates ranging from LIBOR plus 1.45% to LIBOR plus 1.90%, with staggered maturity dates ranging from October 2018 to October 2020(1)	300,000		300,000
Unsecured revolving credit facility, effective interest rate of LIBOR plus 1.50%, maturing October 2017(1)	116,000		99,000
	$	718,909	$	673,648

⁽¹⁾  At June 30, 2014, LIBOR was 0.16%. All references to LIBOR in the condensed consolidated financial statements refer to one-month LIBOR.

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(a) Mortgage Loans

The following table provides a summary of our mortgage debt at June 30, 2014 and December 31, 2013 (dollars in thousands):

Encumbered Property	Contractual Interest Rate	Effective Interest Rate			Maturity Date	June 30, 2014			December 31, 2013
Annapolis Business Center(1)	5.74%	6.25	%		June 2014	$	—		$	8,076
Storey Park(2)(3)	LIBOR + 2.75%	5.80	%		October 2014	22,000			22,000
Jackson National Life Loan(4)	5.19%	5.19	%		August 2015	65,537			66,116
Hanover Business Center Building D	8.88%	6.63	%		August 2015	179			252
Chesterfield Business Center Buildings C,D,G and H	8.50%	6.63	%		August 2015	495			681
440 First Street, NW Construction Loan(2)	LIBOR + 2.50%	4.78	%		May 2016	23,493			21,699
Gateway Centre Manassas Building I	7.35%	5.88	%		November 2016	536			638
Hillside I and II	5.75%	4.62	%		December 2016	13,150			13,349
Redland Corporate Center Buildings II & III	4.20%	4.64	%		November 2017	66,434			67,038
Hanover Business Center Building C	7.88%	6.63	%		December 2017	581			653
840 First Street, NE	5.72%	6.01	%		July 2020	36,848			37,151
Battlefield Corporate Center	4.26%	4.40	%		November 2020	3,772			3,851
Chesterfield Business Center Buildings A,B,E and F	7.45%	6.63	%		June 2021	1,775			1,873
Airpark Business Center	7.45%	6.63	%		June 2021	968			1,022
1211 Connecticut Avenue, NW	4.22%	4.47	%		July 2022	29,973			30,249
1401 K Street, NW	4.80%	4.93	%		June 2023	37,168			—
		5.06	%	(5)		302,909			274,648
Unamortized fair value adjustments						(558		)	(663		)
Total contractual principal balance						$	302,351		$	273,985

⁽¹⁾  The loan was prepaid, without penalty, on May 1, 2014 with borrowings under our unsecured revolving credit facility.

⁽²⁾  At June 30, 2014, LIBOR was 0.16%.

⁽³⁾  The loan incurs interest at a variable rate of LIBOR plus a spread of 2.75% (with a floor of 5.0%) and matures in October 2014, with a one-year extension at our option.

⁽⁴⁾  At June 30, 2014, the loan was secured by the following properties: Plaza 500, Van Buren Office Park, Rumsey Center, Snowden Center, Greenbrier Technology Center II and Norfolk Business Center. The terms of the loan allow us to substitute collateral, as long as certain debt-service coverage and loan-to-value ratios are maintained, or to prepay a portion of the loan, with a prepayment penalty, subject to a debt-service yield.

⁽⁵⁾  Weighted average interest rate on total mortgage debt.

On April 8, 2014, we acquired 1401 K Street, NW, a 117,000 square foot, twelve-story, office building in downtown Washington, D.C., for $58.0 million. The acquisition was funded with the assumption of a $37.3 million mortgage loan, a $20.0 million draw under our unsecured revolving credit facility and available cash. The mortgage loan has a fixed contractual interest rate of4.80% and matures in June 2023.

Construction Loan

On June 5, 2013, we entered into a construction loan (the “Construction Loan”) that is collateralized by our 440 First Street, NW property, which underwent a major redevelopment that was substantially completed in October 2013. The Construction Loan has a borrowing capacity of up to $43.5 million, of which we initially borrowed $21.7 million in the second quarter of 2013 and borrowed an additional $1.8 million in January 2014. The Construction Loan has a variable interest rate of LIBOR plus a spread of 2.5% and matures in May 2016, with two one-year extension options at our discretion. We can repay all or a portion of the Construction Loan, without penalty, at any time during the term of the loan. At June 30, 2014, per the terms of the loan agreement, 50% of the outstanding principal balance and all of the outstanding accrued interest were recourse to us. The percentage of outstanding principal balance that is recourse to us can be reduced upon the property achieving certain operating thresholds. As of June 30, 2014, we were in compliance with all the financial covenants of the Construction Loan.

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(b) Unsecured Term Loan

The table below shows the outstanding balances and the interest rates of the three tranches of the $300.0 million unsecured term loan at June 30, 2014 (dollars in thousands):

	Maturity Date	Amount		Interest Rate(1)
Tranche A	October 2018	$	100,000	LIBOR, plus 145 basis points
Tranche B	October 2019	100,000		LIBOR, plus 160 basis points
Tranche C	October 2020	100,000		LIBOR, plus 190 basis points
		$	300,000

⁽¹⁾  The interest rate spread is subject to change based on our maximum total indebtedness ratio. For more information, see note 9(e) Debt – Financial Covenants.

The term loan agreement contains various restrictive covenants substantially identical to those contained in our unsecured revolving credit facility, including with respect to liens, indebtedness, investments, distributions, mergers and asset sales. In addition, the agreement requires that we satisfy certain financial covenants that are also substantially identical to those contained in our unsecured 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 our Company under the agreement to be immediately due and payable. As of June 30, 2014, we were in compliance with all the financial covenants of the unsecured term loan.

(c) Unsecured Revolving Credit Facility

During the second quarter of 2014, we borrowed $38.0 million under the unsecured revolving credit facility, of which $20.0 million was used to partially fund the acquisition of 1401 K Street, NW, $8.0 million was used to prepay (without penalty) a mortgage loan that encumbered Annapolis Business Center and $10.0 million was used for general corporate purposes. In addition, in the second quarter of 2014, we borrowed $39.0 million under our unsecured revolving credit facility, to partially fund the acquisition of 1775 Wiehle Avenue, which was repaid the following day with proceeds from the sale of Corporate Campus at Ashburn Center. During the second quarter of 2014, we repaid an additional $18.0 million of the outstanding balance under the unsecured revolving credit facility with proceeds from the sale of Patrick Center and available cash. For the three and six months ended June 30, 2014, our weighted average borrowings under the unsecured revolving credit facility were$112.7 million and $104.9 million, respectively, with a weighted average interest rate of 1.7% for both periods compared with weighted average borrowings of $194.2 million and $208.0 million for the three and six months ended June 30, 2013, respectively, with a weighted average interest rate of 2.8% for both the three and six months ended June 30, 2013. Our maximum outstanding borrowings were $158.0 million for both the three and six months ended June 30, 2014 compared with $245.0 million for both the three and six months ended June 30, 2013. At June 30, 2014, outstanding borrowings under the unsecured revolving credit facility were $116.0 million with a weighted average interest rate of 1.7%. At June 30, 2014, LIBOR was 0.16% and the applicable spread on our unsecured revolving credit facility was 150 basis points. The available capacity under the unsecured revolving credit facility was $146.5 million as of the date of this filing. We are 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 June 30, 2014, we were in compliance with all the financial covenants of the unsecured revolving credit facility.

(d) Interest Rate Swap Agreements

At June 30, 2014, we fixed LIBOR, at a weighted average interest rate of 1.5%, on $300.0 million of our variable rate debt through eleven interest rate swap agreements. See note 10, Derivative Instruments, for more information about our interest rate swap agreements.

(e) Financial Covenants

Our outstanding corporate debt agreements contain specific financial covenants that may impact future financing decisions made by us or may be impacted by a decline in operations. These covenants relate to our allowable leverage, minimum tangible net worth, fixed charge coverage and other financial metrics. As of June 30, 2014, we were in compliance with the covenants of our unsecured term loan and unsecured revolving credit facility and any such financial covenants of our mortgage debt (including the Construction Loan).

Our continued ability to borrow under the unsecured 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 we were in default under other loans, including

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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 we 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 our liquidity, financial condition, results of operations and ability to make distributions to our shareholders.

Our unsecured revolving credit facility and unsecured term loan are subject to interest rate spreads that float based on the quarterly measurement of our maximum consolidated total indebtedness to gross asset value ratio. Based on our leverage ratio at June 30, 2014, the applicable interest rate spreads on the unsecured revolving credit facility and the unsecured term loan will be unchanged.

(10) Derivative Instruments

We are exposed to certain risks arising from business operations and economic factors. We use derivative financial instruments to manage exposure that arise from business activities in which our 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. We do not use derivatives for trading or speculative purposes and intend to enter into derivative agreements only with counterparties that we believe have a strong credit rating to mitigate the risk of counterparty default or insolvency. No hedging activity can completely insulate us from the risks associated with changes in interest rates. Moreover, interest rate hedging could fail to protect us or adversely affect us because, among other things:

• available interest rate hedging may not correspond directly with the interest rate risk for which we seek protection;

• the duration of the hedge may not match the duration of the related liability;

• the party owing money in the hedging transaction may default on its obligation to pay; and

• the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction.

We enter into interest rate swap agreements to hedge our exposure on our 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.

At June 30, 2014, we fixed LIBOR at a weighted average interest rate of 1.5% on $300.0 million of our variable rate debt through eleven interest rate swap agreements that are summarized below (dollars in thousands):

Effective Date	Maturity Date	Notional Amount	Interest Rate Contractual Component	Fixed LIBOR Interest Rate
July 2011	July 2016	$35,000	LIBOR	1.754%
July 2011	July 2016	25,000	LIBOR	1.763%
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%
June 2012	July 2017	50,000	LIBOR	0.955%
June 2012	July 2018	25,000	LIBOR	1.135%
	Total/Weighted Average	$300,000		1.505%

Our interest rate swap agreements are designated as cash flow hedges and we record 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”

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on our consolidated balance sheets. We record our proportionate share of any unrealized gains or losses on our cash flow hedges associated with our unconsolidated joint ventures within “Accumulated other comprehensive loss” and “Investment in affiliates” on our consolidated balance sheets. We record any gains or losses incurred as a result of each interest rate swap agreement’s fixed rate deviating from our respective loan’s contractual rate within “Interest expense” in our consolidated statements of operations. We did not have any material ineffectiveness associated with our cash flow hedges during the three and six months ended June 30, 2014 and 2013.

Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to “Interest expense” on our consolidated statements of operations as interest payments are made on our variable-rate debt. We reclassified accumulated other comprehensive loss as an increase to interest expense of $1.0 million and $1.2 million for the three months ended June 30, 2014 and 2013, respectively, and $2.1 million and $2.3 million for the six months ended June 30, 2014 and 2013, respectively. As of June 30, 2014, we estimated that $3.8 million of our accumulated other comprehensive loss will be reclassified as an increase to interest expense over the following twelve months.

(11) Fair Value Measurements

We apply GAAP that outlines a valuation framework and creates 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 required 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 we provide 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 we have 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.

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 our assumptions about the pricing of an asset or liability.

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In accordance with accounting provisions and the fair value hierarchy described above, the following table shows the fair value of our consolidated assets and liabilities that are measured on a non-recurring and recurring basis as of June 30, 2014 and December 31, 2013 (dollars in thousands):

	Balance at June 30, 2014		Level 1		Level 2		Level 3
Non-recurring Measurements:
Impaired real estate assets	$	12,500	$	—	$	12,500	$	—
Recurring Measurements:
Derivative instrument-swap assets	114		—		114		—
Derivative instrument-swap liabilities	4,944		—		4,944		—
	Balance at December 31, 2013		Level 1		Level 2		Level 3
Non-recurring Measurements:
Impaired real estate assets	$	2,909	$	—	$	2,909	$	—
Recurring Measurements:
Derivative instrument-swap assets	551		—		551		—
Derivative instrument-swap liabilities	4,576		—		4,576		—

We did not re-measure or complete any transactions involving non-financial assets or non-financial liabilities that are measured at fair value on a recurring basis during the three and six months ended June 30, 2014 and 2013. Also, no transfers into or out of fair value measurement levels for assets or liabilities that are measured on a recurring basis occurred during the six months ended June 30, 2014 and 2013.

Impairment of Real Estate Assets

We regularly review 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 second quarter of 2014, we signed a non-binding contract to sell Owings Mills Business Park, a four building business park, located in our Maryland reporting segment. Based on the anticipated sales price, less costs to sell, we recorded an impairment charge of $4.0 million in the second quarter of 2014 and anticipate the property will be sold in the third or fourth quarter of 2014. However, we can provide no assurances regarding the timing or pricing of the sale of the buildings, or that such sale will occur at all.

Interest Rate Derivatives

The interest rate derivatives are fair valued based on prevailing market yield curves on the measurement date and also take into consideration the credit valuation adjustment of the counter-party in determining the fair value of counterparty credit risk associated with our interest rate swap agreements. We use a third party to assist in valuing our interest rate swap agreements. A daily “snapshot” of the market is taken 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 our interest rate swap agreements. Our interest rate swap derivatives are effective cash flow hedges and the effective portion of the change in fair value is recorded in the equity section of our consolidated balance sheets as “Accumulated other comprehensive loss.”

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. We determine the fair value of our notes receivable and debt instruments by discounting future contractual principal and interest payments using prevailing

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market rates for securities with similar terms and characteristics at the balance sheet date. We deem the fair value measurement of our debt instruments as a Level 2 measurement as we use quoted interest rates for similar debt instruments to value our debt instruments. We also use quoted market interest rates to value our notes receivable, which we consider a Level 2 measurement as we do not believe notes receivable trade in an active market.

The carrying value and estimated fair value of our financial assets and liabilities are as follows (dollars in thousands):

	June 30, 2014				December 31, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets:
Notes receivable(1)	$	63,751	$	63,806	$	54,696	$	56,812
Financial Liabilities:
Mortgage debt	$	302,909	$	290,050	$	274,648	$	262,873
Unsecured term loan	300,000		300,000		300,000		300,000
Unsecured revolving credit facility	116,000		116,000		99,000		99,000
Total	$	718,909	$	706,050	$	673,648	$	661,873

⁽¹⁾  The principal amount of our notes receivable was $63.8 million and $54.9 million at June 30, 2014 and December 31, 2013, respectively. On January 10, 2014, we amended the 950 F Street, NW mezzanine loan and increased the outstanding balance to $34.0 million.

(12) Equity

On July 22, 2014, we declared a dividend of $0.15 per common share, equating to an annualized dividend of $0.60 per common share. The dividend will be paid on August 15, 2014 to common shareholders of record as of August 6, 2014. We also declared a dividend of $0.484375 per share on our Series A Preferred Shares. The dividend will be paid on August 15, 2014 to preferred shareholders of record as of August 6, 2014.

On April 22, 2014, we declared a dividend of $0.15 per common share, equating to an annualized dividend of $0.60 per common share. The dividend was paid on May 15, 2014 to common shareholders of record as of May 6, 2014. We also declared a dividend of $0.484375 per share on our Series A Preferred Shares. The dividend was paid on May 15, 2014 to preferred shareholders of record as of May 6, 2014. Dividends on all non-vested share awards are recorded as a reduction of shareholders’ equity. For each dividend paid by us on our common and preferred shares, the Operating Partnership distributes an equivalent distribution on our common and preferred Operating Partnership units, respectively.

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

As a result of the redemption feature of the Operating Partnership units, the noncontrolling interests associated with the Operating Partnership are recorded outside of permanent equity. Our equity and redeemable noncontrolling interests are as follows (dollars in thousands):

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	First Potomac Realty Trust			Non-redeemable noncontrolling interests		Total Equity			Redeemable noncontrolling interests
Balance at December 31, 2013	$	738,510		$	781	$	739,291		$	33,221
Net income	16,434			—		16,434			458
Changes in ownership, net	(886		)	161		(725		)	2,358
Distributions to owners	(23,786		)	—		(23,786		)	(789		)
Other comprehensive loss	(767		)	—		(767		)	(34		)
Balance at June 30, 2014	$	729,505		$	942	$	730,447		$	35,214

	First Potomac Realty Trust			Non-redeemable noncontrolling interests			Total Equity			Redeemable noncontrolling interests
Balance at December 31, 2012	$	658,765		$	3,728		$	662,493		$	34,367
Net income (loss)	16,033			(13		)	16,020			419
Changes in ownership, net	105,613			—			105,613			452
Distributions to owners	(21,529		)	—			(21,529		)	(779		)
Other comprehensive income	6,731			—			6,731			327
Balance at June 30, 2013	$	765,613		$	3,715		$	769,328		$	34,786

A summary of our accumulated other comprehensive loss is as follows (dollars in thousands):

	2014			2013
Beginning balance at January1,	$	(3,836	)	$	(10,917	)
Net unrealized (loss) gain on derivative instruments	(801		)	7,058
Net loss (gain) attributable to noncontrolling interests	34			(327		)
Ending balance at June 30,	$	(4,603	)	$	(4,186	)

(13) Noncontrolling Interests

(a) Noncontrolling Interests in the Operating Partnership

Noncontrolling interests relate to the common interests in the Operating Partnership not owned by us. 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 our option, our common shares on a one-for-one basis or cash based on the fair value of our 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. We account for issuances of common Operating Partnership units individually, which could result in some portion of our noncontrolling interests being carried at fair value with the remainder being carried at historical cost. Based on the closing price of our common shares at June 30, 2014, the cost to acquire, through cash purchase or issuance of our common shares, all of the outstanding common Operating Partnership units not owned by us would be approximately $34.5 million. At June 30, 2014 and December 31, 2013, we recorded adjustments of $5.6 million and $3.3 million, respectively, to present certain common Operating Partnership units at the greater of their carrying value or redemption value.

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At December 31, 2013, 2,627,452 of the total common Operating Partnership units, or 4.3%, were not owned by us. During the first quarter of 2014, we issued 3,125 common Operating Partnership units at a fair value of $40 thousand to the seller of 840 First Street, NE to satisfy our contingent consideration obligation related to the acquisition of the property. As a result, 2,630,577 of the total common Operating Partnership units, or 4.3%, were not owned by us at June 30, 2014. There were no common Operating Partnership units redeemed for common shares or cash during the six months ended June 30, 2014.

(b) Noncontrolling Interests in the Consolidated Partnership

When we are deemed to have a controlling interest in a partially-owned entity, we will consolidate all of the entity’s assets, liabilities and operating results within our 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 our 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 income attributable to noncontrolling interests” in our consolidated statements of operations.

On August 4, 2011, we formed a joint venture, in which we have a 97% interest, with an affiliate of Perseus Realty, LLC to acquire Storey Park in our Washington, D.C. reporting segment. At the time, the site was leased to Greyhound, which subsequently relocated its operations. Greyhound’s lease expired on August 31, 2013, at which time the property was placed into development. The joint venture anticipates developing a mixed-use project on the 1.6 acre site, which can accommodate up to 712,000 square feet of office space. At June 30, 2014, the total investment in the development project was $53.5 million, which included the original cost basis of the property of $43.3 million. The majority of the costs in excess of the original cost basis relate to capitalized architectural fees and site preparation costs. We are currently exploring our options related to this property; however, until a definitive plan for the property has been reached and we begin significant development activities, we cannot determine the total cost of the project or the anticipated completion date.

(14) Share-Based Payments

We record costs related to our share-based compensation based on the grant-date fair value calculated in accordance with GAAP. We recognize 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 our consolidated statements of operations based on the employee’s job function.

Non-Vested Share Awards

We issue non-vested common 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. We issue new common shares, subject to restrictions, upon each grant of non-vested common share awards. In May 2014, we granted a total of 29,792 non-vested common shares to our non-employee trustees, all of which will vest on the earlier of the first anniversary of the award date or the date of our 2015 annual meetings of shareholders, subject to continued service by the trustee until that date. In June 2014, we granted 15,128 non-vested common shares to our new Chief Operating Officer in connection with his appointment, which will vest ratably on each of the first three anniversaries of the date of grant.

We recognized $0.7 million and $1.4 million of compensation expense associated with our non-vested common share awards during the three and six months ended June 30, 2014 and 2013, respectively. Dividends on all non-vested common share awards are recorded as a reduction of equity. We apply the two-class method for determining EPS as our outstanding non-vested common shares with non-forfeitable dividend rights are considered participating securities. Our excess of dividends over earnings related to participating securities are shown as a reduction in net income attributable to common shareholders in our computation of EPS.

A summary of our non-vested common share awards at June 30, 2014 is as follows:

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	Non-vested Common Shares		Weighted Average Grant Date Fair Value
Non-vested at March 31, 2014	625,192		$	13.26
Granted	44,920		13.02
Vested	(25,872	)	14.52
Non-vested at June 30, 2014	644,240		13.19

We value our non-vested time-based share awards at the grant date fair value, which is the market price of our common shares. As of June 30, 2014, we had $5.2 million of unrecognized compensation cost related to non-vested common shares. We anticipate this cost will be recognized over a weighted-average period of 2.4 years.

(15) Segment Information

Our reportable segments consist of four distinct reporting and operational segments within the greater Washington, D.C. region in which we operate: Washington, D.C., Maryland, Northern Virginia and Southern Virginia. We evaluate the performance of our segments based on the operating results of the properties located within each segment, which excludes large non-recurring gains and losses, gains or losses from sale of rental property, 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.

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The results of operations of our four reporting segments for the three and six months ended June 30, 2014 and 2013 are as follows (dollars in thousands):

	Three Months Ended June 30, 2014
	Washington, D.C.(1)			Maryland			Northern Virginia			Southern Virginia			Consolidated
Number of buildings	5			42			49			38			134
Square feet	649,107			2,178,379			3,021,597			2,851,568			8,700,651
Total revenues	$	7,827		$	11,227		$	13,146		$	8,990		$	41,190
Property operating expense	(2,407		)	(2,427		)	(3,107		)	(2,928		)	(10,869		)
Real estate taxes and insurance	(1,247		)	(975		)	(1,465		)	(685		)	(4,372		)
Total property operating income	$	4,173		$	7,825		$	8,574		$	5,377		$	25,949
Depreciation and amortization expense													(15,610		)
General and administrative													(5,218		)
Acquisition costs													(1,111		)
Impairment of rental property													(3,956		)
Other income (expenses)													16,997
Income from discontinued operations													1,283
Net income													$	18,334
Capital expenditures(2)	$	4,901		$	2,701		$	1,537		$	2,749		$	12,249
	Three Months Ended June 30, 2013
	Washington, D.C.(3)			Maryland			Northern Virginia			Southern Virginia			Consolidated
Number of buildings	4			57			52			38			151
Square feet	531,714			2,617,677			3,125,229			2,858,124			9,132,744
Total revenues	$	7,347		$	10,208		$	12,641		$	8,636		$	38,832
Property operating expense	(1,543		)	(2,414		)	(2,891		)	(2,584		)	(9,432		)
Real estate taxes and insurance	(1,247		)	(827		)	(1,240		)	(661		)	(3,975		)
Total property operating income	$	4,557		$	6,967		$	8,510		$	5,391		$	25,425
Depreciation and amortization expense													(14,208		)
General and administrative													(4,985		)
Contingent consideration related to acquisition of property													(75		)
Other income (expenses)													(7,973		)
Income from discontinued operations													16,292
Net income													$	14,476
Capital expenditures(2)	$	5,112		$	6,816		$	4,685		$	2,571		$	19,350

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	Six Months Ended June 30, 2014
	Washington, D.C.(1)			Maryland			Northern Virginia			Southern Virginia			Consolidated
Total revenues	$	14,767		$	22,872		$	26,813		$	18,152		$	82,604
Property operating expense	(4,393		)	(6,373		)	(7,083		)	(5,918		)	(23,767		)
Real estate taxes and insurance	(2,301		)	(1,978		)	(2,989		)	(1,373		)	(8,641		)
Total property operating income	$	8,073		$	14,521		$	16,741		$	10,861		$	50,196
Depreciation and amortization expense													(30,714		)
General and administrative													(10,414		)
Acquisition costs													(1,179		)
Impairment of rental property													(3,956		)
Other income (expenses)													12,717
Income from discontinued operations													242
Net income													$	16,892
Total assets(4)(5)	$	410,000		$	374,416		$	438,254		$	229,263		$	1,538,266
Capital expenditures(2)	$	11,382		$	5,091		$	2,359		$	4,172		$	23,642
	Six Months Ended June 30, 2013
	Washington, D.C.(3)			Maryland			Northern Virginia			Southern Virginia			Consolidated
Total revenues	$	14,768		$	20,620		$	25,358		$	17,245		$	77,991
Property operating expense	(3,241		)	(5,098		)	(6,133		)	(5,271		)	(19,743		)
Real estate taxes and insurance	(2,595		)	(1,636		)	(2,930		)	(1,326		)	(8,487		)
Total property operating income	$	8,932		$	13,886		$	16,295		$	10,648		$	49,761
Depreciation and amortization expense													(28,195		)
General and administrative													(10,252		)
Contingent consideration related to acquisition of property													(75		)
Other income (expenses)													(16,373		)
Income from discontinued operations													21,573
Net income													$	16,439
Total assets(4)(5)	$	328,581		$	408,246		$	429,781		$	231,393		$	1,557,666
Capital expenditures(2)	$	12,785		$	7,935		$	8,302		$	5,534		$	35,120

⁽¹⁾  Includes occupied space at 440 First Street, NW and excludes Storey Park, which was placed in development in the third quarter of 2013.

⁽²⁾  Capital expenditures for corporate assets not allocated to any of our reportable segments totaled $361 and $166for the three months ended June 30, 2014 and 2013, respectively, and $638 and $564 for the six months ended June 30, 2014 and 2013, respectively.

⁽³⁾  Excludes 440 First Street, NW, which has been in redevelopment since its acquisition in 2010.

⁽⁴⁾  Total assets include our investment in properties that are owned through joint ventures that are not consolidated within our condensed consolidated financial statements. For more information on our unconsolidated investments, including location within our reportable segments, see note 7, Investment in Affiliates.

⁽⁵⁾  Corporate assets not allocated to any of our reportable segments totaled $86,333 and $159,665 at June 30, 2014 and 2013, respectively.

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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 Quarterly Report on Form 10-Q. The discussion and analysis is derived from the consolidated operating results and activities of First Potomac Realty Trust. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. The Company’s actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 and included elsewhere in this Quarterly Report on Form 10-Q. See “Special Note About Forward-Looking Statements” above.

References in this Quarterly Report on Form 10-Q to “we,” “our,” “us,” the “Company” or “First Potomac,” refer to First Potomac Realty Trust and its subsidiaries, on a consolidated basis, unless the context indicates otherwise.

Overview

We are a leader in the ownership, management, development and redevelopment of office and business park properties in the greater Washington, D.C. region. We separate our properties into four distinct reporting segments, which we refer to as the Washington, D.C., Maryland, Northern Virginia and Southern Virginia reporting segments. We strategically focus on acquiring and redeveloping properties that we believe can benefit from our intensive property management, leasing expertise, market knowledge and established relationships, and seek to reposition these properties to increase their profitability and value. Our portfolio primarily contains a mix of single-tenant and multi-tenant office properties and business parks. Office properties are single-story and multi-story buildings that are primarily for office use; and business parks contain buildings with office features combined with some industrial property space.

We conduct our business through First Potomac Realty Investment Limited Partnership, our operating partnership (the “Operating Partnership”). We are the sole general partner of, and, as of June 30, 2014, owned 100% of the preferred interest and 95.7% of the common interest in the Operating Partnership. The remaining common 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 two of our executive officers who contributed properties and other assets to us upon our formation, and the remainder of which are owned by other unrelated parties.

At June 30, 2014, we wholly-owned or had a controlling interest in properties totaling 8.7 million square feet and had a noncontrolling ownership interest in properties totaling an additional 0.9 million square feet through five unconsolidated joint ventures. We also owned land that can support approximately 1.5 million square feet of additional development. Our consolidated properties were 86.0% occupied by 558 tenants at June 30, 2014. We did not include square footage that was in development or redevelopment in our occupancy calculation, which totaled 0.1 million square feet at June 30, 2014. We derive substantially all of our revenue from leases of space within our properties. We operate so as to qualify as a real estate investment trust (“REIT”) for federal income tax purposes.

The primary source of our revenue is rent received from tenants under long-term (generally three to ten years) operating leases at our properties, including reimbursements from tenants for certain operating costs. Additionally, we may generate earnings from the sale of assets to third parties or contributed into joint ventures.

Our long-term growth will principally be driven by our ability to:

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

• continue to grow our portfolio through acquisitions of new properties, potentially through joint ventures;

• sell non-core assets to third parties, or contribute properties to joint ventures, at favorable prices;

• develop and redevelop existing assets; and

• execute initiatives designed to increase balance sheet capacity and expand the potential sources of capital.

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Executive Summary

For the three months ended June 30, 2014, net income increased by $3.8 million to $18.3 million compared with $14.5 million for the same period in 2013. For the six months ended June 30, 2014, net income increased by $0.5 million to $16.9 million compared with $16.4 million for the same period in 2013.

Funds From Operations (“FFO”) increased for the three months ended June 30, 2014 compared with the same period in 2013 due to an aggregate loss on debt extinguishment of $4.6 million for the three months ended June 30, 2013, primarily as a result of selling our industrial portfolio in June 2013. As a result of the reduction in net operating income from the sale of our industrial portfolio, FFO for the six months ended June 30, 2014 decreased compared with the comparable period in 2013. The reduction in net operating income from the industrial portfolio sale for the three and six months ended June 30, 2014 was partially offset by improvements in net operating income on a same-property basis, as well as a reduction in interest expense, as we decreased the weighted average interest rate on our total outstanding debt by over 100 basis points since June 30, 2013.

FFO is a non-GAAP financial measure. For a description of FFO, including why we believe our presentation is useful and a reconciliation of FFO to net income attributable to First Potomac Realty Trust, see “Funds From Operations.”

Significant Activity for the Three Months Ended June 30, 2014

• Executed 353,000 square feet of leases, including 166,000 square feet of new leases.

• Increased leased percentage in consolidated portfolio to 89.5% from 86.5% at June 30, 2013, and increased leased percentage on strategic hold portfolio to 93.0% from 91.0% at June 30, 2013.

• In April, sold West Park, a 29,000 square foot office building, and Patrick Center, a 66,000 square-foot office building, for aggregate net proceeds of $13.8 million.

• In June, sold Corporate Campus at Ashburn Center, a 194,000 square-foot, single-story business park, for net proceeds of $39.9 million, bringing aggregate net proceeds from dispositions for the year to $85.3 million.

• In April, acquired 1401 K Street, NW, a 117,000 square foot, twelve-story, office building located in downtown Washington, D.C., for $58.0 million.

• In June, acquired 1775 Wiehle Avenue, a 130,000 square foot, five-story, fully leased office building located in Reston, Virginia, for $41.0 million, bringing the aggregate purchase price of acquisitions for the year to $99.0 million.

Informal SEC Inquiry

As previously disclosed in our Annual Reports on Form 10-K for the years ended December 31, 2013 and 2012, we were informed that the SEC initiated an informal inquiry relating to the matters that were the subject of the Audit Committee’s internal investigation regarding the material weakness previously identified in our Annual Report on Form 10-K for the year ended December 31, 2011. The SEC staff has informed us that this inquiry should not be construed as an indication by the SEC or its staff that any violations of law have occurred, nor considered a reflection upon any person, entity or security. We have been, and intend to continue, voluntarily cooperating fully with the SEC. The scope and outcome of this matter cannot be determined at this time.

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Properties:

The following sets forth certain information about our properties by segment as of June 30, 2014 (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 June 30, 2014(3)		Occupied at June 30, 2014(3)
Office
440 First Street, NW(4)	1	Capitol Hill	25,486	$	763	100.0	%	100.0	%
500 First Street, NW	1	Capitol Hill	129,035	4,354		100.0	%	100.0	%
840 First Street, NE	1	NoMA	248,536	7,012		97.7	%	88.8	%
1211 Connecticut Avenue, NW	1	CBD	128,807	3,607		93.5	%	68.9	%
1401 K Street, NW	1	East End	117,243	3,324		88.2	%	88.2	%
Total/Weighted Average	5		649,107	19,060		95.7	%	87.4	%
Development and Redevelopment
440 First Street, NW(4)	—	Capitol Hill	113,781	—
Storey Park(5)	—	NoMA	—	—
Total Development and Redevelopment	—		113,781	—
Unconsolidated Joint Venture
1750 H Street, NW	1	CBD	113,235	3,801		97.0	%	84.9	%
Region Total/Weighted Average	6		876,123	$	22,861	95.9	%	87.0	%

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

⁽²⁾  Annualized cash basis rent, which is calculated as the contractual rent due under the terms of the leases, 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 our 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⁾  In October 2013, we substantially completed the redevelopment of the property. At June 30, 2014, we had placed in-service approximately 25,000 square feet of the redeveloped space. The property has approximately 114,000 square feet remaining in redevelopment, which will be placed in-service at the earlier of a tenant taking occupancy or October 2014.

⁽⁵⁾  The property was acquired through a consolidated joint venture in which we have a 97% controlling economic interest. The property was placed into development on September 1, 2013. The joint venture anticipates developing a mixed-used project on the 1.6 acre site, which can accommodate up to 712,000 square feet of office space. We are currently exploring our options related to this property; however, until a definitive plan for the property has been reached and we begin significant development activities, we cannot determine the total cost of the project or the anticipated completion date.

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MARYLAND REGION

Property	Buildings	Location	Square Feet	Annualized Cash Basis Rent(1)		Leased at June 30, 2014		Occupied at June 30, 2014
Business Park
Ammendale Business Park(2)	7	Beltsville	312,846	$	4,195	100.0	%	100.0	%
Gateway 270 West	6	Clarksburg	253,916	2,979		84.0	%	71.4	%
Owings Mills Business Park(3)	4	Owings Mills	180,475	1,136		53.7	%	53.7	%
Rumsey Center	4	Columbia	135,047	1,407		94.7	%	80.7	%
Snowden Center	5	Columbia	145,267	2,182		100.0	%	100.0	%
Total Business Park	26		1,027,551	11,899		87.2	%	82.3	%
Office
Annapolis Business Center	2	Annapolis	101,113	1,749		100.0	%	100.0	%
Metro Park North	4	Rockville	191,211	2,773		87.3	%	87.3	%
Cloverleaf Center	4	Germantown	173,766	2,146		73.0	%	62.9	%
Hillside I and II(4)	2	Columbia	63,709	785		79.5	%	79.5	%
TenThreeTwenty	1	Columbia	137,867	1,773		86.4	%	81.0	%
Redland Corporate Center	3	Rockville	483,162	12,233		100.0	%	100.0	%
Total Office	16		1,150,828	21,459		91.0	%	88.9	%
Total Consolidated	42		2,178,379	33,358		89.2	%	85.7	%
Unconsolidated Joint Ventures
Aviation Business Park	3	Glen Burnie	120,285	1,236		69.8	%	45.9	%
RiversPark I and II	6	Columbia	307,984	4,147		94.7	%	94.7	%
Total Joint Ventures	9		428,269	5,383		87.7	%	81.0	%
Region Total/Weighted Average	51		2,606,648	38,741		89.0	%	85.0	%

⁽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 our full-service leases. The operating expense reimbursements primarily relate to real estate taxes and insurance expenses.

⁽²⁾  Ammendale Business Park consists of the following properties: Ammendale Commerce Center and Indian Creek Court.

⁽³⁾  Owings Mills Business Park consists of the following properties: Owings Mills Business Center and Owings Mills Commerce Center. On June 23, 2014, we entered into a non-binding contract to sell Owings Mills Business Park. The sale is expected to be completed in the third or fourth quarter of 2014. However, we can provide no assurances regarding the timing or pricing of the sale, or that such sale will occur at all.

⁽⁴⁾  Excludes 21,922 square feet of space that was placed into redevelopment during the first quarter of 2014.

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NORTHERN VIRGINIA REGION

Property	Buildings	Location	Square Feet	Annualized Cash Basis Rent(1)		Leased at June 30, 2014		Occupied at June 30, 2014
Business Park
Gateway Centre Manassas	3	Manassas	102,446	$	974	93.1	%	67.0	%
Linden Business Center	3	Manassas	109,787	1,059		97.4	%	97.4	%
Prosperity Business Center	1	Merrifield	71,373	786		92.5	%	84.9	%
Sterling Park Business Center(2)	7	Sterling	474,839	4,308		94.2	%	91.4	%
Total Business Park	14		758,445	7,127		94.4	%	88.4	%
Office
Atlantic Corporate Park(3)	2	Sterling	219,374	3,189		81.3	%	43.9	%
Cedar Hill	2	Tysons Corner	102,632	2,198		100.0	%	100.0	%
Herndon Corporate Center	4	Herndon	128,075	1,626		88.5	%	86.4	%
Enterprise Center	4	Chantilly	187,860	3,074		92.3	%	91.6	%
One Fair Oaks	1	Fairfax	214,214	5,284		100.0	%	100.0	%
Reston Business Campus	4	Reston	82,372	798		66.1	%	53.7	%
1775 Wiehle Avenue	1	Reston	130,048	2,796		100.0	%	100.0	%
Three Flint Hill	1	Oakton	180,819	3,186		96.3	%	93.8	%
Van Buren Office Park	5	Herndon	106,873	979		76.1	%	76.1	%
Windsor at Battlefield	2	Manassas	155,511	2,082		92.0	%	85.5	%
Total Office	26		1,507,778	25,212		90.5	%	83.2	%
Industrial
Newington Business Park Center	7	Lorton	254,727	2,210		78.6	%	78.0	%
Plaza 500	2	Alexandria	500,647	5,127		96.7	%	96.7	%
Total Industrial	9		755,374	7,337		90.6	%	90.4	%
Total Consolidated	49		3,021,597	39,676		91.5	%	86.3	%
Unconsolidated Joint Venture
Prosperity Metro Plaza	2	Merrifield	326,414	7,358		93.0	%	85.8	%
Region Total/Weighted Average	51		3,348,011	47,034		91.6	%	86.2	%

⁽¹⁾  Annualized cash basis rent, which is calculated as the contractual rent due under the terms of the leases, 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 our full-service leases. The operating expense reimbursements primarily relate to real estate taxes and insurance expenses.

⁽²⁾  Sterling Park Business Center consists of the following properties: 403/405 Glenn Drive, Davis Drive and Sterling Park Business Center.

⁽³⁾  In March 2014, we signed a lease for 82,000 square feet with a government tenant to occupy an entire building that was vacant at acquisition. We currently expect the tenant to move into the space in early 2015.

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SOUTHERN VIRGINIA REGION

Property	Buildings	Location	Square Feet	Annualized Cash Basis Rent(1)		Leased at June 30, 2014		Occupied at June 30, 2014
RICHMOND
Business Park
Chesterfield Business Center(2)	11	Richmond	320,189	$	1,717	75.1	%	75.1	%
Hanover Business Center	4	Ashland	184,032	799		66.8	%	66.8	%
Park Central	3	Richmond	204,696	2,190		93.3	%	90.1	%
Virginia Technology Center	1	Glen Allen	118,983	1,237		79.1	%	79.1	%
Total Richmond	19		827,900	5,943		78.3	%	77.6	%
NORFOLK
Business Park
Battlefield Corporate Center	1	Chesapeake	96,720	811		100.0	%	100.0	%
Crossways Commerce Center(3)	9	Chesapeake	1,082,753	11,321		94.8	%	94.8	%
Greenbrier Business Park(4)	4	Chesapeake	410,609	3,689		73.5	%	73.5	%
Norfolk Commerce Park(5)	3	Norfolk	262,010	2,576		92.3	%	88.4	%
Total Business Park	17		1,852,092	18,397		90.0	%	89.4	%
Office
Greenbrier Towers	2	Chesapeake	171,576	1,695		81.5	%	81.5	%
Total Norfolk	19		2,023,668	20,092		89.3	%	88.7	%
Region Total/Weighted Average	38		2,851,568	26,035		86.1	%	85.5	%

⁽¹⁾  Annualized cash basis rent, which is calculated as the contractual rent due under the terms of the leases, 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 our full-service leases. The operating expense reimbursements primarily relate to real estate taxes and insurance expenses.

⁽²⁾  Chesterfield Business Center consists of the following properties: Airpark Business Center, Chesterfield Business Center and Pine Glen.

⁽³⁾  Crossways Commerce Center consists of the following properties: Coast Guard Building, Crossways Commerce Center I, Crossways Commerce Center II, Crossways Commerce Center IV and 1434 Crossways Boulevard.

⁽⁴⁾  Greenbrier Business Park consists of the following properties: Greenbrier Technology Center I, Greenbrier Technology Center II and Greenbrier Circle Corporate Center.

⁽⁵⁾  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

We construct office buildings and business parks on a build-to-suit basis or with the intent to lease upon completion of construction. We own developable land that can accommodate 1.5 million square feet of additional building space, of which, 0.7 million is located in the Washington, D.C. reporting segment, 0.1 million in the Maryland reporting segment, 0.6 million in the Northern Virginia reporting segment and 0.1 million in the Southern Virginia reporting segment.

On August 4, 2011, we formed a joint venture, in which we have a 97% interest, with an affiliate of Perseus Realty, LLC to acquire Storey Park in our Washington, D.C. reporting segment. At the time, the site was leased to Greyhound Lines, Inc. (“Greyhound”), which subsequently relocated its operations. Greyhound’s lease expired on August 31, 2013, at which time the property was placed into development. The joint venture anticipates developing a mixed-use project on the 1.6 acre site, which can accommodate up to 712,000 square feet of office space. At June 30, 2014, the total investment in the development project was $53.5 million, which included the original cost basis of the property of $43.3 million. The majority of the costs in excess of the original cost basis relate to capitalized architectural fees and site preparation costs. We are currently exploring our options related to this property; however, until a definitive plan for the property has been reached and we begin significant development activities, we cannot determine the total cost of the project or the anticipated completion date.

On December 28, 2010, we acquired 440 First Street, NW, a vacant eight-story office building in our Washington, D.C. reporting segment. In October 2013, we substantially completed the redevelopment of the 139,000 square foot property. At June 30, 2014, we had placed in-service 25,000 square feet of the redeveloped space at the property. At June 30, 2014, our total investment in the redevelopment project was $55.0 million, which included the original cost basis of the property of $23.6 million.

We will place completed construction activities in service upon the earlier of a tenant taking occupancy or twelve months from substantial completion. At June 30, 2014, we had 114,000 square feet of redevelopment at 440 First Street, NW that had yet to be placed-in service. At June 30, 2014, we had no completed development efforts that had yet to be placed in service.

Lease Expirations

Approximately 3.0% of our annualized cash basis rent, excluding month-to-month leases (which represent 0.2% of our annualized cash basis rent), is scheduled to expire during the remainder of 2014. We expect replacement rents on leases expiring in the second half of 2014 to decrease on a cash basis relative to the current rental rates being paid by tenants. Current tenants are not obligated to renew their leases upon the expiration of their terms. If non-renewals or terminations occur, we 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 our financial obligations. Moreover, the terms of a renewal or new lease, including the amount of rent, may be less favorable to us than the current lease terms, or we may be forced to provide tenant improvements at our 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. We continually monitor our 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. Prior to signing a lease with a tenant, we generally assess the prospective tenant’s credit quality through review of its financial statements and tax returns, and the result of that review is a factor in establishing the rent to be charged and/or level of security deposit required. Over the course our leases, we monitor our tenants to stay aware of any material changes in credit quality. The metrics we use to evaluate a significant tenant’s liquidity and creditworthiness depend on facts and circumstances specific to that tenant and to the industry in which it operates and include the tenant’s credit history and economic conditions related to the tenant, its operations and the markets in which it operates.  These factors may change over time. In addition, our property management personnel have regular contact with tenants and tenant employees, and, where the terms of the lease permit and we deem it prudent we may request tenant financial information for periodic review, review publicly-available financial statements in the case of public company tenants and monitor news and rating agency reports regarding our tenants (or their parent companies) and their underlying businesses. In addition, we regularly analyze account receivable balances as part of the ongoing monitoring of the timeliness of rent collections from tenants.

During the second quarter of 2014, we delivered positive net absorption of approximately 63,000 square feet, and had a tenant retention rate of 65%. After reflecting all the renewal leases on a triple-net equivalent basis to allow for comparability, the weighted average rental rate of our renewed leases increased 1.9% and 2.5% for the three and six months ended June 30, 2014, respectively, compared with the expiring leases on a U.S. generally accepted accounting principles (“GAAP”) basis. During the second quarter of 2014, we executed new leases for 166,000 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 tenant improvement and leasing commission costs on a rentable square foot basis for all new and renewal leases signed during the six months ended June 30, 2014:

	New	Renewal
Tenant improvements (per rentable square foot)	$31.61	$4.66
Leasing commissions (per rentable square foot)	$10.87	$2.40

The following table sets forth a summary schedule of the lease expirations at our consolidated properties for leases in place as of June 30, 2014 (dollars in thousands, except per square foot data):

Year of Lease Expiration(1)	Number of Leases Expiring	Leased Square Feet	% of Leased Square Feet		Annualized Cash Basis Rent(2)		% of Annualized Cash Basis Rent		Average Base Rent per Square Foot(2)(3)
MTM	5	24,606	0.3	%	$	210	0.2	%	$	8.52
2014	53	287,464	3.7	%	3,577		3.0	%	12.44
2015	106	657,966	8.5	%	9,575		8.1	%	14.55
2016	105	769,697	9.9	%	12,699		10.8	%	16.50
2017	104	1,276,624	16.4	%	19,146		16.2	%	15.00
2018	88	1,038,203	13.3	%	14,014		11.9	%	13.50
2019	84	943,079	12.1	%	12,626		10.7	%	13.39
2020	50	910,242	11.7	%	13,590		11.5	%	14.93
2021	30	270,803	3.5	%	3,473		2.9	%	12.82
2022	30	258,420	3.3	%	3,828		3.2	%	14.81
2023	14	521,779	6.7	%	10,755		9.1	%	20.61
Thereafter	50	825,640	10.6	%	14,637		12.4	%	17.73
Total / Weighted Average	719	7,784,523	100.0	%	$	118,130	100.0	%	$	15.17

⁽¹⁾  We classify leases that expired or were terminated on the last day of the quarter as leased square footage since the tenant is contractually entitled to the space.

⁽²⁾  Annualized Cash Basis Rent, which is calculated as the contractual rent due under the terms of the leases, 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 our full-service leases. The operating expense reimbursements primarily relate to real estate taxes and insurance expenses.

⁽³⁾  Represents Annualized Cash Basis Rent at June 30, 2014, divided by the square footage of the expiring leases.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP that require us 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 we deem most important to the portrayal of our 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 our consolidated financial statements. Our 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 rental property, derivative instruments and share-based compensation.

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

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Revenue Recognition

We generate substantially all of our revenue from leases on our properties. We recognize rental revenue on a straight-line basis over the term of our 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. We consider 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.

Tenant leases generally contain provisions under which the tenants reimburse us for a portion of property operating expenses and real estate taxes we incur. Such reimbursements are recognized in the period in which the expenses are incurred. We record a provision for losses on estimated uncollectible accounts receivable based on our 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 we have possession of the terminated space.

In May 2014, FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers, (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance when it becomes effective on January 1, 2017. Early adoption is not permitted. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. We have not yet selected a transition method and are evaluating the impact that ASU 2014-09 will have on our consolidated financial statements and related disclosures.

Accounts and Notes Receivable

We must make estimates of the collectability of our accounts and notes receivable related to minimum rent, deferred rent, tenant reimbursements, lease termination fees and interest and other income. We specifically analyze accounts receivable and historical bad debt experience, tenant concentrations, tenant creditworthiness and current economic trends when evaluating the adequacy of our allowance for doubtful accounts receivable. These estimates have a direct impact on our 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. We consider 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 our 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

We regularly review 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 carrying value of a property, an impairment analysis is performed. We assess 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 to maintain

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the operating capacity, 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. We are required to make estimates as to whether there are impairments in the carrying values of our investments in real estate. Further, we will record an impairment loss if we expect to dispose of a property, in the near term, at a price below carrying value. In such an event, we 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.

We will classify a building as held-for-sale in accordance with GAAP in the period in which we have made the decision to dispose of the building, our 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 exist that could cause the transaction not to be completed in a timely manner. We will cease recording depreciation on a building once it has been classified as held-for-sale. In the second quarter of 2014, we prospectively adopted ASU 2014-08, which impacts the presentation of operations and gains or losses from disposed properties and properties classified as held-for-sale. For more information, see note 2(c), Summary of Significant Accounting Policies - Application of New Accounting Standards, in the notes to our condensed consolidated financial statements.

If the building does not qualify as a discontinued operation under ASU 2014-08 we will classify the building’s operating results, together with any impairment charges and any gains or losses on the sale of the building, in continuing operations for all periods presented in our consolidated statements of operations. We will classify the assets and related liabilities related to the building as held-for-sale in our consolidated balance sheet for the period the held-for-sale criteria was met.

If the building does qualify as a discontinued operation under ASU 2014-08, we will classify the building’s operating results, together with any impairment charges and any gains or losses on the sale of the building, in discontinued operations in our consolidated statements of operations for all periods presented and classify the assets and liabilities related to the building as held-for-sale in our consolidated balance sheets for the periods presented. 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 us after the disposition.

We recognize 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.

We capitalize interest costs incurred on qualifying expenditures for real estate assets under development or redevelopment, which include our investments 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. We 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. We also capitalize direct compensation costs of our 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. We do not capitalize any other general administrative costs such as office supplies, office rent expense or an overhead allocation to our development or redevelopment projects. Capitalized compensation costs were immaterial during the three and six months ended June 30, 2014 and 2013. 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. We will also place redevelopment and development assets into 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:

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• 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.

Our determination of these fair values requires us 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

We are exposed to certain risks arising from business operations and economic factors. We use derivative financial instruments to manage exposures that arise from business activities in which our 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. We do not use derivatives for trading or speculative purposes and we intend to enter into derivative agreements only with counterparties that we believe have a strong credit rating to mitigate the risk of counterparty default or insolvency. No hedging activity can completely insulate us from the risks associated with changes in interest rates. Moreover, interest rate hedging could fail to protect us or adversely affect us because, among other things:

• available interest rate hedging may not correspond directly with the interest rate risk for which we seek protection;

• the duration of the hedge may not match the duration of the related liability;

• the party owing money in the hedging transaction may default on its obligation to pay; and

• the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign its side of the hedging transaction.

We 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 effective portion of 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, we record our proportionate share of unrealized gains or losses on our derivative instruments associated with our unconsolidated joint ventures within equity and “Investment in affiliates.” We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting any applicable credit enhancements, such as collateral postings, thresholds, mutual inputs and guarantees.

Share-Based Payments

We measure 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, we use a Black-Scholes option-pricing model. Expected volatility is based on an assessment of our realized volatility over the preceding period that is equivalent to the award’s expected life. The expected term represents the period of time the options are anticipated to remain outstanding as well as our 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, we use 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, we use 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.

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Results of Operations

Comparison of the Three and Six Months Ended June 30, 2014with the Three and Six Months Ended June 30, 2013

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

In the tables below, the designation “NM” is used to refer to a percentage that is not meaningful.

Total Revenues

Total revenues are summarized as follows:

									Three Months				Six Months
	Three Months Ended June 30,				Six Months Ended June 30,						Percent				Percent
(dollars in thousands)	2014		2013		2014		2013		Change		Change		Change		Change
Rental	$	33,130	$	31,087	$	65,070	$	61,780	$	2,043	7	%	$	3,290	5	%
Tenant reimbursements and other	$	8,060	$	7,745	$	17,534	$	16,211	$	315	4	%	$	1,323	8	%

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 $2.0 million and $3.3 million for the three and six months ended June 30, 2014, respectively, compared with the same periods in 2013, primarily due to an increase in occupancy. The occupancy of our consolidated portfolio was 86.0% at June 30, 2014 compared with 84.0% at June 30, 2013. The increase in rental revenue for the three and six months ended June 30, 2014 compared with the same periods in 2013 includes $0.8 million and $0.6 million, respectively, for Washington, D.C., $0.9 million and $1.6 million, respectively, for Maryland, $0.2 million and $0.7 million, respectively, for Northern Virginia and $0.1 million and $0.4 million, respectively, for Southern Virginia. Due to the timing of acquisitions and dispositions in 2014, which may or may not occur for the remainder of 2014, we cannot determine if rental revenue will continue to increase during 2014 compared with 2013.

Tenant Reimbursements and Other Revenues

Tenant reimbursements and other revenues include operating and common area maintenance costs reimbursed by our 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 $0.3 million and $1.3 million for the three and six months ended June 30, 2014, respectively, compared with the same periods in 2013. The increase in tenant reimbursements and other revenues for the three months ended June 30, 2014 compared with 2013 was primarily due to higher recoverable property operating expenses as of the result of higher occupancy. The increase in tenant reimbursements and other revenues for the six months ended June 30, 2014 compared with 2013 was primarily due to an increase in recoverable snow and ice removal costs as an increase in utility costs related to the colder temperatures during the first quarter of 2014. The increase in tenant reimbursements and other revenues for the three and six months ended June 30, 2014 compared with the same periods in 2013 includes $0.1 million and $0.6 million, respectively, for Maryland, $0.3 million and $0.8 million, respectively, for Northern Virginia and $0.2 million and $0.5 million, respectively, for Southern Virginia. Tenant reimbursements and other revenues for Washington, D.C. decreased $0.3 million and $0.6 million for the three and six months ended June 30, 2014, respectively, compared with the same periods in 2013 as a tenant at Storey Park vacated in August 2013 and the property was subsequently placed into development. We anticipate full-year tenant reimbursements and other revenues will be greater than full-year 2013 tenant reimbursements and other revenues due to an increase in recoverable snow and ice removal costs during the first quarter of 2014.

Total Expenses

Property Operating Expenses

Property operating expenses are summarized as follows:

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									Three Months				Six Months
	Three Months Ended June 30,				Six Months Ended June 30,						Percent				Percent
(dollars in thousands)	2014		2013		2014		2013		Change		Change		Change		Change
Property operating	$	10,869	$	9,432	$	23,767	$	19,743	$	1,437	15	%	$	4,024	20	%
Real estate taxes and insurance	$	4,372	$	3,975	$	8,641	$	8,487	$	397	10	%	$	154	2	%

Property operating expenses increased $1.4 million and $4.0 million for the three and six months ended June 30, 2014 compared with the same periods in 2013. The increase in property operating expenses for the three months ended June 30, 2014 compared with 2013 was primarily due to an increase in both occupancy, which resulted in higher variable operating expenses, and reserves for anticipated bad debt expense. The increase in property operating expenses for the six months ended June 30, 2014 compared with 2013 was primarily due to a $1.5 million increase in snow and ice removal costs and an increase in utility costs related to the colder temperatures during the first quarter of 2014. The increase in property operating expenses for the three and six months ended June 30, 2014 compared with the same periods in 2013 includes $0.9 million and $1.2 million, respectively, for Washington, D.C., $0.2 million and $0.9 million, respectively, for Northern Virginia, and $0.3 million and $0.6 million, respectively, for Southern Virginia. Property operating expenses for Maryland remained flat for the three months ended June 30, 2014 compared with 2013 and increased $1.3 million for the six months ended June 30, 2014 compared with 2013. We anticipate full-year 2014 property operating expenses will be greater than full-year 2013 property operating expenses due to the increase in snow and ice removal costs during the first quarter of 2014.

Real estate taxes and insurance expense increased $0.4 million and $0.2 million for the three and six months ended June 30, 2014 compared with the same periods in 2013, primarily due to higher real estate tax assessments. The increase in real estate taxes and insurance expense for the three and six months ended June 30, 2014 was partially offset by a decrease in real estate taxes and insurance expense related to Storey Park being placed into development, at which point taxes and insurance began to be capitalized. The increase in real estate taxes and insurance expense for the three and six months ended June 30, 2014 compared with the same periods in 2013 includes $0.2 million and $0.3 million, respectively, for Maryland, $0.2 million and $0.1 million, respectively, for Northern Virginia, and slight increases for both the three and six months ended June 30, 2014 compared with the same periods in 2013 for Southern Virginia. Real estate taxes and insurance expense for Washington, D.C. remained flat for the three months ended June 30, 2014 compared with 2013 and decreased $0.3 million for the six months ended June 30, 2014 compared with 2013. Due to the timing of acquisitions and dispositions in 2014, which may or may not occur for the remainder of 2014, we cannot determine if real estate taxes and insurance expense will continue to increase during 2014 compared with 2013.

Other Operating Expenses

General and administrative expenses are summarized as follows:

									Three Months				Six Months
	Three Months Ended June 30,				Six Months Ended June 30,						Percent				Percent
(dollars in thousands)	2014		2013		2014		2013		Change		Change		Change		Change
	$	5,218	$	4,985	$	10,414	$	10,252	$	233	5	%	$	162	2	%

General and administrative expenses increased $0.2 million for both the three and six months ended June 30, 2014 compared with the same periods in 2013 due to an increase in employee compensation costs, particularly costs associated with the employment of our new Chief Operating Officer. The increase in general and administrative expenses for the six months ended June 30, 2014 compared with 2013 was partially offset by a decrease in legal fees as we incurred $0.3 million of legal fees associated with an informal SEC inquiry during the first quarter of 2013. We currently anticipate that general and administrative expenses will decrease in 2014 compared with 2013 as we expect an overall decline in legal fees in 2014 compared with 2013 and do not expect to incur any personnel separation costs in 2014. However, the informal inquiry initiated by the SEC could result in increased legal and/or accounting fees in 2014.

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Acquisition costs are summarized as follows:

									Three Months				Six Months
	Three Months Ended June 30,				Six Months Ended June 30,						Percent				Percent
(dollars in thousands)	2014		2013		2014		2013		Change		Change		Change		Change
	$	1,111	$	—	$	1,179	$	—	$	1,111	$	—	$	1,179	$	—

During the second quarter of 2014, we acquired 1401 K Street, NW, a twelve-story, 117,000 square foot office building in Washington D.C., for $58.0 million and 1775 Wiehle Avenue, a five-story, 130,000 square foot office building in Reston, Virginia for $41.0 million, which caused an increase in acquisition costs for the three and six months ended June 30, 2014 compared with the same periods in 2013. We did not acquire any properties during the three and six months ended June 30, 2013.

Depreciation and amortization expense is summarized as follows:

									Three Months				Six Months
	Three Months Ended June 30,				Six Months Ended June 30,						Percent				Percent
(dollars in thousands)	2014		2013		2014		2013		Change		Change		Change		Change
	$	15,610	$	14,208	$	30,714	$	28,195	$	1,402	10	%	$	2,519	9	%

Depreciation and amortization expense includes depreciation of rental property and amortization of intangible assets and leasing commissions. Depreciation and amortization expense increased $1.4 million and $2.5 million for the three and six months ended June 30, 2014, respectively, compared with the same periods in 2013, primarily due to additional leasing and tenant improvements costs related to the increase in occupancy in our portfolio. Depreciation expense also increased for the three and six months ended June 30, 2014 compared with the same periods in 2013 due to the acquisition of an additional building at Redland Corporate Center in October 2013, and the acquisitions of 1401 K Street, NW and 1775 Wiehle Avenue in the second quarter of 2014. Due to the timing of acquisitions and dispositions in 2014, which may or may not occur for the remainder of 2014, we cannot determine if depreciation expense will continue to increase during 2014 compared with 2013.

Impairment of rental property is summarized as follows:

									Three Months			Six Months
	Three Months Ended June 30,				Six Months Ended June 30,						Percent			Percent
(dollars in thousands)	2014		2013		2014		2013		Change		Change	Change		Change
	$	3,956	$	—	$	3,956	$	—	$	3,956	—	$	3,956	—

On June 23, 2014, we entered into a non-binding contract to Owings Mills Business Park, a four-building, 180,500 square foot business park, which is located in our Maryland reporting segment. Based on the anticipated sales price, less costs to sell, we recorded an impairment charge of $4.0 million in the second quarter of 2014. The sale is expected to be completed in the third or fourth quarter of 2014. However, we can provide no assurances regarding the timing or pricing of the sale of the property, or that such sale will occur at all. The impairment charge related to the four buildings is reflected in continuing operations in our consolidated statements of operations. We did not record any other impairment charges within continuing operations for the three and six months ended June 30, 2014 and 2013.

Contingent consideration related to acquisition of property is summarized as follows:

									Three Months					Six Months
	Three Months Ended June 30,				Six Months Ended June 30,							Percent					Percent
(dollars in thousands)	2014		2013		2014		2013		Change			Change		Change			Change
	$	—	$	75	$	—	$	75	$	(75	)	(100	)%	$	(75	)	(100	)%

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As part of the consideration for our 2009 acquisition of Corporate Campus at Ashburn Center, we recorded a contingent consideration obligation arising from a fee agreement entered into with the seller pursuant to which we were obligated to pay additional consideration if certain returns were achieved over the five-year term of the agreement or if the property was sold within the term of the five-year agreement. During June 2013, we achieved the specified returns and increased our liability to the seller. We paid the seller of Corporate Campus at Ashburn Center $1.7 million during the third quarter of 2013 to fulfill the obligation. The property was subsequently sold in June 2014.

Other (Income) Expenses

Interest expense is summarized as follows:

									Three Months					Six Months
	Three Months Ended June 30,				Six Months Ended June 30,							Percent					Percent
(dollars in thousands)	2014		2013		2014		2013		Change			Change		Change			Change
	$	6,102	$	9,353	$	11,914	$	19,310	$	(3,251	)	(35	)%	$	(7,396	)	(38	)%

At June 30, 2014, we had $718.9 million of debt outstanding with a weighted average interest rate of 3.8% compared with $688.0 million of debt outstanding with a weighted average interest rate of 4.9% at June 30, 2013.

Interest expense decreased $3.3 million and $7.4 million for the three and six months ended June 30, 2014, respectively, compared with the same periods in 2013, primarily due to decreasing our weighted average debt outstanding and decreasing the weighted average interest rate on our total outstanding debt by over 100 basis points from June 30, 2013. During 2013, we repaid outstanding debt with proceeds from both the sale of our industrial portfolio and the issuance of 7.5 million common shares in May 2013. We amended and restated our unsecured revolving credit facility and unsecured term loan in October 2013, which reduced our LIBOR spreads to current market rates. For the three and six months ended June 30, 2014, our weighted average borrowings under the unsecured revolving credit facility were $112.7 million and $104.9 million, respectively, with a weighted average interest rate of 1.7% for both periods compared with weighted average borrowings of $194.2 million and $208.0 million for the three and six months ended June 30, 2013, respectively, with a weighted average interest rate of 2.8% for both the three and six months ended June 30, 2013.

We anticipate that interest expense will continue to decline in 2014 compared with 2013 as a result of reducing both our weighted average debt outstanding and the applicable interest rates associated with our unsecured revolving credit facility and our unsecured term loan.

Interest and other income are summarized as follows:

									Three Months				Six Months
	Three Months Ended June 30,				Six Months Ended June 30,						Percent				Percent
(dollars in thousands)	2014		2013		2014		2013		Change		Change		Change		Change
	$	1,670	$	1,574	$	3,429	$	3,103	$	96	6	%	$	326	11	%

In December 2010, we provided a $25.0 million mezzanine loan to the owners of 950 F Street, NW, a ten-story, 287,000 square-foot office/retail building located in Washington, D.C., which is secured by a portion of the owners’ interest in the property. On January 10, 2014, we amended and restated the loan to increase the outstanding balance to $34.0 million, and reduced the fixed interest rate from 12.5% to 9.75%. As part of amending the loan, we wrote-off $0.1 million of unamortized financing fees related to the origination of the mezzanine loan, which increased interest and other income for the six months ended June 30, 2014 compared with the same period in 2013. In April 2011, we provided a $30.0 million mezzanine loan to the owners of America’s Square, a 461,000 square foot office complex in Washington, D.C., which has a fixed interest rate of 9.0%. In May 2013, the loan began requiring monthly principal payments, which will reduce the outstanding balance of the loan. We recorded interest and other income related to these loans of $1.6 million and $3.1 million for the three and six months ended June 30, 2014, respectively, compared with $1.5 million and $2.9 million for the three and six months ended June 30, 2013, respectively.

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In January 2013, we subleased 5,000 square feet of our corporate headquarters, and subleased an additional 2,700 square feet of our corporate headquarters at the end of the first quarter of 2014. We recognized income of $0.1 million for both the three and six months ended June 30, 2014 and 2013 associated with these subleases, which is reflected within “Interest and other income” in our consolidated statements of operations.

We anticipate interest and other income will continue to increase in 2014 compared with 2013 due to a full-year impact of the higher outstanding balance on the 950 F Street, NW mezzanine loan and the subleasing of additional corporate office space in 2014.

Equity in (earnings) losses of affiliates is summarized as follows:

												Three Months				Six Months
	Three Months Ended June 30,						Six Months Ended June 30,								Percent			Percent
(dollars in thousands)	2014			2013			2014		2013			Change			Change	Change		Change
	$	(199	)	$	(7	)	$	28	$	(35	)	$	(192	)	NM	$	63	NM

Equity in (earnings) losses of affiliates reflects our aggregate ownership interest in the operating results of the properties in which we do not have a controlling interest. Our unconsolidated joint ventures had aggregate earnings for both the three months ended June 30, 2014 and 2013, incurred an aggregate loss for the six months ended June 30, 2014 and had aggregate earnings for the six months ended June 30, 2013.

Gain on sale of rental property is summarized as follows:

									Three Months			Six Months
	Three Months Ended June 30,				Six Months Ended June 30,						Percent			Percent
(dollars in thousands)	2014		2013		2014		2013		Change		Change	Change		Change
	$	21,230	$	—	$	21,230	$	—	$	21,230	—	$	21,230	—

On June 26, 2014, we sold Corporate Campus at Ashburn Center, a three-building, 194,000 square foot single-story business park, which is located in Ashburn, Virginia, for net proceeds of $39.9 million and reported a gain on the sale of the property of $21.2 million in the second quarter. We used the net proceeds from the sale, together with available cash, to acquire 1775 Wiehle Avenue. During the second quarter of 2014, we adopted new accounting standards impacting the presentation of disposed properties. In accordance with the new accounting standards, the operating results and gain on the sale of the Corporate Campus at Ashburn Center are reflected in continuing operations in our consolidated statements of operations for each of the periods presented. We did not record any gain on sale of rental property within continuing operations during the three and six months ended June 30, 2013.

Loss on debt extinguishment is summarized as follows:

									Three Months				Six Months
	Three Months Ended June 30,				Six Months Ended June 30,							Percent				Percent
(dollars in thousands)	2014		2013		2014		2013		Change			Change	Change			Change
	$	—	$	201	$	—	$	201	$	(201	)	(100)%	$	(201	)	(100)%

During the second quarter of 2013, we recorded a loss on debt extinguishment of $0.2 million that was associated with the prepayment of our secured term loan, our secured bridge loan and a $16.4 million mortgage loan encumbered by Cloverleaf Center.

Income from Discontinued Operations

Income from discontinued operations is summarized as follows:

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									Three Months					Six Months
	Three Months Ended June 30,				Six Months Ended June 30,							Percent					Percent
(dollars in thousands)	2014		2013		2014		2013		Change			Change		Change			Change
	$	1,283	$	16,292	$	242	$	21,573	$	(15,009	)	(92	)%	$	(21,331	)	(99	)%

During the second quarter of 2014, we prospectively adopted ASU 2014-08, which requires us to classify the operating results from a disposed property within discontinued operations only if the disposition of the property represents a strategic shift in operations that has a major impact on our financial results. Discontinued operations for the periods presented reflects disposed properties that were previously classified as discontinued operations or held-for-sale in previously filed financial statements prior to our adoption of ASU 2014-08.

During the first quarter of 2014, we sold a portfolio of properties that consisted of Girard Business Center and Gateway Center, which were both located in our Maryland reporting segment. We recorded a gain on the sale of the portfolio of $0.1 million during the first quarter of 2014. During the second quarter of 2014, we sold our Patrick Center and West Park properties, which were both located in our Maryland reporting segment, and recorded a net gain of $1.3 million in the second quarter of 2014. During the second quarter of 2013, we sold the majority of our industrial portfolio, which was comprised of 24 industrial properties. We recognized an $18.9 million gain on the sale of the industrial properties. As part of the sale of the industrial properties, we incurred $4.4 million of debt extinguishment charges related to debt that was encumbered by the sold properties. We have had, and will have, no continuing involvement with these properties subsequent to their disposal. For more information about our discontinued operations, see note 8 – Dispositions, in the notes to our condensed consolidated financial statements.

Net income attributable to noncontrolling interests

Net income attributable to noncontrolling interests is summarized as follows:

									Three Months			Six Months
	Three Months Ended June 30,				Six Months Ended June 30,						Percent			Percent
(dollars in thousands)	2014		2013		2014		2013		Change		Change	Change		Change
	$	652	$	466	$	458	$	406	$	186	42%	$	136	33	%

Net income attributable to noncontrolling interests reflects the ownership interests in our net income or loss, less amounts owed to our preferred shareholders, to parties other than us. During the three and six months ended June 30, 2014, we had net income of $18.3 million and $16.9 million, respectively, compared with net income of $14.5 million and $16.4 million for the same periods in 2013. The weighted average percentage of the common Operating Partnership units held by third parties increased to 4.3% at June 30, 2014 compared with 4.2% at June 30, 2013, as we issued 35,911 common Operating Partnership units in December 2013 to the seller of 840 First Street, NE to partially satisfy our contingent consideration obligation related to the acquisition of the property. In February 2014, we issued an additional 3,125 common Operating Partnership units to fully satisfy our contingent consideration obligation related to 840 First Street, NE.

At June 30, 2014, we consolidated the operating results of one joint venture and recognized our joint venture partner’s percentage of gains or losses within net income attributable to noncontrolling interests. On November 8, 2013, we acquired the remaining interest, which was owned by an unrelated third party for the three and six months ended June 30, 2013, in a consolidated partnership that owns two buildings at Redland Corporate Center for $4.6 million.

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 (i.e., those consolidated properties owned and in-service for the entirety of the periods presented), is a primary performance measure we use to assess the results of operations at our properties. Same Property NOI is a non-GAAP measure. As an indication of our operating performance, Same Property NOI should not be considered an alternative to net income calculated in accordance with GAAP. A reconciliation of our Same Property NOI to net income from our 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, we eliminate 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

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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.

Comparison of the Three and Six Months Ended June 30, 2014 with the Three and Six Months Ended June 30, 2013

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

CONSOLIDATED

	Three Months Ended June 30,									Six Months Ended June 30,
(dollars in thousands)	2014			2013			$ Change		% Change	2014			2013			$ Change		% Change
Number of buildings(1)	130			130			—		—	130			130			—		—
Same property revenues
Rental	$	30,116		$	29,725		$	391	1.3	$	60,290		$	59,073		$	1,217	2.1
Tenant reimbursements and other	7,187			6,789			398		5.9	15,820			14,372			1,448		10.1
Total same property revenues	37,303			36,514			789		2.2	76,110			73,445			2,665		3.6
Same property operating expenses
Property	8,991			8,634			357		4.1	20,408			18,331			2,077		11.3
Real estate taxes and insurance	3,914			3,593			321		8.9	7,921			7,676			245		3.2
Total same property operating expenses	12,905			12,227			678		5.5	28,329			26,007			2,322		8.9
Same property net operating income	$	24,398		$	24,287		$	111	0.5	$	47,781		$	47,438		$	343	0.7
Reconciliation to net income:
Same property net operating income	$	24,398		$	24,287					$	47,781		$	47,438
Non-comparable net operating income(2)	1,551			1,137						2,415			2,323
General and administrative expenses	(5,218		)	(4,985		)				(10,414		)	(10,252		)
Depreciation and amortization	(15,610		)	(14,208		)				(30,714		)	(28,195		)
Other(3)	11,930			(8,047		)				7,582			(16,448		)
Discontinued operations	1,283			16,292						242			21,573
Net income	$	18,334		$	14,476					$	16,892		$	16,439

	Weighted Average Occupancy For Three Months Ended June 30,				Weighted Average Occupancy For the Six Months Ended June 30,
	2014		2013		2014		2013
Same Properties	85.5	%	83.7	%	85.4	%	83.2	%

⁽¹⁾  Same-property comparisons are based upon those consolidated properties owned and in-service for the entirety of the periods presented. Same-property results exclude the operating results of the following non-comparable properties: 440 First Street, NW, Storey Park, 1401 K Street, NW, 1775 Wiehle Avenue and a building at Redland Corporate Center.

⁽²⁾  Non-comparable property NOI has been adjusted to reflect a normalized management fee percentage in lieu of an administrative overhead allocation for comparative purposes, as well as Corporate Campus at Ashburn Center, which was sold in June 2014.

⁽³⁾  Combines acquisition costs, impairment of rental property, contingent consideration related to acquisition of property and total other (income) expenses from our consolidated statements of operations.

Same Property NOI increased $0.1 million and $0.3 million for the three and six months ended June 30, 2014, respectively, compared with the same periods in 2013. Total same property rental revenues increased $0.4 million and $1.2 million for the three and six months ended June 30, 2014, respectively, compared with 2013 primarily due to an increase in occupancy. Both tenant reimbursements and other revenue and property operating expenses increased $0.4 million for the three months ended June 30, 2014 compared with 2013 as a result of an increase in recoverable operating expenses due to higher occupancy. For the six months ended June 30, 2014, tenant reimbursements and other revenue and property operating expenses increased $1.4 million and $2.1 million, respectively, compared with the same period in 2013 due to higher occupancy and an increase in snow and ice removal costs that were incurred in the first quarter of 2014. Real estate taxes and insurance expense increased $0.3 million and $0.2 million for the three and six months ended June 30, 2014, respectively, compared with the same periods in 2013 due to higher real estate tax assessments.

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Washington, D.C.

	Three Months Ended June 30,									Six Months Ended June 30,
(dollars in thousands)	2014		2013		$ Change			% Change		2014		2013		$ Change			% Change
Number of buildings(1)	3		3		—			—		3		3		—			—
Same property revenues
Rental	$	4,331	$	4,411	$	(80	)	(1.8	)	$	8,897	$	8,810	$	87		1.0
Tenant reimbursements and other	1,871		2,033		(162		)	(8.0	)	3,920		4,120		(200		)	(4.9	)
Total same property revenues	6,202		6,444		(242		)	(3.8	)	12,817		12,930		(113		)	(0.9	)
Same property operating expenses
Property	1,441		1,375		66			4.8		3,011		2,934		77			2.6
Real estate taxes and insurance	1,030		1,009		21			2.1		2,054		2,084		(30		)	(1.4	)
Total same property operating expenses	2,471		2,384		87			3.6		5,065		5,018		47			0.9
Same property net operating income:	$	3,731	$	4,060	$	(329	)	(8.1	)	$	7,752	$	7,912	$	(160	)	(2.0	)
Reconciliation to total property operating income
Same property net operating income	$	3,731	$	4,060						$	7,752	$	7,912
Non-comparable net operating income(2)	442		497							321		1,020
Total property operating income	$	4,173	$	4,557						$	8,073	$	8,932

	Weighted Average Occupancy For Three Months Ended June 30,				Weighted Average Occupancy For Six Months Ended June 30,
	2014		2013		2014		2013
Same Properties	86.6	%	99.3	%	91.2	%	99.3	%

⁽¹⁾  Same-property comparisons are based upon those consolidated properties owned and in-service for the entirety of the periods presented. Same-property results exclude the operating results of the following non-comparable properties: 440 First Street, NW, Storey Park and 1401 K Street, NW.

⁽²⁾  Non-comparable property NOI 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 decreased $0.3 million and $0.2 million for the three and six months ended June 30, 2014, respectively, compared with the same periods in 2013. Total same property revenues decreased $0.2 million and $0.1 million for the three and six months ended June 30, 2014, respectively, compared with the same periods in 2013 as a result of a decrease in occupancy due to known move-outs at 1211 Connecticut Avenue, NW (the majority of the vacant space has been subsequently leased). Total same property operating expenses slightly increased for both the three and six months ended June 30, 2014 compared with 2013 due to an increase in property operating expenses.

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Maryland

	Three Months Ended June 30,									Six Months Ended June 30,
(dollars in thousands)	2014		2013		$ Change			% Change		2014		2013		$ Change			% Change
Number of buildings(1)	41		41		—			—		41		41		—			—
Same property revenues
Rental	$	8,628	$	8,484	$	144		1.7		$	17,099	$	16,988	$	111		0.7
Tenant reimbursements and other	1,360		1,215		145			11.9		3,323		2,774		549			19.8
Total same property revenues	9,988		9,699		289			3.0		20,422		19,762		660			3.3
Same property operating expenses
Property	2,032		2,199		(167		)	(7.6	)	5,349		4,719		630			13.4
Real estate taxes and insurance	847		775		72			9.3		1,716		1,531		185			12.1
Total same property operating expenses	2,879		2,974		(95		)	(3.2	)	7,065		6,250		815			13.0
Same property net operating income	$	7,109	$	6,725	$	384		5.7		$	13,357	$	13,512	$	(155	)	(1.1	)
Reconciliation to total property operating income:
Same property net operating income	$	7,109	$	6,725						$	13,357	$	13,512
Non-comparable net operating income(2)	716		242							1,164		374
Total property operating income	$	7,825	$	6,967						$	14,521	$	13,886

	Weighted Average Occupancy For Three Months Ended June 30,				Weighted Average Occupancy For Six Months Ended June 30,
	2014		2013		2014		2013
Same Properties	84.8	%	81.5	%	83.8	%	81.0	%

⁽¹⁾  Same-property comparisons are based upon those consolidated properties owned or in-service for the entirety of the periods presented. Same-property results exclude the operating results of the following non-comparable properties: A building at Redland Corporate Center.

⁽²⁾  Non-comparable property NOI 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 $0.4 million for the three months ended June 30, 2014 compared with 2013 and decreased $0.2 million for the six months ended June 30, 2014 compared with 2013. Total same property revenues increased $0.3 million and $0.7 million for the three and six months ended June 30, 2014, respectively, compared with the same periods in 2013 due to an increase in occupancy. Also, total same property revenues increased for the six months ended June 30, 2014 compared with the same period in 2013 due to an increase in recoverable snow and ice removal costs in the first quarter of 2014. Total same property operating expenses decreased $0.1 million for the three months ended June 30, 2014 compared with 2013 due to reducing our reserves for anticipated bad debt expense. Total same property operating expenses increased $0.8 million for the six months ended June 30, 2014 compared with 2013 due to an increase in snow and ice removal costs in the first quarter of 2014.

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Northern Virginia

	Three Months Ended June 30,							Six Months Ended June 30,
(dollars in thousands)	2014		2013		$ Change		% Change	2014		2013		$ Change		% Change
Number of buildings(1)	48		48		—		—	48		48		—		—
Same property revenues
Rental	$	9,875	$	9,636	$	239	2.5	$	19,576	$	18,930	$	646	3.4
Tenant reimbursements and other	2,332		2,098		234		11.2	5,225		4,653		572		12.3
Total same property revenues	12,207		11,734		473		4.0	24,801		23,583		1,218		5.2
Same property operating expenses
Property	2,810		2,650		160		6.0	6,516		5,710		806		14.1
Real estate taxes and insurance	1,357		1,153		204		17.7	2,787		2,744		43		1.6
Total same property operating expenses	4,167		3,803		364		9.6	9,303		8,454		849		10.0
Same property net operating income	$	8,040	$	7,931	$	109	1.4	$	15,498	$	15,129	$	369	2.4
Reconciliation to total property operating income:
Same property net operating income	$	8,040	$	7,931				$	15,498	$	15,129
Non-comparable net operating income(2)	534		579					1,243		1,166
Total property operating income	$	8,574	$	8,510				$	16,741	$	16,295

	Weighted Average Occupancy For Three Months Ended June 30,				Weighted Average Occupancy For Six Months Ended June 30,
	2014		2013		2014		2013
Same Properties	85.7	%	80.5	%	85.2	%	79.7	%

⁽¹⁾  Same-property comparisons are based upon those consolidated properties owned and in-service for the entirety of the periods presented. Same-property results exclude the operating results of the following non-comparable properties: 1775 Wiehle Avenue.

⁽²⁾  Non-comparable property NOI has been adjusted to reflect a normalized management fee percentage in lieu of an administrative overhead allocation for comparative purposes, as well as Corporate Campus at Ashburn Center, which was sold in June 2014.

Same Property NOI for the Northern Virginia properties increased $0.1 million and $0.4 million for the three and six months ended June 30, 2014, respectively, compared with the same periods in 2013. Total same property revenues increased $0.5 million and $1.2 million for the three and six months ended June 30, 2014, respectively, compared with the same periods in 2013 primarily due to an increase in occupancy. Also, total same property revenues increased for the six months ended June 30, 2014 compared with 2013 due to an increase in recoverable snow and ice removal costs in the first quarter of 2014. Total same property operating expenses increased $0.4 million for the three months ended June 30, 2014 compared with the same period in 2013 due to higher real estate tax assessments and increased $0.8 million for the six months ended June 30, 2014 compared with the same period in 2013 due to an increase in snow and ice removal costs in the first quarter of 2014.

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Southern Virginia

	Three Months Ended June 30,											Six Months Ended June 30,
(dollars in thousands)	2014			2013			$ Change			% Change		2014			2013			$ Change		% Change
Number of buildings(1)	38			38			—			—		38			38			—		—
Same property revenues
Rental	$	7,282		$	7,194		$	88		1.2		$	14,718		$	14,346		$	372	2.6
Tenant reimbursements and other	1,625			1,442			183			12.7		3,352			2,825			527		18.7
Total same property revenues	8,907			8,636			271			3.1		18,070			17,171			899		5.2
Same property operating expenses
Property	2,709			2,410			299			12.4		5,531			4,969			562		11.3
Real estate taxes and insurance	680			657			23			3.5		1,364			1,317			47		3.6
Total same property operating expenses	3,389			3,067			322			10.5		6,895			6,286			609		9.7
Same property net operating income	$	5,518		$	5,569		$	(51	)	(0.9	)	$	11,175		$	10,885		$	290	2.7
Reconciliation to total property operating income:
Same property net operating income	$	5,518		$	5,569							$	11,175		$	10,885
Non-comparable net operating loss(2)	(141		)	(178		)						(314		)	(237		)
Total property operating income	$	5,377		$	5,391							$	10,861		$	10,648

	Weighted Average Occupancy For Three Months Ended June 30,				Weighted Average Occupancy For Six Months Ended June 30,
	2014		2013		2014		2013
Same Properties	85.5	%	86.1	%	85.9	%	85.6	%

⁽¹⁾  Same-property comparisons are based upon those consolidated properties owned and in-service for the entirety of the periods presented. Same-property results do not exclude the operating results of any non-comparable properties during each of the periods presented.

⁽²⁾  Non-comparable property NOI 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 $0.1 million for the three months ended June 30, 2014 compared with 2013 and increased $0.3 million for the six months ended June 30, 2014 compared with 2013. Total same property revenues increased $0.3 million and $0.9 million for the three and six months ended June 30, 2014, respectively, compared with the same periods in 2013 as a result of an increase in recoverable operating expenses. Total same property operating expense increased $0.3 million and $0.6 million for the three and six months ended June 30, 2014, respectively, compared with the same periods in 2013 due an increase in reserves for anticipated bad debt expense. Total same property operating expenses also increased for the six months ended June 30, 2014 due to an increase in recoverable snow and ice removal costs.

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Liquidity and Capital Resources

Overview

We seek to maintain a flexible balance sheet, with an appropriate balance of cash, debt, equity and available funds under our unsecured revolving credit facility, to readily provide access to capital given the volatility of the market and to position us to take advantage of potential growth opportunities. In January 2013, we provided an updated strategic and capital plan, which included the marketing of our industrial properties, the execution of steps designed to increase balance sheet flexibility, reduce leverage and a rightsizing of our quarterly dividend. We have executed on several key components of our updated strategic and capital plan, including the industrial portfolio sale, which generated total gross proceeds of $259.0 million; the issuance of 7,475,000 common shares, the net proceeds of which were primarily used to repay outstanding debt; and a 25% reduction in the quarterly dividend beginning in the first quarter of 2013. During the six months ended June 30, 2014, we sold eleven buildings in our Maryland reporting segment for net proceeds of $45.4 million and three buildings (Corporate Campus at Ashburn Center) in our Northern Virginia reporting segment for net proceeds of $39.9 million. We also acquired a building in Washington, D.C. for $58.0 million, which was funded with the assumption of a $37.3 million mortgage loan, a $20.0 million draw under our unsecured revolving credit facility and available cash, and acquired a building in Northern Virginia for $41.0 million, which was funded with proceeds from the sale of Corporate Campus at Ashburn Center and available cash. We expect to meet short-term liquidity requirements generally through working capital, net cash provided by operations, and, if necessary, borrowings on our unsecured revolving credit facility. Our short-term obligations consist primarily of the lease for our 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.

On May 1, 2014, we prepaid, without penalty, an $8.0 million mortgage loan that encumbered Annapolis Business Center with a draw under our unsecured revolving credit facility. At June 30, 2014, we had $116.0 million outstanding under our unsecured revolving credit facility. As of the date of this filing, we had $111.0 million outstanding and $146.5 million of availability under our unsecured revolving credit facility. In the next 12 months, we have $22.0 million of consolidated debt maturing, which comprises one construction loan that has a one-year extension option.

Over the next twelve months, we believe that we will generate sufficient cash flow from operations and have access to the capital resources, through debt and equity markets, necessary to expand and develop our business, to fund our operating and administrative expenses, to continue to meet our debt service obligations and to pay distributions in accordance with REIT requirements. However, our 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, we cannot assure that our 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 our tenants that are smaller companies. Further, approximately 7.6% of our annualized cash basis rent (excluding month-to-month leases) is scheduled to expire during the next twelve months and, if we are unable to renew these leases or re-lease the space, our cash flow could be negatively impacted.

We also believe, based on our historical experience and forecasted operations, that we will have sufficient cash flow or access to capital to meet our obligations over the next five years. We intend to meet our 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 our unsecured revolving credit facility and unsecured term loan, proceeds from disposal of strategically identified assets (outright or through joint ventures) and the issuance of equity and debt securities. In the process of exploring different financing options, we actively monitor the impact that each potential financing decision will have on our financial covenants in order to avoid any issues of non-compliance with the terms of our existing financial covenants.

Our 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 our shares. We will continue to analyze which sources of capital are most advantageous to us at any particular point in time, but the capital markets may not be consistently available on terms we deem attractive, or at all.

Financial Covenants

Our outstanding corporate debt agreements contain specific financial covenants that may impact future financing decisions made by us or may be impacted by a decline in operations. As of June 30, 2014, we were in compliance with the covenants of our amended and restated unsecured term loan, amended and restated unsecured revolving credit facility and construction loan.

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Our continued ability to borrow under the amended and restated unsecured 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 we are 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 we 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 our liquidity, financial condition, results of operations and ability to make distributions to our shareholders.

Below is a summary of certain financial covenants associated with these debt agreements (dollars in thousands):

Unsecured Revolving Credit Facility, Unsecured Term Loan and Construction Loan

Covenants	Quarter Ended June 30, 2014	Covenant
Consolidated Total Leverage Ratio(1)	44.3%	< 60.0%
Tangible Net Worth(1)	$968,974	>$601,202
Fixed Charge Coverage Ratio(1)	2.03x	> 1.50x
Maximum Dividend Payout Ratio	72.6%	< 95%
Restricted Investments:
Joint Ventures	5.5%	< 15%
Real Estate Assets Under Development	3.3%	< 15%
Undeveloped Land	1.3%	< 5%
Structured Finance Investments	3.7%	< 5%
Total Restricted Investments	8.3%	< 25%
Restricted Indebtedness:
Maximum Secured Debt	20.1%	< 40%
Unencumbered Pool Leverage(1)	44.9%	< 60%
Unencumbered Pool Interest Coverage Ratio(1)	5.55x	> 1.75x

⁽¹⁾  These are the only covenants that apply to our construction loan, which are calculated in accordance with the amended and restated unsecured revolving credit facility.

Cash Flows

Due to the nature of our business, we rely on working capital and net cash provided by operations and, if necessary, borrowings under our unsecured revolving credit facility to fund our short-term liquidity needs. Net cash provided by operations is substantially dependent on the continued receipt of rental payments and other expenses reimbursed by our tenants. The ability of tenants to meet their obligations, including the payment of rent contractually owed to us, and our ability to lease space to new or replacement tenants on favorable terms, could affect our cash available for short-term liquidity needs. We intend 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 our unsecured revolving credit facility, proceeds from asset disposals and the issuance of equity and debt securities. However, we may not be able to obtain capital from such sources on favorable terms, in the time period we desire, or at all. In addition, our continued ability to borrow under our existing debt instruments is subject to compliance with our 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, we may be required to repay such debt with capital from other sources, which may not be available on attractive terms, or at all.

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

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Consolidated cash flow information is summarized as follows:

	Six Months Ended June 30,
(dollars in thousands)	2014			2013			Change
Cash provided by operating activities	$	30,856		$	33,701		$	(2,845	)
Cash (used in) provided by investing activities	(9,589		)	143,636			(153,225		)
Cash used in financing activities	(16,609		)	(122,062		)	105,453

Net cash provided by operating activities decreased $2.8 million for the six months ended June 30, 2014 compared with the same period in 2013, primarily due to a decrease in net operating income as the result of the sale of our industrial portfolio in June 2013. The decrease in cash provided by operating activities was partially offset by a lesser decrease in rents received in advance for the six months ended June 30, 2014 compared with the same period in 2013.

Net cash used in investing activities was $9.6 million for the six months ended June 30, 2014 compared with net cash provided by investing activities of $143.6 million for the six months ended June 30, 2013. For the six months ended June 30, 2014, we acquired two properties for an aggregate purchase price of $61.7 million and sold four properties for aggregate net proceeds of $85.3 million. For the six months ended June 30, 2013, we did not acquire any properties and sold 25 properties for aggregate net proceeds of $207.2 million, $28.2 million of which was held by a qualified intermediary in order to facilitate a potential tax-free exchange. During the fourth quarter of 2013, we used the proceeds held by a qualified intermediary and available cash to acquire a building a Redland Corporate Center. During the six months ended June 30, 2014, we increased our loan to the owners of 950 F Street, NW by $9.0 million, which was provided by a draw under our unsecured revolving credit facility. For the six months ended June 30, 2014, aggregate cash used for additions to rental property and furniture, fixtures and equipment, and additions to development and redevelopment decreased $11.5 million compared with the same period in 2013 due to the completion of redevelopment of 440 First Street, NW in the third quarter of 2013 and to lower tenant improvement costs.

Net cash used in financing activities decreased $105.5 million for the six months ended June 30, 2014 compared with the same period in 2013 as we issued $104.8 million of debt and repaid $96.7 million of outstanding debt during the six months ended June 30, 2014 compared with the issuance of $99.2 million of debt and the repayment of $302.2 million of outstanding debt during the six months ended June 30, 2013. In May 2013, we issued 7.5 million common shares for net proceeds of $105.1 million. The increase in outstanding common shares resulted in an increase in dividends paid to common shareholders of $2.3 million for the six months ended June 30, 2014 compared with the same period in 2013.

Contractual Obligations

On December 29, 2010, we 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, we 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. At June 30, 2014, the fair value of our contingent consideration obligation to the former owner of Aviation Business Park was immaterial.

As of June 30, 2014, we had contractual construction in progress obligations, which included amounts accrued at June 30, 2014, of $2.2 million related to development activities at Storey Park and redevelopment activities at 440 First Street, NW, both of which are located in our Washington, D.C. reporting segment. As of June 30, 2014, we had contractual rental property and furniture, fixtures and equipment obligations of $7.4 million outstanding, which included amounts accrued at June 30, 2014. The amount of contractual rental property and furniture, fixtures and equipment obligations at June 30, 2014 included a major renovation at 1211 Connecticut Avenue, NW, which is located in our Washington, D.C. reporting segment. We anticipate meeting our contractual obligations related to our construction activities with cash from our operating activities. In the event cash from our operating activities is not sufficient to meet our contractual obligations, we can access additional capital through our unsecured revolving credit facility.

We remain liable, solely to the extent of our proportionate ownership percentage, to fund any capital shortfalls or commitments from properties owned through unconsolidated joint ventures.

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We have various obligations to certain local municipalities associated with our development projects that will require completion of specified site improvements, such as sewer and road maintenance, grading and other general landscaping work. As of June 30, 2014, we remained liable to those local municipalities for $0.1 million in the event that we do not complete the specified work. We intend to complete the improvements in satisfaction of these obligations.

We had no other material contractual obligations as of June 30, 2014.

Distributions

We are required to distribute at least 90% of our REIT taxable income to our shareholders in order to maintain qualification as a REIT, including some types of taxable income we recognize for tax purposes but with regard to which we do not receive corresponding cash. In addition, we must distribute 100% of our taxable income to our shareholders to eliminate our U.S. federal income tax liability. The funds we use to pay dividends on our common and preferred shares are provided through distributions from the Operating Partnership. For each of our common and preferred shares, the Operating Partnership has issued a corresponding common and preferred unit to us. We are the sole general partner of and, as of June 30, 2014, owned 100% of the preferred interest and 95.7% of the common interest in the Operating Partnership. The remaining common interests in the Operating Partnership are limited partnership interests, some of which are owned by several of our executive officers who contributed properties and other assets to us upon our formation, and the remainder of which are owned by other unrelated parties. The Operating Partnership is required to make cash distributions to us in an amount sufficient to meet our 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, our management team recommends a distribution amount that must then be approved by our Board of Trustees in its sole discretion. The amount of future distributions will be at the discretion of our Board of Trustees and will be based on, among other things: (i) the taxable income and cash flow generated by our operating activities; (ii) cash generated by, or used in, our financing and investing activities; (iii) the annual distribution requirements under the REIT provisions of the Internal Revenue Code; and (iv) such other factors as the Board of Trustees deems relevant. Our 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 “—Financial Covenants” above and “Item 1A – 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, 2013 for additional information regarding the financial covenants.

Dividends

On July 22, 2014, we declared a dividend of $0.15 per common share, equating to an annualized dividend of $0.60 per common share. The dividend will be paid on August 15, 2014 to common shareholders of record as of August 6, 2014. We also declared a dividend of $0.484375 per share on our Series A Preferred Shares. The dividend will be paid on August 15, 2014 to preferred shareholders of record as of August 6, 2014.

Funds From Operations

Funds from operations (“FFO”) is a non-GAAP measure used by many investors and analysts that follow the real estate industry. We consider FFO a useful measure of performance for an equity REIT because it facilitates an understanding of the operating performance of our 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, we believe that FFO provides a meaningful indication of our performance. We also consider 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.

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 rental property and impairments of rental property, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. We compute 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. Our methodology for computing FFO adds back noncontrolling interests in the income from our Operating Partnership in determining FFO. We believe this is appropriate as common Operating Partnership units are presented on an as-converted, one-for-one basis for shares of stock in determining FFO per diluted share.

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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 our cash needs, including our ability to make distributions. We present FFO per diluted share calculations that are based on the outstanding dilutive common shares plus the outstanding common Operating Partnership units for the periods presented. Our presentation of FFO in accordance with NAREIT’s definition, or as adjusted by us, should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity.

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net income attributable to First Potomac Realty Trust	$	17,682		$	14,010		$	16,434		$	16,033
Less: Dividends on preferred shares	(3,100		)	(3,100		)	(6,200		)	(6,200		)
Net income attributable to common shareholders	14,582			10,910			10,234			9,833
Add: Depreciation and amortization:
Rental property	15,610			14,208			30,714			28,195
Discontinued operations	41			1,786			496			4,708
Unconsolidated joint ventures	1,014			1,317			2,302			2,669
Consolidated joint ventures	—			(53		)	—			(104		)
Impairment of rental property(1)	3,956			1,446			3,956			1,446
Gain on sale of rental property(2)	(22,514		)	(18,947		)	(22,568		)	(18,947		)
Net income attributable to noncontrolling interests in the Operating Partnership	652			474			458			419
FFO available to common shareholders and unitholders	13,341			11,141			25,592			28,219
Dividends on preferred shares	3,100			3,100			6,200			6,200
FFO	$	16,441		$	14,241		$	31,792		$	34,419
Weighted average common shares and Operating Partnership units outstanding – diluted	60,850			56,289			60,820			54,703

⁽¹⁾  Impairment charges of $4.0 million are included in continuing operations in our consolidated statements of operations for both the three and six months ended June 30, 2014. Impairment charges of $1.4 million are included in discontinued operations in our consolidated statements of operations for both the three and six months ended June 30, 2013.

⁽²⁾  During the three and six months ended June 30, 2014, we recorded a $21.2 million gain on the sale of Corporate Campus at Ashburn Center, which is reflected in continuing operations in our consolidated statements of operations. The remaining gains on sale of rental property for each of the periods presented are included in discontinued operations in our consolidated statements of operations.

Off-Balance Sheet Arrangements

We are secondarily liable for $7.0 million of mortgage debt, which represents our proportionate share of the mortgage debt that is secured by two properties we own through unconsolidated joint ventures. Management believes the fair value of the potential liability to us is inconsequential as the likelihood of our need to perform under the debt agreement is remote. See note 7, Investment in Affiliates, in the notes to our condensed consolidated financial statements for more information.

ITEM 3: QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. In the normal course of business, we are exposed to the effect of interest rate changes. We have 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. We periodically use derivative financial instruments to seek to manage, or hedge, interest rate risks related to our borrowings. We do not use derivatives for trading or speculative purposes and only enter into contracts with

56

major financial institutions based on their credit rating and other factors. We intend to enter into derivative agreements only with counterparties that we believe have a strong credit rating to mitigate the risk of counterparty default or insolvency.

We had $718.9 million of debt outstanding at June 30, 2014, of which $257.4 million was fixed rate debt and $300.0 million was hedged variable rate debt. The remainder of our debt, $161.5 million, was unhedged variable rate debt that consisted of $116.0 million under the unsecured revolving credit facility, a $22.0 million mortgage loan and the $23.5 million outstanding balance under a construction loan. The mortgage loan has a contractual interest rate of LIBOR plus 2.75%, with a 5.0% floor and the construction loan has a contractual interest rate of LIBOR plus 2.50%. At June 30, 2014, LIBOR was 0.16%. A change in interest rates of 1% would result in an increase or decrease of $1.4 million in interest expense on our unhedged variable rate debt on an annualized basis.

The table below summarizes our interest rate swap agreements as of June 30, 2014 (dollars in thousands):

Effective Date	Maturity Date	Notional Amount	Interest Rate Contractual Component	Fixed LIBOR Interest Rate
July 2011	July 2016	$35,000	LIBOR	1.754	%
July 2011	July 2016	25,000	LIBOR	1.763	%
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	%
June 2012	July 2017	50,000	LIBOR	0.955	%
June 2012	July 2018	25,000	LIBOR	1.135	%
Total/Weighted Average		$300,000		1.505	%

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

ITEM 4: CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our periodic reports pursuant to 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.

We 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, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II: OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to legal proceedings and claims arising in the ordinary course of our business. In the opinion of our management, as of June 30, 2014, we were not involved in any material litigation, nor, to management’s knowledge, is any material litigation threatened against us or the Operating Partnership.

Item 1A. Risk Factors

In addition to the risk factors previously disclosed in Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013, we are subject to the following additional risks:

Effective for the District’s taxable year beginning October 1, 2014, Washington, D.C. may implement a new methodology for assessing office property values, and such methodology may increase the assessed values of office properties in Washington, D.C., thereby increasing office property owners’ tax liabilities and making Washington, D.C. a less attractive market for potential tenants, from whom property tax payments are often recoverable pursuant to market lease terms.

Effective for the District’s taxable year beginning October 1, 2014, Washington, D.C. may implement a new methodology for assessing office property values, which are used to determine the amount of property taxes for which office property owners are liable to the city. The new methodology will use market values to determine property values in lieu of the current system, which analyzes rent, occupancy and other operating data. As of June 30, 2014, we own interests in six office properties (including one property owned through an unconsolidated joint venture) in Washington, D.C., which total 762,000 square feet. Pursuant to typical leases between office property owners and their tenants, property owners may recover property tax expenses from tenants. As a result, increases in property tax liabilities may increase the cost to our tenants of leasing office space in Washington, D.C. This could cause our current, as well as potential future tenants, to seek to lease office space in other markets, which could negatively impact our ability to lease and re-lease space in our Washington, D.C. office buildings at current rates or at all.

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

Unregistered Sales of Equity Securities

We did not sell any unregistered equity securities during the six months ended June 30, 2014. During the six months ended June 30, 2014, no common Operating Partnership units were redeemed for either an equivalent number of our common shares or available cash.

During the six months ended June 30, 2014, we issued 3,125 common Operating Partnership units to the seller of 840 First Street, NE, which we acquired in 2011. The issuance of the 3,125 common Operating Partnership units satisfied our remaining contingent consideration obligation to the seller of 840 First Street, NE. These common Operating Partnership units were issued in reliance upon exemptions from registration under Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and/or Regulation D promulgated under the Securities Act (“Regulation D”). Each of the limited partners represented to the Operating Partnership that it was an “accredited investor” as defined in Regulation D and that it was acquiring the common Operating Partnership units for investment purposes. The Operating Partnership issued the units only to the former owners of the property and did not engage in a general solicitation in connection with the issuance.

Issuer Purchases of Equity Securities

During the three months ended June 30, 2014, we did not repurchase any equity securities registered pursuant to Section 12 of the Exchange Act.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item  5. Other Information

Not applicable.

58

Item 6. Exhibits

No.	Description
31.1*	Section 302 Certification of Chief Executive Officer.
31.2*	Section 302 Certification of Chief Financial Officer.
32.1**	Section 906 Certification of Chief Executive Officer.
32.2**	Section 906 Certification of Chief Financial 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 June 30, 2014, formatted in XBRL: (i) Consolidated balance sheets as of June 30, 2014 (unaudited) and December 31, 2013; (ii) Consolidated statements of operations (unaudited) for the three and six months ended June 30, 2014 and 2013; (iii) Consolidated statements of comprehensive income (unaudited) for the three and six months ended June 30, 2014 and 2013; (iv) Consolidated statements of cash flows (unaudited) for the six months ended June 30, 2014 and 2013; and (v) Notes to condensed consolidated financial statements (unaudited).

*	Filed herewith.
**	Furnished herewith.

59

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: July 25, 2014	/s/ Douglas J. Donatelli
	Douglas J. Donatelli
	Chairman of the Board and Chief Executive Officer
Date: July 25, 2014	/s/ Andrew P. Blocher
	Andrew P. Blocher
	Executive Vice President and Chief Financial Officer

60

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: July 25, 2014	/s/ Douglas J. Donatelli
	Douglas J. Donatelli
	Chairman of the Board and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Andrew P. Blocher, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of First Potomac Realty Trust;
2.	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:
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: July 25, 2014	/s/ Andrew P. Blocher
	Andrew P. Blocher
	Executive Vice President and Chief Financial 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 June 30, 2014, 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: July 25, 2014	/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 June 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Andrew P. Blocher, Chief Financial 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: July 25, 2014	/s/ Andrew P. Blocher
	Andrew P. Blocher
	Executive Vice President and Chief Financial Officer

XML

Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Accounting Policies [Abstract]
Allowance for credit losses for its notes receivable	$ 0	$ 0

XML

Dispositions Dispositions - Disposed or Held-for-Sale Properties within Continuing Operations (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Impairment of rental property	$ (3,956)	$ 0	$ (3,956)	$ 0
Corporate Campus at Ashburn Center and Owings Mills Business Park [Member] | Continuing Operations [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Revenues	1,329	1,322	2,794	2,642
Property operating expenses	(400)	(365)	(948)	(773)
Depreciation and amortization	(402)	(350)	(768)	(701)
Impairment of rental property	(3,956)	0	(3,956)	0
(Loss) income from operations of disposed property	(3,429)	607	(2,878)	1,168
Gain on sale of rental property	21,230	0	21,230	0
Net income from continuing operations	$ 17,801	$ 607	$ 18,352	$ 1,168

XML

Notes Receivable - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended		3 Months Ended	6 Months Ended	12 Months Ended		3 Months Ended	6 Months Ended	12 Months Ended			0 Months Ended
	Jun. 30, 2014 sqft	Jun. 30, 2013 sqft	Jun. 30, 2014 sqft	Jun. 30, 2013 sqft	Jun. 30, 2014 Notes Receivables Issued on April 2011 [Member]	Jun. 30, 2014 Notes Receivables Issued on April 2011 [Member]	Dec. 31, 2013 Notes Receivables Issued on April 2011 [Member]	Apr. 30, 2011 Notes Receivables Issued on April 2011 [Member] sqft	Jun. 30, 2014 Notes Receivables Issued on December 2010 [Member]	Jun. 30, 2013 Notes Receivables Issued on December 2010 [Member]	Dec. 31, 2013 Notes Receivables Issued on December 2010 [Member]	Dec. 31, 2010 Notes Receivables Issued on December 2010 [Member] sqft	Jan. 10, 2014 Notes Receivables Issued on December 2010 [Member]	Jan. 10, 2014 Notes Receivables Issued on December 2010 [Member] Maximum [Member]	Jan. 10, 2014 Notes Receivables Issued on December 2010 [Member] Minimum [Member]
Receivables with Imputed Interest [Line Items]
Mezzanine loan provided to owners								$ 30,000,000				$ 25,000,000	$ 34,000,000
Area of real estate property	8,700,651	9,132,744	8,700,651	9,132,744				461,000				287,000
Maturity date of loan						May 01, 2016
Fixed interest rate on loan					9.00%		9.00%		9.75%		12.50%			12.50%	9.75%
Maturity date of loan												Apr. 01, 2017
Interest income	1,500,000		3,000,000	2,900,000					1,500,000	1,500,000
Income from amortization of origination fees	7,000	17,000	18,000	35,000
Write-off of unamortized origination fees									$ 100,000

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Share-Based Payments - Additional Information (Detail) (USD $) In Millions, except Share data, unless otherwise specified	1 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2014	May 31, 2014	Jun. 30, 2014	Jun. 30, 2013 Non-Vested Share Awards	Jun. 30, 2014 Non-Vested Share Awards	Jun. 30, 2014 RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Terms of Award		29,792
Non-vested share awards issued	15,128				44,920
Compensation expense associated with trustee share based awards				$ 1.4	$ 0.7
Unrecognized compensation cost related to non-vested shares						$ 5.2
Weighted-average period for recognition of non-vested shares			2 years 4 months 24 days

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Dispositions - Summary of Completed Property Dispositions (Detail)	0 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended
	Jun. 18, 2013 Property	May 07, 2013 sqft	Jun. 30, 2013 Property sqft	Jun. 30, 2014 sqft	Jun. 30, 2014 Patrick Center sqft	Apr. 30, 2014 Patrick Center sqft	Jun. 30, 2014 West Park sqft	Apr. 30, 2014 West Park sqft	Jun. 30, 2014 Girard Business Center and Gateway Center sqft	Jun. 30, 2014 Worman’s Mill Court sqft	Jun. 30, 2014 Triangle Business Center sqft	Jun. 30, 2014 4200 Tech Court sqft	Jun. 30, 2014 Industrial Portfolio sqft		Jun. 30, 2014 4212 Tech Court sqft
Schedule Of Discontinued Operations [Line Items]
Reporting Segment					Maryland		Maryland		Maryland	Maryland	Maryland	Northern Virginia	Various	[1]	Northern Virginia
Disposition Date					Apr. 16, 2014		Apr. 02, 2014		Jan. 29, 2014	Nov. 19, 2013	Sep. 27, 2013	Aug. 15, 2013			Jun. 05, 2013
Disposition Date													May/June 2013	[1]
Property Type					Office		Office		Business Park and Office	Office	Business Park	Office	Industrial	[1]	Office
Square feet			9,132,744	8,700,651	66,269	66,000	28,333	29,000	341,973	40,099	74,429	33,875	4,280,985	[1]	32,055
Number of industrial properties company sold			24
Square footage of industrial properties held for sale		236,000
Sale of remaining industrial properties	23

[1] During the second quarter of 2013, we sold 24 industrial properties, which consisted of two separate transactions. On May 7, 2013, we sold I-66 Commerce Center, a 236,000 square foot industrial property in Haymarket, Virginia. On June 18, 2013, we completed the sale of the remaining 23 industrial properties.

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Acquisitions - Additional Information (Details) (USD $)	3 Months Ended		6 Months Ended		0 Months Ended		3 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Apr. 08, 2014 Washington DC	Jun. 30, 2014 Washington DC sqft	Jun. 30, 2014 VIRGINIA sqft
Business Acquisition [Line Items]
Business combination, square footage						117,000	130,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Buildings						$ 58,000,000	$ 41,000,000
Mortgage Debt Assumed					37,300,000
Business Combination Funding	20,000,000		20,000,000
Proceeds from Sale of Buildings	39,900,000						39,900,000
Business Combination, Pro Forma Information, Revenue of Acquiree since Acquisition Date, Actual			1,300,000
Business Combination, Pro Forma Information, Earnings or Loss of Acquiree since Acquisition Date, Actual			700,000
Acquisition costs	$ 1,111,000	$ 0	$ 1,179,000	$ 0
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life			3 years 2 months 12 days

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value of Assets and Liabilities

In accordance with accounting provisions and the fair value hierarchy described above, the following table shows the fair value of our consolidated assets and liabilities that are measured on a non-recurring and recurring basis as of June 30, 2014 and December 31, 2013 (dollars in thousands):

	Balance at June 30, 2014		Level 1		Level 2		Level 3
Non-recurring Measurements:
Impaired real estate assets	$	12,500	$	—	$	12,500	$	—
Recurring Measurements:
Derivative instrument-swap assets	114		—		114		—
Derivative instrument-swap liabilities	4,944		—		4,944		—
	Balance at December 31, 2013		Level 1		Level 2		Level 3
Non-recurring Measurements:
Impaired real estate assets	$	2,909	$	—	$	2,909	$	—
Recurring Measurements:
Derivative instrument-swap assets	551		—		551		—
Derivative instrument-swap liabilities	4,576		—		4,576		—

Fair Value of Debt Instruments

The carrying value and estimated fair value of our financial assets and liabilities are as follows (dollars in thousands):

	June 30, 2014				December 31, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets:
Notes receivable(1)	$	63,751	$	63,806	$	54,696	$	56,812
Financial Liabilities:
Mortgage debt	$	302,909	$	290,050	$	274,648	$	262,873
Unsecured term loan	300,000		300,000		300,000		300,000
Unsecured revolving credit facility	116,000		116,000		99,000		99,000
Total	$	718,909	$	706,050	$	673,648	$	661,873

⁽¹⁾  The principal amount of our notes receivable was $63.8 million and $54.9 million at June 30, 2014 and December 31, 2013, respectively. On January 10, 2014, we amended the 950 F Street, NW mezzanine loan and increased the outstanding balance to $34.0 million.

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Segment Information - Summary of Segment Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014 sqft		Jun. 30, 2013 sqft		Jun. 30, 2014 sqft		Jun. 30, 2013 sqft		Dec. 31, 2013	Mar. 31, 2013
Segment Reporting Information [Line Items]
Number of buildings	134		151		134		151
Square feet	8,700,651		9,132,744		8,700,651		9,132,744
Total revenues	$ 41,190		$ 38,832		$ 82,604		$ 77,991
Property operating expense	(10,869)		(9,432)		(23,767)		(19,743)
Real estate taxes and insurance	(4,372)		(3,975)		(8,641)		(8,487)
Total property operating income	25,949		25,425		50,196		49,761
Depreciation and amortization expense	(15,610)		(14,208)		(30,714)		(28,195)
General and administrative	(5,218)		(4,985)		(10,414)		(10,252)
Contingent consideration related to acquisition of property			(75)		0		(75)
Acquisition costs	(1,111)		0		(1,179)		0
Impairment of rental property	(3,956)		0		(3,956)		0
Other income (expenses)	16,997		(7,973)		12,717		(16,373)
Income from discontinued operations	(1,283)		(16,292)		(242)		(21,573)
Net income	18,334		14,476		16,892		16,439
Total assets	1,538,266	[1],[2]	1,557,666	[1],[2]	1,538,266	[1],[2]	1,557,666	[1],[2]	1,502,460
Capital expenditure	12,249	[3]	19,350	[3]	23,642	[3]	35,120	[2]
Capital expenditures for corporate assets not allocated to any reportable segments	361		638		166		564
Corporate assets not allocated to any reportable segments	86,333				86,333					159,665
Washington, D.C.
Segment Reporting Information [Line Items]
Number of buildings	5	[4]	4	[5]	5	[4]	4	[5]
Square feet	649,107	[4]	531,714	[5]	649,107	[4]	531,714	[5]
Total revenues	7,827	[4]	7,347	[5]	14,767	[4]	14,768	[5]
Property operating expense	(2,407)	[4]	(1,543)	[5]	(4,393)	[4]	(3,241)	[5]
Real estate taxes and insurance	(1,247)	[4]	(1,247)	[5]	(2,301)	[4]	(2,595)	[5]
Total property operating income	4,173	[4]	4,557	[5]	8,073	[4]	8,932	[5]
Total assets	410,000	[1],[2],[4]	328,581	[1],[2],[5]	410,000	[1],[2],[4]	328,581	[1],[2],[5]
Capital expenditure	4,901	[3],[4]	5,112	[3],[5]	11,382	[3],[4]	12,785	[2],[5]
Maryland
Segment Reporting Information [Line Items]
Number of buildings	42		57		42		57
Square feet	2,178,379		2,617,677		2,178,379		2,617,677
Total revenues	11,227		10,208		22,872		20,620
Property operating expense	(2,427)		(2,414)		(6,373)		(5,098)
Real estate taxes and insurance	(975)		(827)		(1,978)		(1,636)
Total property operating income	7,825		6,967		14,521		13,886
Total assets	374,416	[1],[2]	408,246	[1],[2]	374,416	[1],[2]	408,246	[1],[2]
Capital expenditure	2,701	[3]	6,816	[3]	5,091	[3]	7,935	[2]
Northern Virginia
Segment Reporting Information [Line Items]
Number of buildings	49		52		49		52
Square feet	3,021,597		3,125,229		3,021,597		3,125,229
Total revenues	13,146		12,641		26,813		25,358
Property operating expense	(3,107)		(2,891)		(7,083)		(6,133)
Real estate taxes and insurance	(1,465)		(1,240)		(2,989)		(2,930)
Total property operating income	8,574		8,510		16,741		16,295
Total assets	438,254	[1],[2]	429,781	[1],[2]	438,254	[1],[2]	429,781	[1],[2]
Capital expenditure	1,537	[3]	4,685	[3]	2,359	[3]	8,302	[2]
Southern Virginia
Segment Reporting Information [Line Items]
Number of buildings	38		38		38		38
Square feet	2,851,568		2,858,124		2,851,568		2,858,124
Total revenues	8,990		8,636		18,152		17,245
Property operating expense	(2,928)		(2,584)		(5,918)		(5,271)
Real estate taxes and insurance	(685)		(661)		(1,373)		(1,326)
Total property operating income	5,377		5,391		10,861		10,648
Total assets	229,263	[1],[2]	231,393	[1],[2]	229,263	[1],[2]	231,393	[1],[2]
Capital expenditure	$ 2,749	[3]	$ 2,571	[3]	$ 4,172	[3]	$ 5,534	[2]

[1] Total assets include our investment in properties that are owned through joint ventures that are not consolidated within our condensed consolidated financial statements. For more information on our unconsolidated investments, including location within our reportable segments, see note 7, Investment in Affiliates.

[2] Corporate assets not allocated to any of our reportable segments totaled $86,333 and $159,665 at June 30, 2014 and 2013, respectively.

[3] Capital expenditures for corporate assets not allocated to any of our reportable segments totaled $361 and $166for the three months ended June 30, 2014 and 2013, respectively, and $638 and $564 for the six months ended June 30, 2014 and 2013, respectively.

[4] Includes occupied space at 440 First Street, NW and excludes Storey Park, which was placed in development in the third quarter of 2013.

[5] Excludes 440 First Street, NW, which has been in redevelopment since its acquisition in 2010.

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Debt - Schedule of Borrowings (Detail) (USD $) In Thousands, unless otherwise specified						6 Months Ended				6 Months Ended
	Jun. 30, 2014		Dec. 31, 2013		Mar. 31, 2013	Jun. 30, 2014 Unsecured Term Loan, Effective Interest Rates Ranging from LIBOR Plus 1.45% to LIBOR Plus 1.90%, with Staggered Maturity Dates ranging from October 2018 to October 2020		Dec. 31, 2013 Unsecured Term Loan, Effective Interest Rates Ranging from LIBOR Plus 1.45% to LIBOR Plus 1.90%, with Staggered Maturity Dates ranging from October 2018 to October 2020		Jun. 30, 2014 Mortgage Loans	Jun. 30, 2014 Unsecured revolving credit facility
Debt Instrument [Line Items]
Mortgage loans, effective interest rates ranging from 4.40% to 6.63%, maturing at various dates through June 2023(1)	$ 302,909	[1]	$ 274,648	[1]	$ 274,648
Unsecured term loan, effective interest rates ranging from LIBOR plus 1.45% to LIBOR plus 1.90%, with staggered maturity dates ranging from October 2018 to October 2020(1)						300,000	[1]	300,000	[1]
Unsecured revolving credit facility, effective interest rate of LIBOR plus 1.50%, maturing October 2017(1)	116,000	[1]	99,000	[1]
Total long term debt	$ 718,909		$ 673,648
Debt instrument, interest rate, effective percentage rate range, minimum										4.40%
Debt instrument, interest rate, effective percentage rate range, maximum										6.63%
Debt instrument basis spread on variable rate, minimum						1.45%
Debt instrument basis spread on variable rate, maximum						1.90%
Effective interest rate on the notes	5.06%	[2]									1.50%
Debt instrument maturity date						October 2018 to October 2020				July 2022	October 2017

[1] At June 30, 2014, LIBOR was 0.16%. All references to LIBOR in the condensed consolidated financial statements refer to one-month LIBOR.

[2] Weighted average interest rate on total mortgage debt.

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Share-Based Payments - Summary of Company's Non-vested Share Awards (Detail) (USD $)	1 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014 Non-Vested Share Awards
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Non-vested Shares, Beginning Balance		625,192
Non-vested Shares, Granted	15,128	44,920
Non-vested Shares, Vested		(25,872)
Non-vested Shares, Ending Balance		644,240
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Weighted Average Grant Date Fair Value, Beginning Balance		$ 13.26
Weighted Average Grant Date Fair Value, Granted		$ 13.02
Weighted Average Grant Date Fair Value, Vested		$ 14.52
Weighted Average Grant Date Fair Value, Ending Balance		$ 13.19

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Earnings Per Common Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Computation of Company's Basic and Diluted Earnings Per Share

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Numerator for basic and diluted earnings per common share:
Income (loss) from continuing operations	$	17,051		$	(1,816	)	$	16,650		$	(5,134	)
Income from discontinued operations	1,283			16,292			242			21,573
Net income	18,334			14,476			16,892			16,439
Less: Net (income) loss from continuing operations attributable to noncontrolling interests	(593		)	223			(448		)	538
Less: Net income from discontinued operations attributable to noncontrolling interests	(59		)	(689		)	(10		)	(944		)
Net income attributable to First Potomac Realty Trust	17,682			14,010			16,434			16,033
Less: Dividends on preferred shares	(3,100		)	(3,100		)	(6,200		)	(6,200		)
Net income attributable to common shareholders	14,582			10,910			10,234			9,833
Less: Allocation to participating securities	(77		)	(106		)	(155		)	(206		)
Net income attributable to common shareholders	$	14,505		$	10,804		$	10,079		$	9,627
Denominator for basic and diluted earnings per common share:
Weighted average common shares outstanding:
Basic	58,146			53,586			58,122			52,004
Diluted	58,220			53,586			58,190			52,004
Basic and diluted earnings per common share:
Income (loss) from continuing operations	$	0.23		$	(0.09	)	$	0.17		$	(0.21	)
Income from discontinued operations	0.02			0.29			—			0.40
Net income	$	0.25		$	0.20		$	0.17		$	0.19

Anti-Dilutive Shares Not Included in Calculation of Diluted Earnings Per Share

In accordance with GAAP regarding earnings per common share, we did not include the following potential weighted average common shares in our calculation of diluted earnings per common share as they are anti-dilutive for the periods presented (amounts in thousands):

	Three Months Ended June 30,		Six Months Ended June 30,
	2014	2013	2014	2013
Stock option awards	1,145	1,473	1,170	1,484
Non-vested share awards	400	510	419	533
Series A Preferred Shares(1)	12,296	11,015	12,480	11,319
	13,841	12,998	14,069	13,336

⁽¹⁾  Our Series A Preferred Shares are only convertible into our common shares upon certain changes in control of our 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.

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Investment in Affiliates - Net Assets of Company's Unconsolidated Joint Ventures (Detail) (USD $) In Thousands, unless otherwise specified											3 Months Ended
	Jun. 30, 2014		Dec. 31, 2013	Jun. 30, 2013		Dec. 31, 2012	Jun. 30, 2014 Unconsolidated Joint Ventures		Dec. 31, 2013 Unconsolidated Joint Ventures		Jun. 30, 2014 Unconsolidated Entities [Member]
Assets:
Rental property, net	$ 1,258,646		$ 1,203,299				$ 193,011		$ 194,240
Cash and cash equivalents	13,398		8,740	64,649		9,374	4,336		3,680
Other assets							16,058		15,585
Total assets	1,538,266	[1],[2]	1,502,460	1,557,666	[1],[2]		213,405		213,505
Liabilities:
Mortgage loans(1)(2)							104,814	[3],[4]	106,384	[3],[4]
Other liabilities							6,641		5,046
Total liabilities	772,605		729,948				111,455		111,430
Net assets	61,731						101,950		102,075
Recourse mortgage debt	$ 718,909		$ 673,648								$ 7,000
Maturity of recourse mortgage loan											2014-03
Extended maturity of loan											2014-09

[1] Total assets include our investment in properties that are owned through joint ventures that are not consolidated within our condensed consolidated financial statements. For more information on our unconsolidated investments, including location within our reportable segments, see note 7, Investment in Affiliates.

[2] Corporate assets not allocated to any of our reportable segments totaled $86,333 and $159,665 at June 30, 2014 and 2013, respectively.

[3] Includes the unamortized fair value adjustments recorded at acquisition upon the assumption of mortgage loans.

[4] Of the total mortgage debt that encumbers our unconsolidated properties, $7.0 million is recourse to us. The recourse mortgage loan was scheduled to mature in March 2014; however, the joint venture extended the loan’s maturity date to September 2014. We believe the fair value of the potential liability to us under this guaranty is inconsequential as the likelihood of our need to perform under the debt agreement is remote.

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Rental Property - Summary of Rental Property (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Rental property, net	$ 1,258,646	$ 1,203,299
Rental Property [Member]
Property, Plant and Equipment [Line Items]
Land and land improvements	321,774	294,753
Buildings and improvements	896,142	868,027
Construction in process	103,293	93,269
Tenant improvements	151,517	146,176
Furniture, fixtures and equipment	5,127	5,047
Rental property, gross	1,477,853	1,407,272
Less: accumulated depreciation	$ (219,207)	$ (203,973)

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Description of Business - Additional Information (Detail)	3 Months Ended
	Jun. 30, 2014 JointVenture Person Property sqft Executives	Jun. 30, 2013 sqft
Real Estate Properties [Line Items]
Number of separate reporting segments of properties	4
Operating Partnership in preferred	100.00%
Interest in Operating Partnership	95.70%
Number of officers who owned limited partnership interests	2
Area of real estate property	8,700,651	9,132,744
Unconsolidated joint ventures	5
Square footage of land for additional development	1,500,000
Occupancy rate in the Company's consolidated properties	86.00%
Number of tenants representing the 85.8% occupancy rate	558
Square footage in development or redevelopment not included on occupancy calculation	100,000
Percent of Annualized Cash Rent	27.00%
Wholly-owned Properties [Member]
Real Estate Properties [Line Items]
Area of real estate property	8,700,000
Unconsolidated Properties [Member]
Real Estate Properties [Line Items]
Area of real estate property	900,000

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Investment in Affiliates - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended	3 Months Ended
	Jun. 30, 2014 Rate	Jun. 30, 2014 Rate	Jun. 30, 2014 Washington D C Reporting Segment [Member] Maximum [Member] sqft	Jul. 10, 2014 Subsequent Event Rate	Jul. 10, 2014 Subsequent Event 1750 H Street [Domain]
Schedule of Equity Method Investments [Line Items]
Ownership Percentage in Unconsolidated Joint Venture				50.00%
Investment in Affiliates Joint Venture Repaid Mortgage					$ 27.9
Investment in Affiliates Variable Interest Entity Square Feet			113,000
Investment in Affiliates Joint Venture Financing				32.0
Investment in Affiliates Joint Venture mortgage interest rate	3.92%	3.92%
Investment in Affiliates Joint Venture Loan Maturity Date	Aug. 01, 2024
Investment in Affiliates Joint Venture Loan Prepayment Date	Aug. 01, 2021
Fees from joint ventures	$ 0.2	$ 0.3

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Equity - Company's Allocation Between Non-controlling Interests (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance	$ 739,291	$ 662,493
Net income (loss)	16,434	16,020
Changes in ownership, net	(725)	105,613
Distributions to owners	(23,786)	(21,529)
Other comprehensive income	(767)	6,731
Ending Balance	730,447	769,328
Increase (Decrease) in Temporary Equity [Roll Forward]
Beginning Balance, Redeemable noncontrolling interests	33,221	34,367
Net income (loss), Redeemable noncontrolling interests	458	419
Change in ownership, net, Redeemable noncontrolling interests	2,358	452
Distributions to owners, Redeemable noncontrolling interests	(789)	(779)
Other comprehensive income, Redeemable noncontrolling interests	(34)	327
Ending Balance, Redeemable noncontrolling interests	35,214	34,786
First Potomac Realty Trust
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance	738,510	658,765
Net income (loss)	16,434	16,033
Changes in ownership, net	(886)	105,613
Distributions to owners	(23,786)	(21,529)
Other comprehensive income	(767)	6,731
Ending Balance	729,505	765,613
Non-redeemable Noncontrolling Interests
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance	781	3,728
Net income (loss)		(13)
Changes in ownership, net	161
Ending Balance	$ 942	$ 3,715

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Derivative Instruments - Summary of Interest Rate Swap Agreements (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2014
Derivatives, Fair Value [Line Items]
Fixed LIBOR Interest Rate	1.50%
Interest Rate Swap
Derivatives, Fair Value [Line Items]
Notional Amount	$ 300,000
Fixed LIBOR Interest Rate	1.505%
Interest Rate Swap One
Derivatives, Fair Value [Line Items]
Derivative, Effective Date	Jul. 31, 2011
Maturity Date	Jul. 31, 2016
Notional Amount	35,000
Interest Rate Contractual Component	LIBOR
Fixed LIBOR Interest Rate	1.754%
Interest Rate Swap Two
Derivatives, Fair Value [Line Items]
Derivative, Effective Date	Jul. 31, 2011
Maturity Date	Jul. 31, 2016
Notional Amount	25,000
Interest Rate Contractual Component	LIBOR
Fixed LIBOR Interest Rate	1.763%
Interest Rate Swap Three
Derivatives, Fair Value [Line Items]
Derivative, Effective Date	Jul. 31, 2011
Maturity Date	Jul. 31, 2017
Notional Amount	30,000
Interest Rate Contractual Component	LIBOR
Fixed LIBOR Interest Rate	2.093%
Interest Rate Swap Four
Derivatives, Fair Value [Line Items]
Derivative, Effective Date	Jul. 31, 2011
Maturity Date	Jul. 31, 2017
Notional Amount	30,000
Interest Rate Contractual Component	LIBOR
Fixed LIBOR Interest Rate	2.093%
Interest Rate Swap Five
Derivatives, Fair Value [Line Items]
Derivative, Effective Date	Sep. 30, 2011
Maturity Date	Jul. 31, 2018
Notional Amount	30,000
Interest Rate Contractual Component	LIBOR
Fixed LIBOR Interest Rate	1.66%
Interest Rate Swap Six
Derivatives, Fair Value [Line Items]
Derivative, Effective Date	Jan. 31, 2012
Maturity Date	Jul. 31, 2018
Notional Amount	25,000
Interest Rate Contractual Component	LIBOR
Fixed LIBOR Interest Rate	1.394%
Interest Rate Swap Seven
Derivatives, Fair Value [Line Items]
Derivative, Effective Date	Mar. 31, 2012
Maturity Date	Jul. 31, 2017
Notional Amount	25,000
Interest Rate Contractual Component	LIBOR
Fixed LIBOR Interest Rate	1.129%
Interest Rate Swap Eight
Derivatives, Fair Value [Line Items]
Derivative, Effective Date	Mar. 31, 2012
Maturity Date	Jul. 31, 2017
Notional Amount	12,500
Interest Rate Contractual Component	LIBOR
Fixed LIBOR Interest Rate	1.129%
Interest Rate Swap Nine
Derivatives, Fair Value [Line Items]
Derivative, Effective Date	Mar. 31, 2012
Maturity Date	Jul. 31, 2018
Notional Amount	12,500
Interest Rate Contractual Component	LIBOR
Fixed LIBOR Interest Rate	1.383%
Interest Rate Swap Ten
Derivatives, Fair Value [Line Items]
Derivative, Effective Date	Jun. 30, 2012
Maturity Date	Jul. 31, 2017
Notional Amount	50,000
Interest Rate Contractual Component	LIBOR
Fixed LIBOR Interest Rate	0.955%
Interest Rate Swap Eleven
Derivatives, Fair Value [Line Items]
Derivative, Effective Date	Jun. 30, 2012
Maturity Date	Jul. 31, 2018
Notional Amount	$ 25,000
Interest Rate Contractual Component	LIBOR
Fixed LIBOR Interest Rate	1.135%

XML

Notes Receivable - Summary of Notes Receivable (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Dec. 31, 2013
Receivables with Imputed Interest [Line Items]
Face Amount	$ 63,806	$ 63,806	$ 54,896
Unamortized Origination Fees	(55)	(55)	(200)
Balance	63,751	63,751	54,696
Notes Receivables Issued on December 2010 [Member]
Receivables with Imputed Interest [Line Items]
Face Amount	34,000	34,000	25,000
Unamortized Origination Fees			(130)
Balance	34,000	34,000	24,870
Interest Rate	9.75%		12.50%
Property		950 F Street, NW	950 F Street, NW
Notes Receivables Issued on April 2011 [Member]
Receivables with Imputed Interest [Line Items]
Face Amount	29,806	29,806	29,896
Unamortized Origination Fees	(55)	(55)	(70)
Balance	$ 29,751	$ 29,751	$ 29,826
Interest Rate	9.00%		9.00%
Property		America’s Square	America’s Square

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

(a) Principles of Consolidation

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

We have condensed or omitted certain information and note 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. We believe 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 our annual report on Form 10-K for the year ended December 31, 2013 and as updated from time to time in other filings with the U.S. Securities and Exchange Commission (the “SEC”).

In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments and accruals necessary to present fairly our financial position as of June 30, 2014 and the results of our operations and our comprehensive income for the three and six months ended June 30, 2014 and 2013 and our cash flows for the six months ended June 30, 2014 and 2013. 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 utilities expense and snow and ice removal costs.

(b) Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires our management team 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) Application of New Accounting Standards

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”), which states that a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations only if the disposal represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results. ASU 2014-08 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2014. Early adoption is permitted, but only for a disposal (or classification as held-for-sale) that has not been reported in financial statements previously issued or available for issuance. ASU 2014-08 must be applied prospectively. We adopted ASU 2014-08 in the second quarter of 2014. The adoption of ASU 2014-08 did not have a material impact on our condensed consolidated financial statements, though it did and will continue to impact the extent and frequency of presenting discontinued operations within our consolidated statements of operations and note disclosures. The operations of all properties that were sold prior to the adoption of ASU 2014-08 and two other properties, West Park and Patrick Center, which were classified as held-for-sale in previously published financial statements prior to our adoption of ASU 2014-08 and were subsequently sold, are reflected within discontinued operations in our consolidated statements of operations for all periods presented. For more information, see note 8, Dispositions. All property operations that have been classified as discontinued operations will remain classified within discontinued operations in any future presentation of our consolidated statements of operations.

In May 2014, FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers, (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance when it becomes effective on January 1, 2017. Early adoption is not permitted. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. We have not yet selected a transition method and are evaluating the impact that ASU 2014-09 will have on our consolidated financial statements and related disclosures.

(d) 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 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 our 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

We regularly review 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 carrying value of a property, an impairment analysis is performed. We assess 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 to maintain the operating capacity, 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. We are required to make estimates as to whether there are impairments in the carrying values of our investments in real estate. Further, we will record an impairment loss if we expect to dispose of a property, in the near term, at a price below carrying value. In such an event, we will record an impairment loss based on the difference between a property’s carrying value and our projected sales price less any estimated costs to sell.

We will classify a building as held-for-sale in accordance with GAAP in the period in which we have made the decision to dispose of the building, our 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 exist that could cause the transaction not to be completed in a timely manner. We will cease recording depreciation on a building once it has been classified as held-for-sale. In the second quarter of 2014, we prospectively adopted ASU 2014-08, which impacts the presentation of operations and gains or losses from disposed properties and properties classified as held-for-sale. For more information, see note 2(c), Summary of Significant Accounting Policies - Application of New Accounting Standards.

If the building does not qualify as a discontinued operation under ASU 2014-08, we will classify the building’s operating results, together with any impairment charges and any gains or losses on the sale of the building, in continuing operations for all periods presented in our consolidated statements of operations. We will classify the assets and liabilities related to the building as held-for-sale in our consolidated balance sheet for the period the held-for-sale criteria was met.

If the building does qualify as a discontinued operation under ASU 2014-08, we will classify the building’s operating results, together with any impairment charges and any gains or losses on the sale of the building, in discontinued operations in our consolidated statements of operations for all periods presented and classify the assets and related liabilities related to the building as held-for-sale in our consolidated balance sheets for the periods presented. 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 us after the disposition.

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

We capitalize interest costs incurred on qualifying expenditures for real estate assets under development or redevelopment, which include our 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. We 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. We also capitalize direct compensation costs of our 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. We do not capitalize any other general and administrative costs such as office supplies, office rent expense or an overhead allocation to our development or redevelopment projects. Capitalized compensation costs were immaterial for the three and six months ended June 30, 2014 and 2013. 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. We will also place redevelopment and development assets into 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.

(e) Notes Receivable

We provide loans to the owners of real estate properties, which can be collateralized by interest in the real estate property. We record these loans as “Notes receivable, net” in our consolidated balance sheets. The loans 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. We record interest earned from notes receivable and amortization of any discount or issuance costs within “Interest and other income” in our consolidated statements of operations.

We will establish a provision for anticipated credit losses associated with our notes receivable when we anticipate that we 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. Our collectability of our notes receivable may be adversely impacted by the financial stability of the Washington, D.C. region and the ability of the 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 we estimate to be adequate based on these factors. Based on the review of the above criteria, we did not record an allowance for credit losses for our notes receivable during the three and six months ended June 30, 2014 and 2013.

(f) 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 as discontinued operations. For more information, see note 8, Dispositions. In the second quarter of 2014, we prospectively adopted the requirements under ASU 2014-08, which impacts the presentation of operations and gains or losses from disposed properties. For more information, see note 2(c), Summary of Significant Accounting Policies - Application of New Accounting Standards.

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Derivative Instruments - Additional Information (Detail) (USD $)			3 Months Ended		6 Months Ended
	Jun. 30, 2014 Interest_Rate_Swaps	Jun. 30, 2014 Interest Rate Swap	Jun. 30, 2014 Interest Rate Swap Interest Expense	Jun. 30, 2013 Interest Rate Swap Interest Expense	Jun. 30, 2014 Interest Rate Swap Interest Expense	Jun. 30, 2014 Interest Rate Swap Interest Expense Year To Date	Jun. 30, 2013 Interest Rate Swap Interest Expense Year To Date
Derivatives, Fair Value [Line Items]
Fixed effective interest rate	1.50%	1.505%
Amount on variable rate debt		$ 300,000,000
Number of interest rate swap agreements	11
Accumulated other comprehensive loss reclassified as an increase in interest expense			1,000,000	1,200,000		2,100,000	2,300,000
Estimated accumulated other comprehensive loss reclassified as an increase in interest expense over the following twelve months					$ 3,800,000

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Rental Property - Additional Information (Detail) (USD $)	0 Months Ended	3 Months Ended
	Aug. 04, 2011 acre	Jun. 30, 2014 sqft
Segment Reporting Information [Line Items]
Area of land available for development in additional building space		1,500,000
Anticipated completion of redevelopment		139,000
440 First Street, NW [Member]
Segment Reporting Information [Line Items]
Original cost basis of the property		$ 23,600,000
Projected incremental investment in redevelopment project		55,000,000
Washington D C Reporting Segment [Member]
Segment Reporting Information [Line Items]
Area of land available for development in additional building space		700,000
Development of area for operations by joint venture	1.6
Lease expiration date	Aug. 31, 2013
Projected incremental investment in development project		53,500,000
Original cost basis of the property		$ 43,300,000
Placed in-service redevelopment efforts		25,000
Redevelopment efforts yet to be placed-in service		114,000
Washington D C Reporting Segment [Member] | Greyhound Lines, Inc. [Member]
Segment Reporting Information [Line Items]
Percentage of interest in joint venture	97.00%
Washington D C Reporting Segment [Member] | Maximum [Member] | Greyhound Lines, Inc. [Member]
Segment Reporting Information [Line Items]
Area of land available for development in additional building space	712,000
Maryland Reporting Segment [Member]
Segment Reporting Information [Line Items]
Area of land available for development in additional building space		100,000
Northern Virginia [Member]
Segment Reporting Information [Line Items]
Area of land available for development in additional building space		600,000
Southern Virginia [Member]
Segment Reporting Information [Line Items]
Area of land available for development in additional building space		100,000

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Investment in Affiliates (Tables)

6 Months Ended

Jun. 30, 2014

Equity Method Investments and Joint Ventures [Abstract]

Components of Investments in Affiliates

Our investment in affiliates consisted of the following (dollars in thousands):

	Reporting Segment	Ownership Interest		June 30, 2014		December 31, 2013
Prosperity Metro Plaza	Northern Virginia	51	%	$	24,666	$	24,735
1750 H Street, NW	Washington, D.C.	50	%	17,307		16,780
Aviation Business Park	Maryland	50	%	4,947		5,008
RiversPark I and II(1)	Maryland	25	%	2,358		2,627
				$	49,278	$	49,150

⁽¹⁾RiversPark I and RiversPark II are owned through two separate joint ventures.

Net Assets of Company's Unconsolidated Joint Ventures

The net assets of our unconsolidated joint ventures consisted of the following (dollars in thousands):

	June 30, 2014		December 31, 2013
Assets:
Rental property, net	$	193,011	$	194,240
Cash and cash equivalents	4,336		3,680
Other assets	16,058		15,585
Total assets	213,405		213,505
Liabilities:
Mortgage loans(1)(2)	104,814		106,384
Other liabilities	6,641		5,046
Total liabilities	111,455		111,430
Net assets	$	101,950	$	102,075

⁽¹⁾  Of the total mortgage debt that encumbers our unconsolidated properties, $7.0 million is recourse to us. The recourse mortgage loan was scheduled to mature in March 2014; however, the joint venture extended the loan’s maturity date to September 2014. We believe the fair value of the potential liability to us under this guaranty is inconsequential as the likelihood of our need to perform under the debt agreement is remote.

⁽²⁾  Includes the unamortized fair value adjustments recorded at acquisition upon the assumption of mortgage loans.

Results of Operations of Company's Unconsolidated Joint Ventures

The following table summarizes the results of operations of our unconsolidated joint ventures, which due to our 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 our consolidated statements of operations (dollars in thousands):

	Three Months Ended   June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Total revenues	$	5,780		$	5,959		$	11,531		$	12,011
Total operating expenses	(1,694		)	(1,905		)	(3,920		)	(3,770		)
Net operating income	4,086			4,054			7,611			8,241
Depreciation and amortization	(2,264		)	(2,854		)	(5,067		)	(5,793		)
Other expenses, net	(1,077		)	(1,090		)	(2,087		)	(2,164		)
Net income	$	745		$	110		$	457		$	284

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Notes Receivable (Tables)

6 Months Ended

Jun. 30, 2014

Receivables [Abstract]

Summary of Notes Receivable

Below is a summary of our notes receivable (dollars in thousands):

Balance at June 30, 2014
Face Amount		Unamortized Origination Fees			Balance		Interest Rate		Property
$	34,000	$	—		$	34,000	9.75	%	950 F Street, NW
29,806		(55		)	29,751		9.0	%	America’s Square
$	63,806	$	(55	)	$	63,751

Balance at December 31, 2013
Face Amount		Unamortized Origination Fees			Balance		Interest Rate		Property
$	25,000	$	(130	)	$	24,870	12.5	%	950 F Street, NW
29,896		(70		)	29,826		9.0	%	America’s Square
$	54,896	$	(200	)	$	54,696

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Dispositions - Net (Loss) Income from Discontinued Operations (Detail) (USD $)	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gain on sale of real estate property	$ 1,400,000
Unamortized straight-line rent	1,000,000
Discontinued Operations [Member] | All properties classified within discontinued operations [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Revenues	65,000		7,875,000		867,000		20,174,000
Net (loss) income, before taxes	(1,000)	[1]	(2,655,000)	[1]	(1,096,000)	[1]	2,626,000	[1]
Gain on sale of real estate property	$ 1,284,000		$ 18,947,000		$ 1,338,000		$ 18,947,000

[1] During the first quarter of 2014, we accelerated $1.0 million of unamortized straight-line rent and deferred abatement costs related to the sale of Girard Business Center and Gateway Center.

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Acquisitions - Fair Value of Assets and Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014
Business Acquisition [Line Items]
Land	$ 33,048
Acquired tenant improvements	7,503
Building and improvements	46,341
In-place leases	8,573
Acquired leasing commissions	3,012
Legal leasing fees	281
Total assets acquired	100,281
Below-market leases assumed	(1,281)
Debt assumed	(37,269)
Net assets acquired	61,731
Above Market Leases [Member]
Business Acquisition [Line Items]
Above-market leases acquired	$ 1,523

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Dispositions (Tables)

6 Months Ended

Jun. 30, 2014

Discontinued Operations and Disposal Groups [Abstract]

Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures

The following table summarizes the results of operations of properties included in discontinued operations (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenues	$	65		$	7,875		$	867		$	20,174
Net (loss) income, before taxes(1)	(1		)	(2,655		)	(1,096		)	2,626
Gain on sale of rental property	1,284			18,947			1,338			18,947

⁽¹⁾  During the first quarter of 2014, we accelerated $1.0 million of unamortized straight-line rent and deferred abatement costs related to the sale of Girard Business Center and Gateway Center.

The following table summarizes the aggregate results of operations for two properties that are included in continuing operations for the periods presented (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenues	$	1,329		$	1,322		$	2,794		$	2,642
Property operating expenses	(400		)	(365		)	(948		)	(773		)
Depreciation and amortization	(402		)	(350		)	(768		)	(701		)
Impairment of rental property	(3,956		)	—			(3,956		)	—
(Loss) income from operations of disposed property	(3,429		)	607			(2,878		)	1,168
Gain on sale of rental property	21,230			—			21,230			—
Net income from continuing operations	$	17,801		$	607		$	18,352		$	1,168

Summary of Completed Property Dispositions

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

	Reporting Segment	Disposition Date	Property Type	Square Feet
Patrick Center	Maryland	4/16/2014	Office	66,269
West Park	Maryland	4/2/2014	Office	28,333
Girard Business Center and Gateway Center	Maryland	1/29/2014	Business Park and Office	341,973
Worman’s Mill Court	Maryland	11/19/2013	Office	40,099
Triangle Business Center	Maryland	9/27/2013	Business Park	74,429
4200 Tech Court	Northern Virginia	8/15/2013	Office	33,875
Industrial Portfolio(1)	Various	May/June 2013	Industrial	4,280,985
4212 Tech Court	Northern Virginia	6/5/2013	Office	32,055

⁽¹⁾  During the second quarter of 2013, we sold 24 industrial properties, which consisted of two separate transactions. On May 7, 2013, we sold I-66 Commerce Center, a 236,000 square foot industrial property in Haymarket, Virginia. On June 18, 2013, we completed the sale of the remaining 23 industrial properties.

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Debt (Tables)

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Schedule of Borrowings

Our borrowings consisted of the following (dollars in thousands):

	June 30, 2014		December 31, 2013
Mortgage loans, effective interest rates ranging from 4.40% to 6.63%, maturing at various dates through June 2023(1)	$	302,909	$	274,648
Unsecured term loan, effective interest rates ranging from LIBOR plus 1.45% to LIBOR plus 1.90%, with staggered maturity dates ranging from October 2018 to October 2020(1)	300,000		300,000
Unsecured revolving credit facility, effective interest rate of LIBOR plus 1.50%, maturing October 2017(1)	116,000		99,000
	$	718,909	$	673,648

⁽¹⁾  At June 30, 2014, LIBOR was 0.16%. All references to LIBOR in the condensed consolidated financial statements refer to one-month LIBOR.

Summary of Company's Mortgage Debt

The following table provides a summary of our mortgage debt at June 30, 2014 and December 31, 2013 (dollars in thousands):

Encumbered Property	Contractual Interest Rate	Effective Interest Rate			Maturity Date	June 30, 2014			December 31, 2013
Annapolis Business Center(1)	5.74%	6.25	%		June 2014	$	—		$	8,076
Storey Park(2)(3)	LIBOR + 2.75%	5.80	%		October 2014	22,000			22,000
Jackson National Life Loan(4)	5.19%	5.19	%		August 2015	65,537			66,116
Hanover Business Center Building D	8.88%	6.63	%		August 2015	179			252
Chesterfield Business Center Buildings C,D,G and H	8.50%	6.63	%		August 2015	495			681
440 First Street, NW Construction Loan(2)	LIBOR + 2.50%	4.78	%		May 2016	23,493			21,699
Gateway Centre Manassas Building I	7.35%	5.88	%		November 2016	536			638
Hillside I and II	5.75%	4.62	%		December 2016	13,150			13,349
Redland Corporate Center Buildings II & III	4.20%	4.64	%		November 2017	66,434			67,038
Hanover Business Center Building C	7.88%	6.63	%		December 2017	581			653
840 First Street, NE	5.72%	6.01	%		July 2020	36,848			37,151
Battlefield Corporate Center	4.26%	4.40	%		November 2020	3,772			3,851
Chesterfield Business Center Buildings A,B,E and F	7.45%	6.63	%		June 2021	1,775			1,873
Airpark Business Center	7.45%	6.63	%		June 2021	968			1,022
1211 Connecticut Avenue, NW	4.22%	4.47	%		July 2022	29,973			30,249
1401 K Street, NW	4.80%	4.93	%		June 2023	37,168			—
		5.06	%	(5)		302,909			274,648
Unamortized fair value adjustments						(558		)	(663		)
Total contractual principal balance						$	302,351		$	273,985

⁽¹⁾  The loan was prepaid, without penalty, on May 1, 2014 with borrowings under our unsecured revolving credit facility.

⁽²⁾  At June 30, 2014, LIBOR was 0.16%.

⁽³⁾  The loan incurs interest at a variable rate of LIBOR plus a spread of 2.75% (with a floor of 5.0%) and matures in October 2014, with a one-year extension at our option.

⁽⁴⁾  At June 30, 2014, the loan was secured by the following properties: Plaza 500, Van Buren Office Park, Rumsey Center, Snowden Center, Greenbrier Technology Center II and Norfolk Business Center. The terms of the loan allow us to substitute collateral, as long as certain debt-service coverage and loan-to-value ratios are maintained, or to prepay a portion of the loan, with a prepayment penalty, subject to a debt-service yield.

⁽⁵⁾  Weighted average interest rate on total mortgage debt.

Unsecured Term Loan

The table below shows the outstanding balances and the interest rates of the three tranches of the $300.0 million unsecured term loan at June 30, 2014 (dollars in thousands):

	Maturity Date	Amount		Interest Rate(1)
Tranche A	October 2018	$	100,000	LIBOR, plus 145 basis points
Tranche B	October 2019	100,000		LIBOR, plus 160 basis points
Tranche C	October 2020	100,000		LIBOR, plus 190 basis points
		$	300,000

⁽¹⁾  The interest rate spread is subject to change based on our maximum total indebtedness ratio. For more information, see note 9(e) Debt – Financial Covenants.

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Description of Business

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Description of Business

Description of Business

First Potomac Realty Trust (the “Company”) is a leader in the ownership, management, development and redevelopment of office and business park properties in the greater Washington, D.C. region. The Company separates its properties into four distinct reporting 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, leasing expertise, market knowledge and established relationships, and seeks to reposition these properties to increase their profitability and value. The Company’s portfolio primarily contains a mix of single-tenant and multi-tenant office properties and business parks. Office properties are single-story and multi-story buildings that are primarily for office use; and business parks contain buildings with office features combined with some industrial property space.

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

We conduct our business through First Potomac Realty Investment Limited Partnership, our operating partnership (the “Operating Partnership”). We are the sole general partner of, and, as of June 30, 2014, owned 100% of the preferred interest and 95.7% of the common interest in the Operating Partnership. The remaining common 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 two of our executive officers who contributed properties and other assets to us upon our formation, and the remainder of which are owned by other unrelated parties.

At June 30, 2014, we wholly-owned or had a controlling interest in properties totaling 8.7 million square feet and had a noncontrolling ownership interest in properties totaling an additional 0.9 million square feet through five unconsolidated joint ventures. We also owned land that can support approximately 1.5 million square feet of additional development. Our consolidated properties were 86.0% occupied by 558 tenants at June 30, 2014. We did not include square footage that was in development or redevelopment, which totaled 0.1 million square feet at June 30, 2014, in our occupancy calculation. We derive substantially all of our revenue from leases of space within our properties. As of June 30, 2014, our largest tenant was the U.S. Government, which along with government contractors, accounted for 27% of our total annualized cash basis rent. We operate so as to qualify as a real estate investment trust (“REIT”) for federal income tax purposes.

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Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of Interest Rate Swap Agreements

At June 30, 2014, we fixed LIBOR at a weighted average interest rate of 1.5% on $300.0 million of our variable rate debt through eleven interest rate swap agreements that are summarized below (dollars in thousands):

Effective Date	Maturity Date	Notional Amount	Interest Rate Contractual Component	Fixed LIBOR Interest Rate
July 2011	July 2016	$35,000	LIBOR	1.754%
July 2011	July 2016	25,000	LIBOR	1.763%
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%
June 2012	July 2017	50,000	LIBOR	0.955%
June 2012	July 2018	25,000	LIBOR	1.135%
	Total/Weighted Average	$300,000		1.505%

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Earnings Per Common Share - Computation of Company's Basic and Diluted Earnings Per Share (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Numerator for basic and diluted earnings per common share:
Income (loss) from continuing operations	$ 17,051	$ (1,816)	$ 16,650	$ (5,134)
Income from discontinued operations	1,283	16,292	242	21,573
Net income	18,334	14,476	16,892	16,439
Less: Net (income) loss from continuing operations attributable to noncontrolling interests	(593)	223	(448)	538
Less: Net income from discontinued operations attributable to noncontrolling interests	(59)	(689)	(10)	(944)
Net income attributable to First Potomac Realty Trust	17,682	14,010	16,434	16,033
Less: Dividends on preferred shares	(3,100)	(3,100)	(6,200)	(6,200)
Net income attributable to common shareholders	14,582	10,910	10,234	9,833
Less: Allocation to participating securities	(77)	(106)	(155)	(206)
Net income attributable to common shareholders	$ 14,505	$ 10,804	$ 10,079	$ 9,627
Denominator for basic and diluted earnings per common share:
Weighted average shares outstanding - basic and diluted	58,146	53,586	58,122	52,004
Diluted	58,220	53,586	58,190	52,004
Basic and diluted earnings per common share:
Loss from continuing operations	$ 0.23	$ (0.09)	$ 0.17	$ (0.21)
(Loss) income from discontinued operations	$ 0.02	$ 0.29	$ 0.00	$ 0.40
Net loss	$ 0.25	$ 0.20	$ 0.17	$ 0.19

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Dispositions - Additional Information (Detail) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended
	Apr. 30, 2014	Jun. 30, 2014 segment sqft	Jun. 30, 2013 sqft	Jun. 30, 2014 sqft	Jun. 30, 2013 sqft
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Area of real estate property		8,700,651	9,132,744	8,700,651	9,132,744
Proceeds from Sale of Buildings		$ 39,900,000
Gain on sale of rental property		21,230,000	0	21,230,000	0
Impairment of rental property		3,956,000	0	3,956,000	0
Number of reportable segments		4
Increase (decrease) in assets held-for-sale		200,000
Proceeds from sale of properties	13,800,000
Accumulated depreciation		3,500,000		3,500,000
Gain on sale of real estate property		1,400,000
Other current assets		600,000		600,000
MARYLAND
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Area of real estate property		180,500		180,500
Impairment of rental property		4,000,000
Corporate Campus at Ashburn Center [Member]
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Area of real estate property		194,000		194,000
West Park
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Area of real estate property	29,000	28,333		28,333
Patrick Center
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Area of real estate property	66,000	66,269		66,269
Land
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Property, Plant, and equipment, gross		2,700,000		2,700,000
Buildings
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Property, Plant, and equipment, gross		11,800,000		11,800,000
Tenant Improvements
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items]
Property, Plant, and equipment, gross		$ 1,500,000		$ 1,500,000

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Segment Information - Additional Information (Detail)	3 Months Ended
	Jun. 30, 2014 segment
Segment Reporting [Abstract]
Number of reportable segments	4

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014		Dec. 31, 2013
Assets:
Rental property, net	$ 1,258,646		$ 1,203,299
Assets held-for-sale	13,093		45,861
Cash and cash equivalents	13,398		8,740
Escrows and reserves	4,753		7,673
Accounts and other receivables, net of allowance for doubtful accounts of $1,104 and $1,181, respectively	10,050		12,384
Accrued straight-line rents, net of allowance for doubtful accounts of $199 and $92, respectively	29,820		30,332
Notes receivable, net	63,751		54,696
Investment in affiliates	49,278		49,150
Deferred costs, net	42,750		43,198
Prepaid expenses and other assets	6,466		8,279
Intangible assets, net	46,261		38,848
Total assets	1,538,266	[1],[2]	1,502,460
Liabilities:
Mortgage loans	302,909		274,648
Unsecured term loan	300,000		300,000
Unsecured revolving credit facility	116,000		99,000
Accounts payable and other liabilities	37,604		41,296
Accrued interest	1,701		1,663
Rents received in advance	5,734		6,118
Tenant security deposits	6,125		5,666
Deferred market rent, net	2,532		1,557
Total liabilities	772,605		729,948
Noncontrolling interests in the Operating Partnership	35,214		33,221
Equity:
Series A Preferred Shares, $25 per share liquidation preference, 6,400 shares issued and outstanding	160,000		160,000
Common shares, $0.001 par value, 150,000 shares authorized; 58,808 and 58,704 shares issued and outstanding, respectively	59		59
Additional paid-in capital	910,680		911,533
Noncontrolling interests in the consolidated partnership	942		781
Accumulated other comprehensive loss	(4,603)		(3,836)
Dividends in excess of accumulated earnings	(336,631)		(329,246)
Total equity	730,447		739,291
Total liabilities, noncontrolling interests and equity	1,538,266		1,502,460
Series A Preferred Shares
Equity:
Series A Preferred Shares, $25 per share liquidation preference, 6,400 shares issued and outstanding	$ 160,000		$ 160,000

[1] Total assets include our investment in properties that are owned through joint ventures that are not consolidated within our condensed consolidated financial statements. For more information on our unconsolidated investments, including location within our reportable segments, see note 7, Investment in Affiliates.

[2] Corporate assets not allocated to any of our reportable segments totaled $86,333 and $159,665 at June 30, 2014 and 2013, respectively.

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Acquisitions - Pro Forma Financial Information (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Business Combinations [Abstract]
Pro forma total revenues	$ 86,293	$ 83,021
Pro forma net income	$ 18,649	$ 14,832
Basic (in dollars per share)	$ 0.21	$ 0.16
Diluted (in dollars per share)	$ 0.20	$ 0.16

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities:
Net income	$ 16,892	$ 16,439
Discontinued operations:
Gain on sale of rental property	(1,338)	(18,947)
Loss on debt extinguishment	0	4,414
Depreciation and amortization	496	4,708
Depreciation and amortization	31,250	28,577
Share based compensation	1,689	1,663
Bad debt expense	481	388
Amortization of deferred market rent, net	(55)	(21)
Amortization of financing costs and discounts	674	1,470
Equity in losses (earnings) of affiliates	28	(35)
Distributions from investments in affiliates	435	1,277
Contingent consideration related to acquisition of property	0	75
Gain on sale of rental property	(21,230)	0
Loss on debt extinguishment	0	201
Impairment of rental property	3,956	1,446
Changes in assets and liabilities:
Escrows and reserves	2,925	2,894
Accounts and other receivables	1,904	1,172
Accrued straight-line rents	(2,918)	(4,319)
Prepaid expenses and other assets	1,802	2,999
Tenant security deposits	240	367
Accounts payable and accrued expenses	(431)	(587)
Accrued interest	38	(747)
Rents received in advance	(436)	(3,699)
Deferred costs	(5,546)	(6,034)
Total adjustments	13,964	17,262
Net cash provided by operating activities	30,856	33,701
Cash flows from investing activities:
Investment in note receivable	(9,000)	0
Proceeds from sale of rental property	85,284	207,203
Principal payments from note receivable	90	25
Change in escrow and reserve accounts	0	(28,175)
Additions to rental property and furniture, fixtures and equipment	(16,639)	(23,670)
Additions to development and redevelopment	(7,003)	(11,450)
Acquisition of rental property and associated intangible assets	(61,731)	0
Investment in affiliates	(590)	(297)
Net cash (used in) provided by investing activities	(9,589)	143,636
Cash flows from financing activities:
Financing costs	(405)	(1,795)
Issuance of common shares, net	0	105,085
Issuance of debt	104,794	99,157
Repayments of debt	(96,697)	(302,237)
Dividends to common shareholders	(17,586)	(15,329)
Dividends to preferred shareholders	(6,200)	(6,200)
Contributions from consolidated joint venture partners	161	0
Distributions to noncontrolling interests	(789)	(780)
Operating partnership unit redemption	0	(84)
Stock option exercises	113	121
Net cash used in financing activities	(16,609)	(122,062)
Net increase in cash and cash equivalents	4,658	55,275
Cash and cash equivalents, beginning of period	8,740	9,374
Cash and cash equivalents, end of period	13,398	64,649
Cash paid for interest, net	10,946	19,452
Non-cash investing and financing activities:
Debt assumed in connection with the acquisition of rental property	37,269	0
Value of common shares retired to settle employee income tax obligations	383	537
Change in fair value of the outstanding common Operating Partnership units	2,318	498
Issuance of common Operating Partnership units in connection with the acquisition of rental property	40	0
Changes in accruals:
Additions to rental property and furniture, fixtures and equipment	(1,571)	(5,135)
Additions to development and redevelopment	$ (426)	$ (3,885)

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Debt - Additional Information (Detail) (USD $)	0 Months Ended	1 Months Ended	3 Months Ended			6 Months Ended		3 Months Ended				3 Months Ended		6 Months Ended	3 Months Ended
	Jun. 05, 2013	Jan. 31, 2014	Jun. 30, 2014 Interest_Rate_Swaps Rate	Jun. 30, 2014 Rate Interest_Rate_Swaps	Jun. 30, 2013	Jun. 30, 2013	Dec. 31, 2013	Jun. 30, 2014 Unsecured term loan Tranches	Jun. 30, 2014 Unsecured revolving credit facility	Jun. 30, 2014 440 First Street, NW Construction Loan	Jun. 30, 2014 Interest Rate Swap	Jun. 30, 2014 Unused lines of credit	Jun. 30, 2013 Unused lines of credit	Jun. 30, 2014 Line of Credit [Member]	Jun. 30, 2014 Washington DC
Debt Instrument [Line Items]
Real Estate And Accumulated Depreciation Property Type															117000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Buildings															$ 58,000,000
Mortgage Loans on Real Estate			37,300,000	37,300,000
Amount borrowed		1,800,000		20,000,000	21,700,000
Debt Instrument, Interest Rate, Stated Percentage			4.80%	4.80%						2.50%
Borrowing capacity of a construction loan	43,500,000
Basis spread over variable rate	2.50%		2.75%	2.75%
Maturity date						2016-05
Maturity Period						1 year
Percentage of outstanding principal										50.00%
Number of tranches								3
Outstanding balance of three tranches			300,000,000	300,000,000			300,000,000	300,000,000
Unsecured revolving credit facility			116,000,000	116,000,000					38,000,000
Line of Credit Facility, Funding									20,000,000
Line of Credit Facility, Prepay Mortgage Loan									8,000,000
Increase in fund due to borrowings of revolving credit facility									10,000,000
Increase in Line of Credit Funding for Acquisitions									39,000,000
Proceed to pay loan				39,900,000					18,000,000
Weighted average borrowings outstanding on unsecured revolving credit facility						208,000,000						112,700,000	194,200,000	104,900,000
Line of Credit Facility, Average Interest Rate at Prior Period End					2.80%
Maximum outstanding borrowings				158,000,000
Maximum Outstanding Borrowings					245,000,000
Weighted average interest rate			1.70%	1.70%
Available capacity on the unsecured revolving credit facility			146,500,000	146,500,000
Line of credit facility basis spread on variable rate basis			0.16%	1.50%
Annual commitment fee			0.25%	0.25%
Fixed effective interest rate			1.50%	1.50%							1.505%
Amount on variable rate debt											$ 300,000,000
Number of interest rate swap agreements			11	11

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Share-Based Payments (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Company's Non-Vested Share Awards

A summary of our non-vested common share awards at June 30, 2014 is as follows:

	Non-vested Common Shares		Weighted Average Grant Date Fair Value
Non-vested at March 31, 2014	625,192		$	13.26
Granted	44,920		13.02
Vested	(25,872	)	14.52
Non-vested at June 30, 2014	644,240		13.19

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Fair Value Measurements - Fair Value of Debt Instruments (Detail) (USD $)	Jun. 30, 2014		Jan. 10, 2014	Dec. 31, 2013
Financial Assets:
Carrying value of notes receivable	$ 63,751,000			$ 54,696,000
Fair value of notes receivable	63,800,000			54,900,000
Financial Liabilities:
Mezzanine loan increased			34,000,000
Carrying Value
Financial Assets:
Carrying value of notes receivable	63,751,000	[1]		54,696,000	[1]
Financial Liabilities:
Carrying value of the debt instruments	718,909,000			673,648,000
Carrying Value | Mortgage debt
Financial Liabilities:
Carrying value of the debt instruments	302,909,000			274,648,000
Carrying Value | Unsecured term loan
Financial Liabilities:
Carrying value of the debt instruments	300,000,000			300,000,000
Carrying Value | Unsecured revolving credit facility
Financial Liabilities:
Carrying value of the debt instruments	116,000,000			99,000,000
Fair Value
Financial Assets:
Fair value of notes receivable	63,806,000	[1]		56,812,000	[1]
Financial Liabilities:
Fair value of the debt instruments	706,050,000			661,873,000
Fair Value | Mortgage debt
Financial Liabilities:
Fair value of the debt instruments	290,050,000			262,873,000
Fair Value | Unsecured term loan
Financial Liabilities:
Fair value of the debt instruments	300,000,000			300,000,000
Fair Value | Unsecured revolving credit facility
Financial Liabilities:
Fair value of the debt instruments	$ 116,000,000			$ 99,000,000

[1] The principal amount of our notes receivable was $63.8 million and $54.9 million at June 30, 2014 and December 31, 2013, respectively. On January 10, 2014, we amended the 950 F Street, NW mezzanine loan and increased the outstanding balance to $34.0 million.

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Segment Information

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Segment Information

Segment Information

Our reportable segments consist of four distinct reporting and operational segments within the greater Washington, D.C. region in which we operate: Washington, D.C., Maryland, Northern Virginia and Southern Virginia. We evaluate the performance of our segments based on the operating results of the properties located within each segment, which excludes large non-recurring gains and losses, gains or losses from sale of rental property, 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.

The results of operations of our four reporting segments for the three and six months ended June 30, 2014 and 2013 are as follows (dollars in thousands):

	Three Months Ended June 30, 2014
	Washington, D.C.(1)			Maryland			Northern Virginia			Southern Virginia			Consolidated
Number of buildings	5			42			49			38			134
Square feet	649,107			2,178,379			3,021,597			2,851,568			8,700,651
Total revenues	$	7,827		$	11,227		$	13,146		$	8,990		$	41,190
Property operating expense	(2,407		)	(2,427		)	(3,107		)	(2,928		)	(10,869		)
Real estate taxes and insurance	(1,247		)	(975		)	(1,465		)	(685		)	(4,372		)
Total property operating income	$	4,173		$	7,825		$	8,574		$	5,377		$	25,949
Depreciation and amortization expense													(15,610		)
General and administrative													(5,218		)
Acquisition costs													(1,111		)
Impairment of rental property													(3,956		)
Other income (expenses)													16,997
Income from discontinued operations													1,283
Net income													$	18,334
Capital expenditures(2)	$	4,901		$	2,701		$	1,537		$	2,749		$	12,249
	Three Months Ended June 30, 2013
	Washington, D.C.(3)			Maryland			Northern Virginia			Southern Virginia			Consolidated
Number of buildings	4			57			52			38			151
Square feet	531,714			2,617,677			3,125,229			2,858,124			9,132,744
Total revenues	$	7,347		$	10,208		$	12,641		$	8,636		$	38,832
Property operating expense	(1,543		)	(2,414		)	(2,891		)	(2,584		)	(9,432		)
Real estate taxes and insurance	(1,247		)	(827		)	(1,240		)	(661		)	(3,975		)
Total property operating income	$	4,557		$	6,967		$	8,510		$	5,391		$	25,425
Depreciation and amortization expense													(14,208		)
General and administrative													(4,985		)
Contingent consideration related to acquisition of property													(75		)
Other income (expenses)													(7,973		)
Income from discontinued operations													16,292
Net income													$	14,476
Capital expenditures(2)	$	5,112		$	6,816		$	4,685		$	2,571		$	19,350

	Six Months Ended June 30, 2014
	Washington, D.C.(1)			Maryland			Northern Virginia			Southern Virginia			Consolidated
Total revenues	$	14,767		$	22,872		$	26,813		$	18,152		$	82,604
Property operating expense	(4,393		)	(6,373		)	(7,083		)	(5,918		)	(23,767		)
Real estate taxes and insurance	(2,301		)	(1,978		)	(2,989		)	(1,373		)	(8,641		)
Total property operating income	$	8,073		$	14,521		$	16,741		$	10,861		$	50,196
Depreciation and amortization expense													(30,714		)
General and administrative													(10,414		)
Acquisition costs													(1,179		)
Impairment of rental property													(3,956		)
Other income (expenses)													12,717
Income from discontinued operations													242
Net income													$	16,892
Total assets(4)(5)	$	410,000		$	374,416		$	438,254		$	229,263		$	1,538,266
Capital expenditures(2)	$	11,382		$	5,091		$	2,359		$	4,172		$	23,642
	Six Months Ended June 30, 2013
	Washington, D.C.(3)			Maryland			Northern Virginia			Southern Virginia			Consolidated
Total revenues	$	14,768		$	20,620		$	25,358		$	17,245		$	77,991
Property operating expense	(3,241		)	(5,098		)	(6,133		)	(5,271		)	(19,743		)
Real estate taxes and insurance	(2,595		)	(1,636		)	(2,930		)	(1,326		)	(8,487		)
Total property operating income	$	8,932		$	13,886		$	16,295		$	10,648		$	49,761
Depreciation and amortization expense													(28,195		)
General and administrative													(10,252		)
Contingent consideration related to acquisition of property													(75		)
Other income (expenses)													(16,373		)
Income from discontinued operations													21,573
Net income													$	16,439
Total assets(4)(5)	$	328,581		$	408,246		$	429,781		$	231,393		$	1,557,666
Capital expenditures(2)	$	12,785		$	7,935		$	8,302		$	5,534		$	35,120

⁽¹⁾  Includes occupied space at 440 First Street, NW and excludes Storey Park, which was placed in development in the third quarter of 2013.

⁽²⁾  Capital expenditures for corporate assets not allocated to any of our reportable segments totaled $361 and $166for the three months ended June 30, 2014 and 2013, respectively, and $638 and $564 for the six months ended June 30, 2014 and 2013, respectively.

⁽³⁾  Excludes 440 First Street, NW, which has been in redevelopment since its acquisition in 2010.

⁽⁴⁾  Total assets include our investment in properties that are owned through joint ventures that are not consolidated within our condensed consolidated financial statements. For more information on our unconsolidated investments, including location within our reportable segments, see note 7, Investment in Affiliates.

⁽⁵⁾  Corporate assets not allocated to any of our reportable segments totaled $86,333 and $159,665 at June 30, 2014 and 2013, respectively.

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Summary of Segment Information

The results of operations of our four reporting segments for the three and six months ended June 30, 2014 and 2013 are as follows (dollars in thousands):

	Three Months Ended June 30, 2014
	Washington, D.C.(1)			Maryland			Northern Virginia			Southern Virginia			Consolidated
Number of buildings	5			42			49			38			134
Square feet	649,107			2,178,379			3,021,597			2,851,568			8,700,651
Total revenues	$	7,827		$	11,227		$	13,146		$	8,990		$	41,190
Property operating expense	(2,407		)	(2,427		)	(3,107		)	(2,928		)	(10,869		)
Real estate taxes and insurance	(1,247		)	(975		)	(1,465		)	(685		)	(4,372		)
Total property operating income	$	4,173		$	7,825		$	8,574		$	5,377		$	25,949
Depreciation and amortization expense													(15,610		)
General and administrative													(5,218		)
Acquisition costs													(1,111		)
Impairment of rental property													(3,956		)
Other income (expenses)													16,997
Income from discontinued operations													1,283
Net income													$	18,334
Capital expenditures(2)	$	4,901		$	2,701		$	1,537		$	2,749		$	12,249
	Three Months Ended June 30, 2013
	Washington, D.C.(3)			Maryland			Northern Virginia			Southern Virginia			Consolidated
Number of buildings	4			57			52			38			151
Square feet	531,714			2,617,677			3,125,229			2,858,124			9,132,744
Total revenues	$	7,347		$	10,208		$	12,641		$	8,636		$	38,832
Property operating expense	(1,543		)	(2,414		)	(2,891		)	(2,584		)	(9,432		)
Real estate taxes and insurance	(1,247		)	(827		)	(1,240		)	(661		)	(3,975		)
Total property operating income	$	4,557		$	6,967		$	8,510		$	5,391		$	25,425
Depreciation and amortization expense													(14,208		)
General and administrative													(4,985		)
Contingent consideration related to acquisition of property													(75		)
Other income (expenses)													(7,973		)
Income from discontinued operations													16,292
Net income													$	14,476
Capital expenditures(2)	$	5,112		$	6,816		$	4,685		$	2,571		$	19,350

	Six Months Ended June 30, 2014
	Washington, D.C.(1)			Maryland			Northern Virginia			Southern Virginia			Consolidated
Total revenues	$	14,767		$	22,872		$	26,813		$	18,152		$	82,604
Property operating expense	(4,393		)	(6,373		)	(7,083		)	(5,918		)	(23,767		)
Real estate taxes and insurance	(2,301		)	(1,978		)	(2,989		)	(1,373		)	(8,641		)
Total property operating income	$	8,073		$	14,521		$	16,741		$	10,861		$	50,196
Depreciation and amortization expense													(30,714		)
General and administrative													(10,414		)
Acquisition costs													(1,179		)
Impairment of rental property													(3,956		)
Other income (expenses)													12,717
Income from discontinued operations													242
Net income													$	16,892
Total assets(4)(5)	$	410,000		$	374,416		$	438,254		$	229,263		$	1,538,266
Capital expenditures(2)	$	11,382		$	5,091		$	2,359		$	4,172		$	23,642
	Six Months Ended June 30, 2013
	Washington, D.C.(3)			Maryland			Northern Virginia			Southern Virginia			Consolidated
Total revenues	$	14,768		$	20,620		$	25,358		$	17,245		$	77,991
Property operating expense	(3,241		)	(5,098		)	(6,133		)	(5,271		)	(19,743		)
Real estate taxes and insurance	(2,595		)	(1,636		)	(2,930		)	(1,326		)	(8,487		)
Total property operating income	$	8,932		$	13,886		$	16,295		$	10,648		$	49,761
Depreciation and amortization expense													(28,195		)
General and administrative													(10,252		)
Contingent consideration related to acquisition of property													(75		)
Other income (expenses)													(16,373		)
Income from discontinued operations													21,573
Net income													$	16,439
Total assets(4)(5)	$	328,581		$	408,246		$	429,781		$	231,393		$	1,557,666
Capital expenditures(2)	$	12,785		$	7,935		$	8,302		$	5,534		$	35,120

⁽¹⁾  Includes occupied space at 440 First Street, NW and excludes Storey Park, which was placed in development in the third quarter of 2013.

⁽²⁾  Capital expenditures for corporate assets not allocated to any of our reportable segments totaled $361 and $166for the three months ended June 30, 2014 and 2013, respectively, and $638 and $564 for the six months ended June 30, 2014 and 2013, respectively.

⁽³⁾  Excludes 440 First Street, NW, which has been in redevelopment since its acquisition in 2010.

⁽⁴⁾  Total assets include our investment in properties that are owned through joint ventures that are not consolidated within our condensed consolidated financial statements. For more information on our unconsolidated investments, including location within our reportable segments, see note 7, Investment in Affiliates.

⁽⁵⁾  Corporate assets not allocated to any of our reportable segments totaled $86,333 and $159,665 at June 30, 2014 and 2013, respectively.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Estimated Useful Life of Assets

The estimated useful lives of our 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

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Equity - Company's Accumulated Other Comprehensive Loss (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2014	Dec. 31, 2012
Statement of Partners' Capital [Abstract]
Beginning balance	$ (4,186)	$ (3,836)	$ (10,917)
Net unrealized (loss) gain on derivative instruments	7,058	(801)
Net loss (gain) attributable to noncontrolling interests	(327)	34
Ending balance		$ (4,603)	$ (10,917)

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Consolidated Statements of Cash Flows (Parenthetical) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2013
Capitalized interest on indebtedness paid in cash		$ 1,800,000	$ 700,000
1401 K Purchase Price	99,000,000
Mortgage Loans on Real Estate	37,300,000	37,300,000
Surrendered common shares to satisfy statutory minimum federal income tax obligations	400,000		500,000
Change in redemption value, noncontrolling interest		5,600,000	4,000,000
Furniture and Fixtures [Member]
Accrued capital expenditure		6,600,000	7,300,000
Development and Redevelopment [Member]
Accrued capital expenditure		1,000,000	700,000
840 First Street, NE [Member]
Operating Partnership units issued for acquisition	3,125	3,125
Operating Partnership units fair valued	$ 40,000	$ 40,000

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Statement of Financial Position [Abstract]
Allowance for doubtful accounts, accounts and other receivables	$ 1,104	$ 1,181
Allowance for doubtful accounts, accrued straight-line rents	$ 199	$ 92
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	50,000,000	50,000,000
Series A Preferred Shares liquidation preference	$ 25	$ 25
Series A Preferred Shares, shares issued	6,400,000	6,400,000
Series A Preferred Shares, shares outstanding	6,400,000	6,400,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	58,808,000	58,704,000
Common stock, shares outstanding	58,808,000	58,704,000

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Derivative Instruments

6 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

We are exposed to certain risks arising from business operations and economic factors. We use derivative financial instruments to manage exposure that arise from business activities in which our 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. We do not use derivatives for trading or speculative purposes and intend to enter into derivative agreements only with counterparties that we believe have a strong credit rating to mitigate the risk of counterparty default or insolvency. No hedging activity can completely insulate us from the risks associated with changes in interest rates. Moreover, interest rate hedging could fail to protect us or adversely affect us because, among other things:

• available interest rate hedging may not correspond directly with the interest rate risk for which we seek protection;

• the duration of the hedge may not match the duration of the related liability;

• the party owing money in the hedging transaction may default on its obligation to pay; and

• the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction.

We enter into interest rate swap agreements to hedge our exposure on our 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.

At June 30, 2014, we fixed LIBOR at a weighted average interest rate of 1.5% on $300.0 million of our variable rate debt through eleven interest rate swap agreements that are summarized below (dollars in thousands):

Effective Date	Maturity Date	Notional Amount	Interest Rate Contractual Component	Fixed LIBOR Interest Rate
July 2011	July 2016	$35,000	LIBOR	1.754%
July 2011	July 2016	25,000	LIBOR	1.763%
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%
June 2012	July 2017	50,000	LIBOR	0.955%
June 2012	July 2018	25,000	LIBOR	1.135%
	Total/Weighted Average	$300,000		1.505%

Our interest rate swap agreements are designated as cash flow hedges and we record 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 our consolidated balance sheets. We record our proportionate share of any unrealized gains or losses on our cash flow hedges associated with our unconsolidated joint ventures within “Accumulated other comprehensive loss” and “Investment in affiliates” on our consolidated balance sheets. We record any gains or losses incurred as a result of each interest rate swap agreement’s fixed rate deviating from our respective loan’s contractual rate within “Interest expense” in our consolidated statements of operations. We did not have any material ineffectiveness associated with our cash flow hedges during the three and six months ended June 30, 2014 and 2013.

Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to “Interest expense” on our consolidated statements of operations as interest payments are made on our variable-rate debt. We reclassified accumulated other comprehensive loss as an increase to interest expense of $1.0 million and $1.2 million for the three months ended June 30, 2014 and 2013, respectively, and $2.1 million and $2.3 million for the six months ended June 30, 2014 and 2013, respectively. As of June 30, 2014, we estimated that $3.8 million of our accumulated other comprehensive loss will be reclassified as an increase to interest expense over the following twelve months.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Jul. 23, 2014
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Entity Registrant Name	FIRST POTOMAC REALTY TRUST
Entity Central Index Key	0001254595
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		58,809,350

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Fair Value Measurements

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

We apply GAAP that outlines a valuation framework and creates 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 required 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 we provide 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 we have 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.

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 our 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 our consolidated assets and liabilities that are measured on a non-recurring and recurring basis as of June 30, 2014 and December 31, 2013 (dollars in thousands):

	Balance at June 30, 2014		Level 1		Level 2		Level 3
Non-recurring Measurements:
Impaired real estate assets	$	12,500	$	—	$	12,500	$	—
Recurring Measurements:
Derivative instrument-swap assets	114		—		114		—
Derivative instrument-swap liabilities	4,944		—		4,944		—
	Balance at December 31, 2013		Level 1		Level 2		Level 3
Non-recurring Measurements:
Impaired real estate assets	$	2,909	$	—	$	2,909	$	—
Recurring Measurements:
Derivative instrument-swap assets	551		—		551		—
Derivative instrument-swap liabilities	4,576		—		4,576		—

We did not re-measure or complete any transactions involving non-financial assets or non-financial liabilities that are measured at fair value on a recurring basis during the three and six months ended June 30, 2014 and 2013. Also, no transfers into or out of fair value measurement levels for assets or liabilities that are measured on a recurring basis occurred during the six months ended June 30, 2014 and 2013.

Impairment of Real Estate Assets

We regularly review 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 second quarter of 2014, we signed a non-binding contract to sell Owings Mills Business Park, a four building business park, located in our Maryland reporting segment. Based on the anticipated sales price, less costs to sell, we recorded an impairment charge of $4.0 million in the second quarter of 2014 and anticipate the property will be sold in the third or fourth quarter of 2014. However, we can provide no assurances regarding the timing or pricing of the sale of the buildings, or that such sale will occur at all.

Interest Rate Derivatives

The interest rate derivatives are fair valued based on prevailing market yield curves on the measurement date and also take into consideration the credit valuation adjustment of the counter-party in determining the fair value of counterparty credit risk associated with our interest rate swap agreements. We use a third party to assist in valuing our interest rate swap agreements. A daily “snapshot” of the market is taken 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 our interest rate swap agreements. Our interest rate swap derivatives are effective cash flow hedges and the effective portion of the change in fair value is recorded in the equity section of our consolidated balance sheets as “Accumulated other comprehensive loss.”

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. We determine the fair value of our 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. We deem the fair value measurement of our debt instruments as a Level 2 measurement as we use quoted interest rates for similar debt instruments to value our debt instruments. We also use quoted market interest rates to value our notes receivable, which we consider a Level 2 measurement as we do not believe notes receivable trade in an active market.

The carrying value and estimated fair value of our financial assets and liabilities are as follows (dollars in thousands):

	June 30, 2014				December 31, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets:
Notes receivable(1)	$	63,751	$	63,806	$	54,696	$	56,812
Financial Liabilities:
Mortgage debt	$	302,909	$	290,050	$	274,648	$	262,873
Unsecured term loan	300,000		300,000		300,000		300,000
Unsecured revolving credit facility	116,000		116,000		99,000		99,000
Total	$	718,909	$	706,050	$	673,648	$	661,873

⁽¹⁾  The principal amount of our notes receivable was $63.8 million and $54.9 million at June 30, 2014 and December 31, 2013, respectively. On January 10, 2014, we amended the 950 F Street, NW mezzanine loan and increased the outstanding balance to $34.0 million.

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Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues:
Rental	$ 33,130	$ 31,087	$ 65,070	$ 61,780
Tenant reimbursements and other	8,060	7,745	17,534	16,211
Total revenues	41,190	38,832	82,604	77,991
Operating expenses:
Property operating	10,869	9,432	23,767	19,743
Real estate taxes and insurance	4,372	3,975	8,641	8,487
General and administrative	5,218	4,985	10,414	10,252
Acquisition costs	1,111	0	1,179	0
Depreciation and amortization	15,610	14,208	30,714	28,195
Impairment of rental property	(3,956)	0	(3,956)	0
Contingent consideration related to property acquisition		75	0	75
Total operating expenses	41,136	32,675	78,671	66,752
Operating income	54	6,157	3,933	11,239
Other (income) expenses
Interest expense	6,102	9,353	11,914	19,310
Interest and other income	(1,670)	(1,574)	(3,429)	(3,103)
Equity in (earnings) losses of affiliates	(199)	(7)	28	(35)
Gain on sale of rental property	(21,230)	0	(21,230)	0
Loss on debt extinguishment	0	201	0	201
Total other (income) expenses	(16,997)	7,973	(12,717)	16,373
Income (loss) from continuing operations	17,051	(1,816)	16,650	(5,134)
Discontinued operations:
(Loss) income from operations	(1)	1,759	(1,096)	7,040
Loss on debt extinguishment	0	(4,414)	0	(4,414)
Gain on sale of rental property	1,284	18,947	1,338	18,947
Income from discontinued operations	1,283	16,292	242	21,573
Net income	18,334	14,476	16,892	16,439
Less: Net income attributable to noncontrolling interests	(652)	(466)	(458)	(406)
Net income attributable to First Potomac Realty Trust	17,682	14,010	16,434	16,033
Less: Dividends on preferred shares	(3,100)	(3,100)	(6,200)	(6,200)
Net income attributable to common shareholders	$ 14,582	$ 10,910	$ 10,234	$ 9,833
Basic and diluted earnings per common share:
Income (loss) from continuing operations	$ 0.23	$ (0.09)	$ 0.17	$ (0.21)
Income from discontinued operations	$ 0.02	$ 0.29	$ 0.00	$ 0.40
Net income	$ 0.25	$ 0.20	$ 0.17	$ 0.19
Weighted average common shares outstanding:
Basic	58,146	53,586	58,122	52,004
Diluted	58,220	53,586	58,190	52,004

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Acquisitions

6 Months Ended

Jun. 30, 2014

Business Combinations [Abstract]

Acquisitions

Acquisitions

On April 8, 2014, we acquired 1401 K Street, NW, a 117,000 square foot, twelve-story, office building in downtown Washington, D.C. for $58.0 million. The acquisition was funded with the assumption of a $37.3 million mortgage loan, a $20.0 million draw under our unsecured revolving credit facility and available cash.

On June 25, 2014, we acquired 1775 Wiehle Avenue, a 130,000 square foot, five-story, office building in Reston, Virginia for $41.0 million. The acquisition was funded with the net proceeds from the sale of Corporate Campus at Ashburn Center, which totaled $39.9 million and available cash.

For both the three and six months ended June 30, 2014, we included $1.3 million of revenues and $0.7 million of net loss in our consolidated statements of operations related to the acquisition of the two properties. We incurred $1.1 million and $1.2 million of acquisition-related due diligence and closing costs during the three and six months ended June 30, 2014, respectively, and we did not record any acquisition costs during either the three or six months ended June 30, 2013, as we did not acquire any properties during those periods.

The fair values of the assets acquired and liabilities assumed in the second quarter of 2014 are as follows (dollars in thousands):

	June 30, 2014
Land	$	33,048
Acquired tenant improvements	7,503
Building and improvements	46,341
In-place leases	8,573
Acquired leasing commissions	3,012
Legal leasing fees	281
Above-market leases acquired	1,523
Total assets acquired	100,281
Below-market leases assumed	(1,281		)
Debt assumed	(37,269		)
Net assets acquired	$	61,731

The fair values of the assets acquired and liabilities assumed in 2014 are preliminary as we continue to finalize their acquisition date fair value determination.

At June 30, 2014, our consolidated intangible assets acquired in 2014 were comprised of the following categories: acquired tenant improvements; in-place leases; acquired leasing commissions; legal expenses; and above-market leases, which had an aggregate weighted average amortization period of 3.2 years.

Pro Forma Financial Information (unaudited)

The unaudited pro forma financial information set forth below presents results for the six months ended June 30 as if the acquisitions of 1401 K Street, NW and 1775 Wiehle Avenue had occurred on January 1, 2013. The pro forma information is not necessarily indicative of the results that actually would have occurred nor does it intend to indicate future operating results (dollars in thousands, except per share amounts):

	2014		2013
Pro forma total revenues	$	86,293	$	83,021
Pro forma net income	$	18,649	$	14,832
Pro forma net income per share:
Basic	$	0.21	$	0.16
Diluted	$	0.20	$	0.16

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Rental Property

6 Months Ended

Jun. 30, 2014

Text Block [Abstract]

Rental Property

Rental Property

Rental property represents buildings and related improvements, net of accumulated depreciation, and developable land that are wholly-owned or owned by an entity in which we have a controlling interest. All of our rental properties are located within the greater Washington, D.C. region. Rental property, excluding properties classified as held-for-sale, consists of the following (dollars in thousands):

	June 30, 2014			December 31, 2013
Land and land improvements	$	321,774		$	294,753
Buildings and improvements	896,142			868,027
Construction in process	103,293			93,269
Tenant improvements	151,517			146,176
Furniture, fixtures and equipment	5,127			5,047
	1,477,853			1,407,272
Less: accumulated depreciation	(219,207		)	(203,973		)
	$	1,258,646		$	1,203,299

Development and Redevelopment Activity

We construct office buildings and business parks on a build-to-suit basis or with the intent to lease upon completion of construction. We own developable land that can accommodate 1.5 million square feet of additional building space, of which, 0.7 million is located in the Washington, D.C. reporting segment, 0.1 million in the Maryland reporting segment, 0.6 million in the Northern Virginia reporting segment and 0.1 million in the Southern Virginia reporting segment.

On August 4, 2011, we formed a joint venture, in which we have a 97% interest, with an affiliate of Perseus Realty, LLC to acquire Storey Park in our Washington, D.C. reporting segment. At the time, the site was leased to Greyhound Lines, Inc. (“Greyhound”), which subsequently relocated its operations. Greyhound’s lease expired on August 31, 2013, at which time the property was placed into development. The joint venture anticipates developing a mixed-use project on the 1.6 acre site, which can accommodate up to 712,000 square feet of office space. At June 30, 2014, the total investment in the development project was $53.5 million, which included the original cost basis of the property of $43.3 million. The majority of the costs in excess of the original cost basis relate to capitalized architectural fees and site preparation costs. We are currently exploring our options related to this property; however, until a definitive plan for the property has been reached and we begin significant development activities, we cannot determine the total cost of the project or the anticipated completion date.

On December 28, 2010, we acquired 440 First Street, NW, a vacant eight-story office building in our Washington, D.C. reporting segment. In October 2013, we substantially completed the redevelopment of the 139,000 square foot property. At June 30, 2014, we had placed in-service 25,000 square feet of the redeveloped space at the property. At June 30, 2014, our total investment in the redevelopment project was $55.0 million, which included the original cost basis of the property of $23.6 million.

We will place completed construction activities in service upon the earlier of a tenant taking occupancy or twelve months from substantial completion. At June 30, 2014, we had 114,000 square feet of redevelopment at 440 First Street, NW that had yet to be placed-in service. At June 30, 2014, we had no completed development that had yet to be placed in service.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

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

We have condensed or omitted certain information and note 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. We believe 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 our annual report on Form 10-K for the year ended December 31, 2013 and as updated from time to time in other filings with the U.S. Securities and Exchange Commission (the “SEC”).

In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments and accruals necessary to present fairly our financial position as of June 30, 2014 and the results of our operations and our comprehensive income for the three and six months ended June 30, 2014 and 2013 and our cash flows for the six months ended June 30, 2014 and 2013. 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 utilities expense and snow and ice removal costs.

Use of Estimates

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires our management team 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.

Application of New Accounting Standards

Application of New Accounting Standards

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”), which states that a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations only if the disposal represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results. ASU 2014-08 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2014. Early adoption is permitted, but only for a disposal (or classification as held-for-sale) that has not been reported in financial statements previously issued or available for issuance. ASU 2014-08 must be applied prospectively. We adopted ASU 2014-08 in the second quarter of 2014. The adoption of ASU 2014-08 did not have a material impact on our condensed consolidated financial statements, though it did and will continue to impact the extent and frequency of presenting discontinued operations within our consolidated statements of operations and note disclosures. The operations of all properties that were sold prior to the adoption of ASU 2014-08 and two other properties, West Park and Patrick Center, which were classified as held-for-sale in previously published financial statements prior to our adoption of ASU 2014-08 and were subsequently sold, are reflected within discontinued operations in our consolidated statements of operations for all periods presented. For more information, see note 8, Dispositions. All property operations that have been classified as discontinued operations will remain classified within discontinued operations in any future presentation of our consolidated statements of operations.

In May 2014, FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers, (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance when it becomes effective on January 1, 2017. Early adoption is not permitted. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. We have not yet selected a transition method and are evaluating the impact that ASU 2014-09 will have on our consolidated financial statements and related disclosures.

Rental Property

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 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 our 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

We regularly review 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 carrying value of a property, an impairment analysis is performed. We assess 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 to maintain the operating capacity, 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. We are required to make estimates as to whether there are impairments in the carrying values of our investments in real estate. Further, we will record an impairment loss if we expect to dispose of a property, in the near term, at a price below carrying value. In such an event, we will record an impairment loss based on the difference between a property’s carrying value and our projected sales price less any estimated costs to sell.

We will classify a building as held-for-sale in accordance with GAAP in the period in which we have made the decision to dispose of the building, our 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 exist that could cause the transaction not to be completed in a timely manner. We will cease recording depreciation on a building once it has been classified as held-for-sale. In the second quarter of 2014, we prospectively adopted ASU 2014-08, which impacts the presentation of operations and gains or losses from disposed properties and properties classified as held-for-sale. For more information, see note 2(c), Summary of Significant Accounting Policies - Application of New Accounting Standards.

If the building does not qualify as a discontinued operation under ASU 2014-08, we will classify the building’s operating results, together with any impairment charges and any gains or losses on the sale of the building, in continuing operations for all periods presented in our consolidated statements of operations. We will classify the assets and liabilities related to the building as held-for-sale in our consolidated balance sheet for the period the held-for-sale criteria was met.

If the building does qualify as a discontinued operation under ASU 2014-08, we will classify the building’s operating results, together with any impairment charges and any gains or losses on the sale of the building, in discontinued operations in our consolidated statements of operations for all periods presented and classify the assets and related liabilities related to the building as held-for-sale in our consolidated balance sheets for the periods presented. 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 us after the disposition.

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

We capitalize interest costs incurred on qualifying expenditures for real estate assets under development or redevelopment, which include our 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. We 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. We also capitalize direct compensation costs of our 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. We do not capitalize any other general and administrative costs such as office supplies, office rent expense or an overhead allocation to our development or redevelopment projects. Capitalized compensation costs were immaterial for the three and six months ended June 30, 2014 and 2013. 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. We will also place redevelopment and development assets into 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.

Notes Receivable

Notes Receivable

We provide loans to the owners of real estate properties, which can be collateralized by interest in the real estate property. We record these loans as “Notes receivable, net” in our consolidated balance sheets. The loans 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. We record interest earned from notes receivable and amortization of any discount or issuance costs within “Interest and other income” in our consolidated statements of operations.

We will establish a provision for anticipated credit losses associated with our notes receivable when we anticipate that we 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. Our collectability of our notes receivable may be adversely impacted by the financial stability of the Washington, D.C. region and the ability of the 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 we estimate to be adequate based on these factors. Based on the review of the above criteria, we did not record an allowance for credit losses for our notes receivable during the three and six months ended June 30, 2014 and 2013.

Reclassifications

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 as discontinued operations. For more information, see note 8, Dispositions. In the second quarter of 2014, we prospectively adopted the requirements under ASU 2014-08, which impacts the presentation of operations and gains or losses from disposed properties. For more information, see note 2(c), Summary of Significant Accounting Policies - Application of New Accounting Standards.

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Equity

6 Months Ended

Jun. 30, 2014

Equity [Abstract]

Equity

Equity

On July 22, 2014, we declared a dividend of $0.15 per common share, equating to an annualized dividend of $0.60 per common share. The dividend will be paid on August 15, 2014 to common shareholders of record as of August 6, 2014. We also declared a dividend of $0.484375 per share on our Series A Preferred Shares. The dividend will be paid on August 15, 2014 to preferred shareholders of record as of August 6, 2014.

On April 22, 2014, we declared a dividend of $0.15 per common share, equating to an annualized dividend of $0.60 per common share. The dividend was paid on May 15, 2014 to common shareholders of record as of May 6, 2014. We also declared a dividend of $0.484375 per share on our Series A Preferred Shares. The dividend was paid on May 15, 2014 to preferred shareholders of record as of May 6, 2014. Dividends on all non-vested share awards are recorded as a reduction of shareholders’ equity. For each dividend paid by us on our common and preferred shares, the Operating Partnership distributes an equivalent distribution on our common and preferred Operating Partnership units, respectively.

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

As a result of the redemption feature of the Operating Partnership units, the noncontrolling interests associated with the Operating Partnership are recorded outside of permanent equity. Our equity and redeemable noncontrolling interests are as follows (dollars in thousands):

	First Potomac Realty Trust			Non-redeemable noncontrolling interests		Total Equity			Redeemable noncontrolling interests
Balance at December 31, 2013	$	738,510		$	781	$	739,291		$	33,221
Net income	16,434			—		16,434			458
Changes in ownership, net	(886		)	161		(725		)	2,358
Distributions to owners	(23,786		)	—		(23,786		)	(789		)
Other comprehensive loss	(767		)	—		(767		)	(34		)
Balance at June 30, 2014	$	729,505		$	942	$	730,447		$	35,214

	First Potomac Realty Trust			Non-redeemable noncontrolling interests			Total Equity			Redeemable noncontrolling interests
Balance at December 31, 2012	$	658,765		$	3,728		$	662,493		$	34,367
Net income (loss)	16,033			(13		)	16,020			419
Changes in ownership, net	105,613			—			105,613			452
Distributions to owners	(21,529		)	—			(21,529		)	(779		)
Other comprehensive income	6,731			—			6,731			327
Balance at June 30, 2013	$	765,613		$	3,715		$	769,328		$	34,786

A summary of our accumulated other comprehensive loss is as follows (dollars in thousands):

	2014			2013
Beginning balance at January1,	$	(3,836	)	$	(10,917	)
Net unrealized (loss) gain on derivative instruments	(801		)	7,058
Net loss (gain) attributable to noncontrolling interests	34			(327		)
Ending balance at June 30,	$	(4,603	)	$	(4,186	)

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Dispositions

6 Months Ended

Jun. 30, 2014

Discontinued Operations and Disposal Groups [Abstract]

Dispositions

Dispositions

During the second quarter of 2014, we prospectively adopted ASU 2014-08, which states that a component of an entity or a group of components of an entity is required to be reported in discontinued operations only if the disposal represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results. For more information, see note 2(c), Summary of Significant Accounting Policies - Application of New Accounting Standards.

(a) Disposed or Held-for-Sale Properties within Continuing Operations

On June 26, 2014, we sold Corporate Campus at Ashburn Center, a three-building, 194,000 square foot single-story business park, which is located in our Northern Virginia reporting segment, for net proceeds of $39.9 million. We recorded a gain on the sale of the property of $21.2 million in the second quarter of 2014 and used the net proceeds from the sale to acquire 1775 Wiehle Avenue.

On June 23, 2014, we entered into a non-binding contract to sell Owings Mills Business Park, a four-building, 180,500 square foot business park, which is located in our Maryland reporting segment. Based on the anticipated sales price, less costs to sell, we recorded an impairment charge of $4.0 million in the second quarter of 2014. The sale is expected to be completed in the third or fourth quarter of 2014. However, we can provide no assurances regarding the timing or pricing of the sale, or that such sale will occur at all. At June 30, 2014, the four buildings at Owings Mills Business Park met our held-for-sale criteria and, therefore, the assets of the buildings were classified within “Assets held-for-sale” and the liabilities of the buildings, which totaled $0.2 million, were classified within “Accounts payable and other liabilities” in our consolidated balance sheet. The majority of the assets classified within “Assets held-for sale” as of June 30, 2014, consisted of $2.7 million in land,  $11.8 million in building, $1.5 million in tenant improvements and accumulated depreciation of $3.5 million.  The remaining $0.6 million classified within “Assets held-for sale” consisted of accrued straight-line rents, net of allowance for doubtful accounts, deferred costs, net of accumulated amortization, and prepaid expenses and other assets.

In accordance with ASU 2014-08, Corporate Campus at Ashburn Center and Owings Mills Business Park did not meet the criteria to be classified as discontinued operations. As a result, the operating results and gain on sale of Corporate Campus at Ashburn Center and the operating results and impairment of Owings Mills Business Park are reflected in continuing operations in our consolidated statements of operations for each of the periods presented. The following table summarizes the aggregate results of operations for two properties that are included in continuing operations for the periods presented (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenues	$	1,329		$	1,322		$	2,794		$	2,642
Property operating expenses	(400		)	(365		)	(948		)	(773		)
Depreciation and amortization	(402		)	(350		)	(768		)	(701		)
Impairment of rental property	(3,956		)	—			(3,956		)	—
(Loss) income from operations of disposed property	(3,429		)	607			(2,878		)	1,168
Gain on sale of rental property	21,230			—			21,230			—
Net income from continuing operations	$	17,801		$	607		$	18,352		$	1,168

(b) Discontinued Operations

All properties classified within discontinued operations were sold prior to our adoption of ASU 2014-08 or classified as held-for-sale in previously published financial statements prior to our adoption of ASU 2014-08.

In April 2014, we sold West Park, a 29,000 square foot, four-story office building, and Patrick Center, a 66,000 square foot, seven-story office building, which are both located in Frederick, Maryland, for aggregate net proceeds of $13.8 million. Proceeds from the sale of West Park and Patrick Center were used to pay down outstanding debt. We reported a gain on the sale of Patrick Center of $1.4 million in our second quarter results. The operating results of the properties and the gain on the sale of Patrick Center are reflected as discontinued operations in our consolidated statements of operations for the periods presented.

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

	Reporting Segment	Disposition Date	Property Type	Square Feet
Patrick Center	Maryland	4/16/2014	Office	66,269
West Park	Maryland	4/2/2014	Office	28,333
Girard Business Center and Gateway Center	Maryland	1/29/2014	Business Park and Office	341,973
Worman’s Mill Court	Maryland	11/19/2013	Office	40,099
Triangle Business Center	Maryland	9/27/2013	Business Park	74,429
4200 Tech Court	Northern Virginia	8/15/2013	Office	33,875
Industrial Portfolio(1)	Various	May/June 2013	Industrial	4,280,985
4212 Tech Court	Northern Virginia	6/5/2013	Office	32,055

⁽¹⁾  During the second quarter of 2013, we sold 24 industrial properties, which consisted of two separate transactions. On May 7, 2013, we sold I-66 Commerce Center, a 236,000 square foot industrial property in Haymarket, Virginia. On June 18, 2013, we completed the sale of the remaining 23 industrial properties.

We have had, and will have, no continuing involvement with any of our disposed properties subsequent to their disposal. The operations of the disposed properties were not subject to any income based taxes. We did not dispose of or enter into any binding agreements to sell any other properties during the six months ended June 30, 2014 and 2013.

The following table summarizes the results of operations of properties included in discontinued operations (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenues	$	65		$	7,875		$	867		$	20,174
Net (loss) income, before taxes(1)	(1		)	(2,655		)	(1,096		)	2,626
Gain on sale of rental property	1,284			18,947			1,338			18,947

⁽¹⁾  During the first quarter of 2014, we accelerated $1.0 million of unamortized straight-line rent and deferred abatement costs related to the sale of Girard Business Center and Gateway Center.

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Debt - Unsecured Term Loan (Detail) (USD $) In Thousands, unless otherwise specified	0 Months Ended	3 Months Ended
	Jun. 05, 2013	Jun. 30, 2014		Dec. 31, 2013
Debt Instrument [Line Items]
Amount		$ 300,000		$ 300,000
Basis spread over variable rate	2.50%	2.75%
Tranche A
Debt Instrument [Line Items]
Maturity Date		October 2018
Amount		100,000
Interest Rate		LIBOR, plus 145 basis points	[1]
Basis spread over variable rate		1.45%
Tranche B
Debt Instrument [Line Items]
Maturity Date		October 2019
Amount		100,000
Interest Rate		LIBOR, plus 160 basis points	[1]
Basis spread over variable rate		1.60%
Tranche C
Debt Instrument [Line Items]
Maturity Date		October 2020
Amount		$ 100,000
Interest Rate		LIBOR, plus 190 basis points	[1]
Basis spread over variable rate		1.90%

[1] The interest rate spread is subject to change based on our maximum total indebtedness ratio. For more information, see note 9(e) Debt – Financial Covenants.

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Notes Receivable

6 Months Ended

Jun. 30, 2014

Receivables [Abstract]

Notes Receivable

Notes Receivable

Below is a summary of our notes receivable (dollars in thousands):

Balance at June 30, 2014
Face Amount		Unamortized Origination Fees			Balance		Interest Rate		Property
$	34,000	$	—		$	34,000	9.75	%	950 F Street, NW
29,806		(55		)	29,751		9.0	%	America’s Square
$	63,806	$	(55	)	$	63,751

Balance at December 31, 2013
Face Amount		Unamortized Origination Fees			Balance		Interest Rate		Property
$	25,000	$	(130	)	$	24,870	12.5	%	950 F Street, NW
29,896		(70		)	29,826		9.0	%	America’s Square
$	54,896	$	(200	)	$	54,696

In April 2011, we provided a $30.0 million mezzanine loan to the owners of America’s Square, a 461,000 square-foot office complex located in Washington, D.C. that is secured by a portion of the owners’ interest in the property. The loan is repayable in full at any time, subject to yield maintenance. The loan matures on May 1, 2016 and required monthly interest-only payments until May 2013, at which time the loan began requiring monthly principal and interest payments through its maturity date. The interest rate on the loan is constant throughout the life of the loan.

In December 2010, we provided a $25.0 million mezzanine loan to the owners of 950 F Street, NW, a ten-story, 287,000 square-foot office/retail building located in Washington, D.C. that is secured by a portion of the owners’ interest in the property. The loan requires monthly interest-only payments with a constant interest rate over the life of the loan. On January 10, 2014, we amended the loan to increase the outstanding balance to $34.0 million and reduce the fixed interest rate from 12.5% to 9.75%. The amended mezzanine loan matures on April 1, 2017 and is repayable in full on or after December 21, 2015.

We recorded interest income of $1.5 million and $3.0 million related to our note receivable for the three and six months ended June 30, 2014, respectively, and $1.5 million and $2.9 million for the three and six months ended June 30, 2013, respectively, which is included within “Interest and other income” in our consolidated statements of operations.

We recorded income from the amortization of origination fees of $7 thousand and $18 thousand for the three and six months ended June 30, 2014, respectively, and $17 thousand and $35 thousand for the three and six months ended June 30, 2013, respectively. During the first quarter of 2014, we wrote-off $0.1 million of unamortized fees related to the original 950 F Street, NW mezzanine loan. The amortization and write-off of unamortized fees are recorded within “Interest and other income” in our consolidated statements of operations.

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Investment in Affiliates

6 Months Ended

Jun. 30, 2014

Equity Method Investments and Joint Ventures [Abstract]

Investment in Affiliates

Investment in Affiliates

We own an interest in several joint ventures that own properties. We do not control the activities that are most significant to the joint ventures. As a result, the assets, the liabilities and the operating results of these noncontrolled joint ventures are not consolidated within our unaudited condensed consolidated financial statements. Our investments in these joint ventures are recorded as “Investment in affiliates” in our consolidated balance sheets. Our investment in affiliates consisted of the following (dollars in thousands):

	Reporting Segment	Ownership Interest		June 30, 2014		December 31, 2013
Prosperity Metro Plaza	Northern Virginia	51	%	$	24,666	$	24,735
1750 H Street, NW	Washington, D.C.	50	%	17,307		16,780
Aviation Business Park	Maryland	50	%	4,947		5,008
RiversPark I and II(1)	Maryland	25	%	2,358		2,627
				$	49,278	$	49,150

⁽¹⁾RiversPark I and RiversPark II are owned through two separate joint ventures.

The net assets of our unconsolidated joint ventures consisted of the following (dollars in thousands):

	June 30, 2014		December 31, 2013
Assets:
Rental property, net	$	193,011	$	194,240
Cash and cash equivalents	4,336		3,680
Other assets	16,058		15,585
Total assets	213,405		213,505
Liabilities:
Mortgage loans(1)(2)	104,814		106,384
Other liabilities	6,641		5,046
Total liabilities	111,455		111,430
Net assets	$	101,950	$	102,075

⁽¹⁾  Of the total mortgage debt that encumbers our unconsolidated properties, $7.0 million is recourse to us. The recourse mortgage loan was scheduled to mature in March 2014; however, the joint venture extended the loan’s maturity date to September 2014. We believe the fair value of the potential liability to us under this guaranty is inconsequential as the likelihood of our need to perform under the debt agreement is remote.

⁽²⁾  Includes the unamortized fair value adjustments recorded at acquisition upon the assumption of mortgage loans.

On July 10, 2014, our 50% owned unconsolidated joint venture repaid a $27.9 million mortgage loan that encumbered 1750 H Street, NW, a 113,000 square-foot, ten-story, office building located in Washington, D.C. Simultaneously with the repayment, the joint venture entered into a new $32.0 million mortgage loan that has a fixed interest rate of 3.92%, a maturity date of August 1, 2024 and is repayable in full without penalty on or after August 1, 2021. The new loan requires monthly interest-only payments with a constant interest rate over the life of the loan.

Our share of earnings or losses related to our unconsolidated joint ventures is recorded in our consolidated statements of operations as “Equity in (earnings) losses of affiliates.”

The following table summarizes the results of operations of our unconsolidated joint ventures, which due to our 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 our consolidated statements of operations (dollars in thousands):

	Three Months Ended   June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Total revenues	$	5,780		$	5,959		$	11,531		$	12,011
Total operating expenses	(1,694		)	(1,905		)	(3,920		)	(3,770		)
Net operating income	4,086			4,054			7,611			8,241
Depreciation and amortization	(2,264		)	(2,854		)	(5,067		)	(5,793		)
Other expenses, net	(1,077		)	(1,090		)	(2,087		)	(2,164		)
Net income	$	745		$	110		$	457		$	284

We earn various fees from several of our joint ventures, which include management fees, leasing commissions and construction management fees. We recognize fees only to the extent of the third party ownership interest in our unconsolidated joint ventures. We recognized fees from our unconsolidated joint ventures of $0.2 million and $0.3 million for both the three and six months ended June 30, 2014 and 2013, respectively, which are reflected within “Tenant reimbursements and other revenues” in our consolidated statements of operations.

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Debt

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Debt

Debt

Our borrowings consisted of the following (dollars in thousands):

	June 30, 2014		December 31, 2013
Mortgage loans, effective interest rates ranging from 4.40% to 6.63%, maturing at various dates through June 2023(1)	$	302,909	$	274,648
Unsecured term loan, effective interest rates ranging from LIBOR plus 1.45% to LIBOR plus 1.90%, with staggered maturity dates ranging from October 2018 to October 2020(1)	300,000		300,000
Unsecured revolving credit facility, effective interest rate of LIBOR plus 1.50%, maturing October 2017(1)	116,000		99,000
	$	718,909	$	673,648

⁽¹⁾  At June 30, 2014, LIBOR was 0.16%. All references to LIBOR in the condensed consolidated financial statements refer to one-month LIBOR.

(a) Mortgage Loans

The following table provides a summary of our mortgage debt at June 30, 2014 and December 31, 2013 (dollars in thousands):

Encumbered Property	Contractual Interest Rate	Effective Interest Rate			Maturity Date	June 30, 2014			December 31, 2013
Annapolis Business Center(1)	5.74%	6.25	%		June 2014	$	—		$	8,076
Storey Park(2)(3)	LIBOR + 2.75%	5.80	%		October 2014	22,000			22,000
Jackson National Life Loan(4)	5.19%	5.19	%		August 2015	65,537			66,116
Hanover Business Center Building D	8.88%	6.63	%		August 2015	179			252
Chesterfield Business Center Buildings C,D,G and H	8.50%	6.63	%		August 2015	495			681
440 First Street, NW Construction Loan(2)	LIBOR + 2.50%	4.78	%		May 2016	23,493			21,699
Gateway Centre Manassas Building I	7.35%	5.88	%		November 2016	536			638
Hillside I and II	5.75%	4.62	%		December 2016	13,150			13,349
Redland Corporate Center Buildings II & III	4.20%	4.64	%		November 2017	66,434			67,038
Hanover Business Center Building C	7.88%	6.63	%		December 2017	581			653
840 First Street, NE	5.72%	6.01	%		July 2020	36,848			37,151
Battlefield Corporate Center	4.26%	4.40	%		November 2020	3,772			3,851
Chesterfield Business Center Buildings A,B,E and F	7.45%	6.63	%		June 2021	1,775			1,873
Airpark Business Center	7.45%	6.63	%		June 2021	968			1,022
1211 Connecticut Avenue, NW	4.22%	4.47	%		July 2022	29,973			30,249
1401 K Street, NW	4.80%	4.93	%		June 2023	37,168			—
		5.06	%	(5)		302,909			274,648
Unamortized fair value adjustments						(558		)	(663		)
Total contractual principal balance						$	302,351		$	273,985

⁽¹⁾  The loan was prepaid, without penalty, on May 1, 2014 with borrowings under our unsecured revolving credit facility.

⁽²⁾  At June 30, 2014, LIBOR was 0.16%.

⁽³⁾  The loan incurs interest at a variable rate of LIBOR plus a spread of 2.75% (with a floor of 5.0%) and matures in October 2014, with a one-year extension at our option.

⁽⁴⁾  At June 30, 2014, the loan was secured by the following properties: Plaza 500, Van Buren Office Park, Rumsey Center, Snowden Center, Greenbrier Technology Center II and Norfolk Business Center. The terms of the loan allow us to substitute collateral, as long as certain debt-service coverage and loan-to-value ratios are maintained, or to prepay a portion of the loan, with a prepayment penalty, subject to a debt-service yield.

⁽⁵⁾  Weighted average interest rate on total mortgage debt.

On April 8, 2014, we acquired 1401 K Street, NW, a 117,000 square foot, twelve-story, office building in downtown Washington, D.C., for $58.0 million. The acquisition was funded with the assumption of a $37.3 million mortgage loan, a $20.0 million draw under our unsecured revolving credit facility and available cash. The mortgage loan has a fixed contractual interest rate of4.80% and matures in June 2023.

Construction Loan

On June 5, 2013, we entered into a construction loan (the “Construction Loan”) that is collateralized by our 440 First Street, NW property, which underwent a major redevelopment that was substantially completed in October 2013. The Construction Loan has a borrowing capacity of up to $43.5 million, of which we initially borrowed $21.7 million in the second quarter of 2013 and borrowed an additional $1.8 million in January 2014. The Construction Loan has a variable interest rate of LIBOR plus a spread of 2.5% and matures in May 2016, with two one-year extension options at our discretion. We can repay all or a portion of the Construction Loan, without penalty, at any time during the term of the loan. At June 30, 2014, per the terms of the loan agreement, 50% of the outstanding principal balance and all of the outstanding accrued interest were recourse to us. The percentage of outstanding principal balance that is recourse to us can be reduced upon the property achieving certain operating thresholds. As of June 30, 2014, we were in compliance with all the financial covenants of the Construction Loan.

(b) Unsecured Term Loan

The table below shows the outstanding balances and the interest rates of the three tranches of the $300.0 million unsecured term loan at June 30, 2014 (dollars in thousands):

	Maturity Date	Amount		Interest Rate(1)
Tranche A	October 2018	$	100,000	LIBOR, plus 145 basis points
Tranche B	October 2019	100,000		LIBOR, plus 160 basis points
Tranche C	October 2020	100,000		LIBOR, plus 190 basis points
		$	300,000

⁽¹⁾  The interest rate spread is subject to change based on our maximum total indebtedness ratio. For more information, see note 9(e) Debt – Financial Covenants.

The term loan agreement contains various restrictive covenants substantially identical to those contained in our unsecured revolving credit facility, including with respect to liens, indebtedness, investments, distributions, mergers and asset sales. In addition, the agreement requires that we satisfy certain financial covenants that are also substantially identical to those contained in our unsecured 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 our Company under the agreement to be immediately due and payable. As of June 30, 2014, we were in compliance with all the financial covenants of the unsecured term loan.

(c) Unsecured Revolving Credit Facility

During the second quarter of 2014, we borrowed $38.0 million under the unsecured revolving credit facility, of which $20.0 million was used to partially fund the acquisition of 1401 K Street, NW, $8.0 million was used to prepay (without penalty) a mortgage loan that encumbered Annapolis Business Center and $10.0 million was used for general corporate purposes. In addition, in the second quarter of 2014, we borrowed $39.0 million under our unsecured revolving credit facility, to partially fund the acquisition of 1775 Wiehle Avenue, which was repaid the following day with proceeds from the sale of Corporate Campus at Ashburn Center. During the second quarter of 2014, we repaid an additional $18.0 million of the outstanding balance under the unsecured revolving credit facility with proceeds from the sale of Patrick Center and available cash. For the three and six months ended June 30, 2014, our weighted average borrowings under the unsecured revolving credit facility were$112.7 million and $104.9 million, respectively, with a weighted average interest rate of 1.7% for both periods compared with weighted average borrowings of $194.2 million and $208.0 million for the three and six months ended June 30, 2013, respectively, with a weighted average interest rate of 2.8% for both the three and six months ended June 30, 2013. Our maximum outstanding borrowings were $158.0 million for both the three and six months ended June 30, 2014 compared with $245.0 million for both the three and six months ended June 30, 2013. At June 30, 2014, outstanding borrowings under the unsecured revolving credit facility were $116.0 million with a weighted average interest rate of 1.7%. At June 30, 2014, LIBOR was 0.16% and the applicable spread on our unsecured revolving credit facility was 150 basis points. The available capacity under the unsecured revolving credit facility was $146.5 million as of the date of this filing. We are 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 June 30, 2014, we were in compliance with all the financial covenants of the unsecured revolving credit facility.

(d) Interest Rate Swap Agreements

At June 30, 2014, we fixed LIBOR, at a weighted average interest rate of 1.5%, on $300.0 million of our variable rate debt through eleven interest rate swap agreements. See note 10, Derivative Instruments, for more information about our interest rate swap agreements.

(e) Financial Covenants

Our outstanding corporate debt agreements contain specific financial covenants that may impact future financing decisions made by us or may be impacted by a decline in operations. These covenants relate to our allowable leverage, minimum tangible net worth, fixed charge coverage and other financial metrics. As of June 30, 2014, we were in compliance with the covenants of our unsecured term loan and unsecured revolving credit facility and any such financial covenants of our mortgage debt (including the Construction Loan).

Our continued ability to borrow under the unsecured 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 we were 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 we 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 our liquidity, financial condition, results of operations and ability to make distributions to our shareholders.

Our unsecured revolving credit facility and unsecured term loan are subject to interest rate spreads that float based on the quarterly measurement of our maximum consolidated total indebtedness to gross asset value ratio. Based on our leverage ratio at June 30, 2014, the applicable interest rate spreads on the unsecured revolving credit facility and the unsecured term loan will be unchanged.

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Fair Value Measurements - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Jun. 30, 2014
Derivatives, Fair Value [Line Items]
Impairment Of Properties	$ 4.0
Interest Rate Swap
Derivatives, Fair Value [Line Items]
Minimum number of daily snapshot used for valuation of interest rate swap agreements	7,500

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Equity - Additional Information (Detail) (USD $)	0 Months Ended
	Apr. 22, 2014	Jan. 29, 2014
Class of Stock [Line Items]
Common share dividend per share declared	$ 0.15	$ 0.15
Common share dividend per share annualized	$ 0.60	$ 0.60
Series A Preferred Shares
Class of Stock [Line Items]
Dividend paid date	May 15, 2014	Aug. 15, 2014
Dividends declared on Series A Preferred Shares	$ 0.484375	$ 0.484375
Dividend record date	May 06, 2014	Aug. 06, 2014
Common Shares [Member]
Class of Stock [Line Items]
Dividend declared date	Apr. 22, 2014	Jul. 22, 2014
Dividend paid date	May 15, 2014	Aug. 15, 2014
Dividend record date	May 06, 2014	Aug. 06, 2014

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Fair Value Measurements - Fair Value of Assets and Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Non-recurring Measurements
Non-recurring Measurements:
Impaired real estate assets	$ 12,500	$ 2,909
Recurring Measurements
Recurring Measurements:
Derivative instrument-swap assets	114	551
Derivative instrument-swap liabilities	4,944	4,576
Level 1 | Non-recurring Measurements
Non-recurring Measurements:
Impaired real estate assets	0	0
Level 1 | Recurring Measurements
Recurring Measurements:
Derivative instrument-swap assets	0	0
Derivative instrument-swap liabilities	0	0
Level 2 | Non-recurring Measurements
Non-recurring Measurements:
Impaired real estate assets	12,500	2,909
Level 2 | Recurring Measurements
Recurring Measurements:
Derivative instrument-swap assets	114	551
Derivative instrument-swap liabilities	4,944	4,576
Level 3 | Non-recurring Measurements
Non-recurring Measurements:
Impaired real estate assets	0	0
Level 3 | Recurring Measurements
Recurring Measurements:
Derivative instrument-swap assets	0	0
Derivative instrument-swap liabilities	$ 0	$ 0

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Equity (Tables)

6 Months Ended

Jun. 30, 2014

Equity [Abstract]

Company's Allocation between Non-controlling Interests

Our equity and redeemable noncontrolling interests are as follows (dollars in thousands):

	First Potomac Realty Trust			Non-redeemable noncontrolling interests		Total Equity			Redeemable noncontrolling interests
Balance at December 31, 2013	$	738,510		$	781	$	739,291		$	33,221
Net income	16,434			—		16,434			458
Changes in ownership, net	(886		)	161		(725		)	2,358
Distributions to owners	(23,786		)	—		(23,786		)	(789		)
Other comprehensive loss	(767		)	—		(767		)	(34		)
Balance at June 30, 2014	$	729,505		$	942	$	730,447		$	35,214

	First Potomac Realty Trust			Non-redeemable noncontrolling interests			Total Equity			Redeemable noncontrolling interests
Balance at December 31, 2012	$	658,765		$	3,728		$	662,493		$	34,367
Net income (loss)	16,033			(13		)	16,020			419
Changes in ownership, net	105,613			—			105,613			452
Distributions to owners	(21,529		)	—			(21,529		)	(779		)
Other comprehensive income	6,731			—			6,731			327
Balance at June 30, 2013	$	765,613		$	3,715		$	769,328		$	34,786

Company's Accumulated Other Comprehensive Loss

A summary of our accumulated other comprehensive loss is as follows (dollars in thousands):

	2014			2013
Beginning balance at January1,	$	(3,836	)	$	(10,917	)
Net unrealized (loss) gain on derivative instruments	(801		)	7,058
Net loss (gain) attributable to noncontrolling interests	34			(327		)
Ending balance at June 30,	$	(4,603	)	$	(4,186	)

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Investment in Affiliates - Results of Operations of Company's Unconsolidated Joint Ventures (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Schedule of Equity Method Investments [Line Items]
Total revenues	$ 41,190	$ 38,832	$ 82,604	$ 77,991
Total operating expenses	(41,136)	(32,675)	(78,671)	(66,752)
Operating income	54	6,157	3,933	11,239
Depreciation and amortization	(15,610)	(14,208)	(30,714)	(28,195)
Other expenses, net	16,997	(7,973)	12,717	(16,373)
Net income	199	7	(28)	35
Unconsolidated Joint Ventures
Schedule of Equity Method Investments [Line Items]
Total revenues	5,780	5,959	11,531	12,011
Total operating expenses	(1,694)	(1,905)	(3,920)	(3,770)
Operating income	4,086	4,054	7,611	8,241
Depreciation and amortization	(2,264)	(2,854)	(5,067)	(5,793)
Other expenses, net	(1,077)	(1,090)	(2,087)	(2,164)
Net income	$ 745	$ 110	$ 457	$ 284

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Share-Based Payments

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Payments

Share-Based Payments

We record costs related to our share-based compensation based on the grant-date fair value calculated in accordance with GAAP. We recognize 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 our consolidated statements of operations based on the employee’s job function.

Non-Vested Share Awards

We issue non-vested common 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. We issue new common shares, subject to restrictions, upon each grant of non-vested common share awards. In May 2014, we granted a total of 29,792 non-vested common shares to our non-employee trustees, all of which will vest on the earlier of the first anniversary of the award date or the date of our 2015 annual meetings of shareholders, subject to continued service by the trustee until that date. In June 2014, we granted 15,128 non-vested common shares to our new Chief Operating Officer in connection with his appointment, which will vest ratably on each of the first three anniversaries of the date of grant.

We recognized $0.7 million and $1.4 million of compensation expense associated with our non-vested common share awards during the three and six months ended June 30, 2014 and 2013, respectively. Dividends on all non-vested common share awards are recorded as a reduction of equity. We apply the two-class method for determining EPS as our outstanding non-vested common shares with non-forfeitable dividend rights are considered participating securities. Our excess of dividends over earnings related to participating securities are shown as a reduction in net income attributable to common shareholders in our computation of EPS.

A summary of our non-vested common share awards at June 30, 2014 is as follows:

	Non-vested Common Shares		Weighted Average Grant Date Fair Value
Non-vested at March 31, 2014	625,192		$	13.26
Granted	44,920		13.02
Vested	(25,872	)	14.52
Non-vested at June 30, 2014	644,240		13.19

We value our non-vested time-based share awards at the grant date fair value, which is the market price of our common shares. As of June 30, 2014, we had $5.2 million of unrecognized compensation cost related to non-vested common shares. We anticipate this cost will be recognized over a weighted-average period of 2.4 years.

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Rental Property (Tables)

6 Months Ended

Jun. 30, 2014

Text Block [Abstract]

Summary of Rental Property

Rental property, excluding properties classified as held-for-sale, consists of the following (dollars in thousands):

	June 30, 2014			December 31, 2013
Land and land improvements	$	321,774		$	294,753
Buildings and improvements	896,142			868,027
Construction in process	103,293			93,269
Tenant improvements	151,517			146,176
Furniture, fixtures and equipment	5,127			5,047
	1,477,853			1,407,272
Less: accumulated depreciation	(219,207		)	(203,973		)
	$	1,258,646		$	1,203,299

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Investment in Affiliates - Components of Investments in Affiliates (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2014		Dec. 31, 2013
Schedule of Equity Method Investments [Line Items]
Company Investment	$ 49,278		$ 49,150
Prosperity Metro Plaza [Member]
Schedule of Equity Method Investments [Line Items]
Reporting Segment	Northern Virginia
Ownership Interest	51.00%
Company Investment	24,666		24,735
1750 H Street, NW [Member]
Schedule of Equity Method Investments [Line Items]
Reporting Segment	Washington, D.C.
Ownership Interest	50.00%
Company Investment	17,307		16,780
Aviation Business Park [Member]
Schedule of Equity Method Investments [Line Items]
Reporting Segment	Maryland
Ownership Interest	50.00%
Company Investment	4,947		5,008
Rivers Park I and II [Member]
Schedule of Equity Method Investments [Line Items]
Reporting Segment	Maryland
Ownership Interest	25.00%	[1]
Company Investment	$ 2,358	[1]	$ 2,627	[1]

[1] RiversPark I and RiversPark II are owned through two separate joint ventures

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Earnings Per Common Share - Anti-Dilutive Shares Not Included in Calculation of Diluted Earnings Per Share (Detail)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share, Amount	13,841,000	12,998,000	14,069,000	13,336,000
Stock Option Awards [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share, Amount	1,145,000	1,473,000	1,170,000	1,484,000
Non-vested Share Awards [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share, Amount	400,000	510,000	419,000	533,000
Series A Preferred Shares
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share, Amount	12,296,000	11,015,000	12,480,000	11,319,000

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Consolidated Statements of Comprehensive (Loss) Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Statement of Comprehensive Income [Abstract]
Net income	$ 18,334	$ 14,476	$ 16,892	$ 16,439
Unrealized gain on derivative instruments	99	5,965	416	7,058
Unrealized loss on derivative instruments	(1,079)		(1,217)
Total comprehensive income	17,354	20,441	16,091	23,497
Net income attributable to noncontrolling interests	(652)	(466)	(458)	(406)
Net loss (gain) from derivative instruments attributable to noncontrolling interests	42	(274)	34	(327)
Comprehensive income attributable to First Potomac Realty Trust	$ 16,744	$ 19,701	$ 15,667	$ 22,764

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Earnings Per Common Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Earnings Per Common Share

Earnings Per Common Share

Basic earnings or loss per common 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 and preferred shares. We apply the two-class method for determining EPS as our outstanding unvested shares with non-forfeitable dividend rights are considered participating securities. Our excess of distributions over earnings related to participating securities is shown as a reduction in total earnings attributable to common shareholders in our computation of EPS.

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Numerator for basic and diluted earnings per common share:
Income (loss) from continuing operations	$	17,051		$	(1,816	)	$	16,650		$	(5,134	)
Income from discontinued operations	1,283			16,292			242			21,573
Net income	18,334			14,476			16,892			16,439
Less: Net (income) loss from continuing operations attributable to noncontrolling interests	(593		)	223			(448		)	538
Less: Net income from discontinued operations attributable to noncontrolling interests	(59		)	(689		)	(10		)	(944		)
Net income attributable to First Potomac Realty Trust	17,682			14,010			16,434			16,033
Less: Dividends on preferred shares	(3,100		)	(3,100		)	(6,200		)	(6,200		)
Net income attributable to common shareholders	14,582			10,910			10,234			9,833
Less: Allocation to participating securities	(77		)	(106		)	(155		)	(206		)
Net income attributable to common shareholders	$	14,505		$	10,804		$	10,079		$	9,627
Denominator for basic and diluted earnings per common share:
Weighted average common shares outstanding:
Basic	58,146			53,586			58,122			52,004
Diluted	58,220			53,586			58,190			52,004
Basic and diluted earnings per common share:
Income (loss) from continuing operations	$	0.23		$	(0.09	)	$	0.17		$	(0.21	)
Income from discontinued operations	0.02			0.29			—			0.40
Net income	$	0.25		$	0.20		$	0.17		$	0.19

In accordance with GAAP regarding earnings per common share, we did not include the following potential weighted average common shares in our calculation of diluted earnings per common share as they are anti-dilutive for the periods presented (amounts in thousands):

	Three Months Ended June 30,		Six Months Ended June 30,
	2014	2013	2014	2013
Stock option awards	1,145	1,473	1,170	1,484
Non-vested share awards	400	510	419	533
Series A Preferred Shares(1)	12,296	11,015	12,480	11,319
	13,841	12,998	14,069	13,336

⁽¹⁾  Our Series A Preferred Shares are only convertible into our common shares upon certain changes in control of our 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.

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Debt - Summary of Company's Mortgage Debt (Detail) (USD $) In Thousands, unless otherwise specified	0 Months Ended	3 Months Ended
	Jun. 05, 2013	Jun. 30, 2014		Dec. 31, 2013		Mar. 31, 2013
Debt Instrument [Line Items]
Contractual Interest Rate		4.80%
Effective Interest Rate		5.06%	[1]
Total Mortgage Debt		$ 302,909	[2]	$ 274,648	[2]	$ 274,648
Unamortized fair value adjustments		(558)				(663)
Total contractual principal balance		718,909		673,648
Debt instrument variable rate basis		0.16%
LIBOR plus interest rate	2.50%	2.75%
LIBOR floor rate		5.00%
Maturity date		Oct. 31, 2014
Mortgage Loans
Debt Instrument [Line Items]
Total contractual principal balance		302,351				273,985
Annapolis Business Center
Debt Instrument [Line Items]
Contractual Interest Rate		5.74%	[3]
Effective Interest Rate		6.25%	[3]
Maturity Date		June 2014	[3]
Total Mortgage Debt		0	[3]			8,076	[3]
Storey Park
Debt Instrument [Line Items]
Contractual Interest Rate		2.75%
Contractual Interest Rate		LIBOR + 2.75%	[4],[5]
Effective Interest Rate		5.80%	[4],[5]
Maturity Date		October 2014	[4],[5]
Total Mortgage Debt		22,000	[4],[5]			22,000	[4],[5]
Jackson National Life Loan
Debt Instrument [Line Items]
Contractual Interest Rate		5.19%	[6]
Effective Interest Rate		5.19%	[6]
Maturity Date		August 2015	[6]
Total Mortgage Debt		65,537	[6]			66,116	[6]
Hanover Business Center Building D
Debt Instrument [Line Items]
Contractual Interest Rate		8.88%
Effective Interest Rate		6.63%
Maturity Date		August 2015
Total Mortgage Debt		179				252
Chesterfield Business Center Buildings C,D,G and H
Debt Instrument [Line Items]
Contractual Interest Rate		8.50%
Effective Interest Rate		6.63%
Maturity Date		August 2015
Total Mortgage Debt		495				681
440 First Street, NW Construction Loan
Debt Instrument [Line Items]
Contractual Interest Rate		2.50%
Contractual Interest Rate		LIBOR + 2.50%	[4]
Effective Interest Rate		4.78%	[4]
Maturity Date		May 2016	[4]
Total Mortgage Debt		23,493	[4]			21,699	[4]
Gateway Centre Manassas Building I
Debt Instrument [Line Items]
Contractual Interest Rate		7.35%
Effective Interest Rate		5.88%
Maturity Date		November 2016
Total Mortgage Debt		536				638
Hillside I and II
Debt Instrument [Line Items]
Contractual Interest Rate		5.75%
Effective Interest Rate		4.62%
Maturity Date		December 2016
Total Mortgage Debt		13,150				13,349
Redland Corporate Center Buildings II & III
Debt Instrument [Line Items]
Contractual Interest Rate		4.20%
Effective Interest Rate		4.64%
Maturity Date		November 2017
Total Mortgage Debt		66,434				67,038
Hanover Business Center Building C
Debt Instrument [Line Items]
Contractual Interest Rate		7.88%
Effective Interest Rate		6.63%
Maturity Date		December 2017
Total Mortgage Debt		581				653
840 First Street, NE
Debt Instrument [Line Items]
Contractual Interest Rate		5.72%
Effective Interest Rate		6.01%
Maturity Date		July 2020
Total Mortgage Debt		36,848				37,151
Battlefield Corporate Center
Debt Instrument [Line Items]
Contractual Interest Rate		4.26%
Effective Interest Rate		4.40%
Maturity Date		November 2020
Total Mortgage Debt		3,772				3,851
Chesterfield Business Center Buildings A,B,E and F
Debt Instrument [Line Items]
Contractual Interest Rate		7.45%
Effective Interest Rate		6.63%
Maturity Date		June 2021
Total Mortgage Debt		1,775				1,873
Airpark Business Center
Debt Instrument [Line Items]
Contractual Interest Rate		7.45%
Effective Interest Rate		6.63%
Maturity Date		June 2021
Total Mortgage Debt		968				1,022
1211 Connecticut Avenue, NW
Debt Instrument [Line Items]
Contractual Interest Rate		4.22%
Effective Interest Rate		4.47%
Maturity Date		July 2022
Total Mortgage Debt		29,973				30,249
1401 K Street, NW
Debt Instrument [Line Items]
Contractual Interest Rate		4.80%
Effective Interest Rate		4.93%
Maturity Date		June 1, 2023
Total Mortgage Debt		$ 37,168				$ 0

[1] Weighted average interest rate on total mortgage debt.

[2] At June 30, 2014, LIBOR was 0.16%. All references to LIBOR in the condensed consolidated financial statements refer to one-month LIBOR.

[3] The loan was prepaid, without penalty, on May 1, 2014 with borrowings under our unsecured revolving credit facility.

[4] At June 30, 2014, LIBOR was 0.16%.

[5] The loan incurs interest at a variable rate of LIBOR plus a spread of 2.75% (with a floor of 5.0%) and matures in October 2014, with a one-year extension at our option.

[6] At June 30, 2014, the loan was secured by the following properties: Plaza 500, Van Buren Office Park, Rumsey Center, Snowden Center, Greenbrier Technology Center II and Norfolk Business Center. The terms of the loan allow us to substitute collateral, as long as certain debt-service coverage and loan-to-value ratios are maintained, or to prepay a portion of the loan, with a prepayment penalty, subject to a debt-service yield.

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Noncontrolling Interests - Additional Information (Detail) (USD $)	3 Months Ended	6 Months Ended	12 Months Ended		0 Months Ended	3 Months Ended		6 Months Ended		0 Months Ended
	Jun. 30, 2014 sqft	Jun. 30, 2014	Dec. 31, 2013	Mar. 31, 2013	Aug. 04, 2011 Washington D C Reporting Segment [Member] acre	Jun. 30, 2014 Washington D C Reporting Segment [Member] sqft	Jun. 30, 2014 840 First Street, NE [Member]	Jun. 30, 2014 840 First Street, NE [Member]	Aug. 04, 2011 Greyhound Lines, Inc. [Member] Washington D C Reporting Segment [Member]	Aug. 04, 2011 Greyhound Lines, Inc. [Member] Washington D C Reporting Segment [Member] Maximum [Member] sqft
Business Acquisition [Line Items]
Cost to acquire all of the outstanding common Operating Partnership units not owned by the Company	$ 34,500,000	$ 34,500,000
Fair value adjustment, cost basis	5,600,000	5,600,000	3,300,000
Outstanding Operating Partnership units not owned by the Company		2,630,577	2,627,452
Operating Partnership units not owned by Company	4.30%		4.30%
Operating Partnership units issued for acquisition							3,125	3,125
Operating Partnership units fair valued							40,000	40,000
Common operating partnership units redeemed for cash	0	0		0
Percentage of interest in joint venture									97.00%
Development of area for operations by joint venture					1.6
Area of land available for development in additional building space	1,500,000					700,000				712,000
Projected incremental investment in development project						53,500,000
Original cost basis of the property						$ 43,300,000

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Acquisitions (Tables)

6 Months Ended

Jun. 30, 2014

Business Combinations [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The fair values of the assets acquired and liabilities assumed in the second quarter of 2014 are as follows (dollars in thousands):

	June 30, 2014
Land	$	33,048
Acquired tenant improvements	7,503
Building and improvements	46,341
In-place leases	8,573
Acquired leasing commissions	3,012
Legal leasing fees	281
Above-market leases acquired	1,523
Total assets acquired	100,281
Below-market leases assumed	(1,281		)
Debt assumed	(37,269		)
Net assets acquired	$	61,731

Business Acquisition, Pro Forma Information

The pro forma information is not necessarily indicative of the results that actually would have occurred nor does it intend to indicate future operating results (dollars in thousands, except per share amounts):

	2014		2013
Pro forma total revenues	$	86,293	$	83,021
Pro forma net income	$	18,649	$	14,832
Pro forma net income per share:
Basic	$	0.21	$	0.16
Diluted	$	0.20	$	0.16

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Summary of Significant Accounting Policies - Estimated Useful Lives of Company's Assets, by Class (Detail)	6 Months Ended		3 Months Ended
	Jun. 30, 2014	Jun. 30, 2014 Buildings	Jun. 30, 2014 Minimum [Member] Building improvements	Jun. 30, 2014 Minimum [Member] Furniture, fixtures and equipment	Jun. 30, 2014 Maximum [Member] Building improvements	Jun. 30, 2014 Maximum [Member] Furniture, fixtures and equipment
Property, Plant and Equipment [Line Items]
Useful life		39 years	5 years	5 years	20 years	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

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Noncontrolling Interests

6 Months Ended

Jun. 30, 2014

Noncontrolling Interest [Abstract]

Noncontrolling Interests

Noncontrolling Interests

(a) Noncontrolling Interests in the Operating Partnership

Noncontrolling interests relate to the common interests in the Operating Partnership not owned by us. 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 our option, our common shares on a one-for-one basis or cash based on the fair value of our 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. We account for issuances of common Operating Partnership units individually, which could result in some portion of our noncontrolling interests being carried at fair value with the remainder being carried at historical cost. Based on the closing price of our common shares at June 30, 2014, the cost to acquire, through cash purchase or issuance of our common shares, all of the outstanding common Operating Partnership units not owned by us would be approximately $34.5 million. At June 30, 2014 and December 31, 2013, we recorded adjustments of $5.6 million and $3.3 million, respectively, to present certain common Operating Partnership units at the greater of their carrying value or redemption value.

At December 31, 2013, 2,627,452 of the total common Operating Partnership units, or 4.3%, were not owned by us. During the first quarter of 2014, we issued 3,125 common Operating Partnership units at a fair value of $40 thousand to the seller of 840 First Street, NE to satisfy our contingent consideration obligation related to the acquisition of the property. As a result, 2,630,577 of the total common Operating Partnership units, or 4.3%, were not owned by us at June 30, 2014. There were no common Operating Partnership units redeemed for common shares or cash during the six months ended June 30, 2014.

(b) Noncontrolling Interests in the Consolidated Partnership

When we are deemed to have a controlling interest in a partially-owned entity, we will consolidate all of the entity’s assets, liabilities and operating results within our 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 our 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 income attributable to noncontrolling interests” in our consolidated statements of operations.

On August 4, 2011, we formed a joint venture, in which we have a 97% interest, with an affiliate of Perseus Realty, LLC to acquire Storey Park in our Washington, D.C. reporting segment. At the time, the site was leased to Greyhound, which subsequently relocated its operations. Greyhound’s lease expired on August 31, 2013, at which time the property was placed into development. The joint venture anticipates developing a mixed-use project on the 1.6 acre site, which can accommodate up to 712,000 square feet of office space. At June 30, 2014, the total investment in the development project was $53.5 million, which included the original cost basis of the property of $43.3 million. The majority of the costs in excess of the original cost basis relate to capitalized architectural fees and site preparation costs. We are currently exploring our options related to this property; however, until a definitive plan for the property has been reached and we begin significant development activities, we cannot determine the total cost of the project or the anticipated completion date.