First Potomac Realty Trust (FPO) 8-K First Potomac Realty Trust Reports Strong Fourth Quarter and Full-year 2004 Results

Exhibit 99.2

Fourth Quarter 2004 Supplemental Financial Report

Matters other than historical facts set forth within this Supplemental Financial Report are forward-looking statements within the meaning of the federal securities laws. You should exercise caution in interpreting and relying on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which could materially affect actual results, performance or achievements. These factors include, without limitation, the ability to enter into new leases or renew leases on favorable terms, the financial condition of tenants, the uncertainties of acquisition activity, the cost and availability of financing, the effects of general and local economic and market conditions, regulatory changes and other risks and uncertainties detailed in the Company’s Annual Report on Form 10-K. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

Index to Supplemental Information
December 31, 2004

	Page
Company Information		2
Results and Basis of Presentation Discussion		3
Statements of Operations		4
Financial Measures		5
Net Operating Income (NOI) - Same Property Analysis		6
Consolidated Balance Sheets		7
Selected Operating Ratios		8
Total Market Capitalization		9
Description of Properties		10
Portfolio Analysis		11
Summary of Largest Tenants		12
Lease Expirations		13
Leasing Analysis		14
Debt Analysis		15
Management Statements		16

-1-

Quarterly Supplemental Disclosure
December 31, 2004

Company Information

First Potomac Realty Trust is a self-managed, self-administered real estate investment trust formed to acquire, operate and develop industrial and flex properties in the Washington, DC metropolitan area and other major markets in Virginia and Maryland. Our focus is acquiring properties that can benefit from our intensive property management and seeking to reposition these properties to increase their profitability and value. Since its formation in 1997, First Potomac has assembled a 39-property portfolio consisting of 80 buildings totaling approximately 5.3 million square feet as of December 31, 2004.

Corporate Headquarters	7200 Wisconsin Ave.	Investor Relations	Tripp Sullivan
	Suite 310		Corporate Communications, Inc.
	Bethesda, MD 20814		(615) 254-3376
			tripp.sullivan@cci-ir.com
New York Stock Exchange			Barry H. Bass Chief Financial Officer (301) 986-9200 bbass@first-potomac.com
Web Site	www.first-potomac.com

-2-

Quarterly Supplemental Disclosure
December 31, 2004

Company Background

First Potomac Realty Trust is a self-administered, self-managed real estate investment trust that acquires and operates primarily industrial and flex properties in the Washington, D.C. metropolitan area and other major markets in Virginia and Maryland. The Company was formed in 1997 and completed its initial public offering in October 2003. The Company’s largest tenant is the U.S. Government.

Results and Basis of Presentation

The results and financial information for the three and twelve months ended December 31, 2003 that are presented in this supplemental disclosure for the Company’s pre-IPO predecessor (“First Potomac Predecessor”) are presented on a combined historical basis. First Potomac Predecessor is not a legal entity but rather a combination of the entities that comprised the historical operations of the Company and included (i) First Potomac Realty Investment Trust, Inc., the general partner of its Operating Partnership since 1997, (ii) First Potomac Realty Investment Limited Partnership, its Operating Partnership and (iii) First Potomac Management, Inc., the property management company that managed all of its assets.

-3-

Quarterly Supplemental Disclosure
December 31, 2004

STATEMENTS OF OPERATIONS
(unaudited, in thousands)

	Three Months Ended												Twelve Months Ended
	March 31, 2004			June 30, 2004			September 30, 2004			December 31, 2004			December 31, 2004
OPERATING REVENUES
Rental revenues	$	6,526		$	7,157		$	10,556		$	12,247		$	36,486
Tenant reimbursments and other		987			1,052			1,627			1,960			5,626
	$	7,513		$	8,209		$	12,183		$	14,207		$	42,112
PROPERTY EXPENSES
Property operating		1,444			1,399			2,192			2,540			7,575
Real estate taxes and insurance		673			790			1,123			1,292			3,878
NET OPERATING INCOME	$	5,396		$	6,020		$	8,868		$	10,375		$	30,659
OTHER INCOME (EXPENSE)
General and administrative		(772	)		(1,225	)		(1,004	)		(1,162	)		(4,163	)
Other		(51	)		(56	)		(180	)		(252	)		(539	)
Interest and other income		35			29			108			43			215
EBITDA		4,608			4,768			7,792			9,004			26,172
Depreciation and amortization		(2,540	)		(2,610	)		(3,811	)		(4,396	)		(13,357	)
Interest expense		(2,067	)		(2,237	)		(3,404	)		(3,720	)		(11,428	)
Loss from early retirement of debt		(212	)		—			77			(618	)		(753	)
Income (loss) from continuing operations before minority interests and discontinued operations		(211	)		(79	)		654			270			634
Minority interests		29			7			(61	)		(23	)		(48	)
Income (loss) from continuing operations		(182	)		(72	)		593			247			586
DISCONTINUED OPERATIONS
Income from operations of disposed property		13			15			71			56			155
Gain on sale of disposed property		—			—			—			2,092			2,092
Minority interests in discontinued operations		(2	)		(2	)		(6	)		(193	)		(203	)
Income from discontinued operations		11			13			65			1,955			2,044
NET INCOME (LOSS)	$	(171	)	$	(59	)	$	658		$	2,202		$	2,630

-4-

Quarterly Supplemental Disclosure
December 31, 2004

FINANCIAL MEASURES
(unaudited, in thousands, except per share data)

	Three Months Ended												Twelve Months Ended
	March 31, 2004			June 30, 2004			September 30, 2004			December 31, 2004			December 31, 2004
FUNDS FROM OPERATIONS (“FFO”)
Net income (loss)	$	(171	)	$	(58	)	$	657		$	2,202		$	2,630
Add back:
Depreciation of real estate and amortization of leasing costs		2,540			2,610			3,811			4,396			13,357
Discontinued operations depreciation and amortization		65			65			51			7			188
Deduct:
Gain on Sale of Asset		—			—			—			(2,092	)		(2,092	)
Minority interest		(28	)		(5	)		67			217			251
FFO	$	2,406		$	2,612		$	4,586		$	4,730		$	14,334
ADJUSTED FUNDS FROM OPERATIONS (“AFFO”)
FFO	$	2,406		$	2,612		$	4,586		$	4,730		$	14,334
Straight-line rent, net		(65	)		(73	)		(185	)		(180	)		(503	)
Deferred market rent		(102	)		(78	)		(177	)		(206	)		(563	)
Non real-estate depreciation		8			10			13			16			47
Amortization of finance costs		380			188			51			831			1,450
Tenant improvements		(168	)		(118	)		(218	)		(1,198	)		(1,702	)
Leasing commissions		(125	)		(144	)		(279	)		(470	)		(1,018	)
Capital expenditures		(56	)		(229	)		(405	)		(474	)		(1,164	)
AFFO	$	2,278		$	2,168		$	3,386		$	3,049		$	10,881
Total weighted average shares and OP units
Basic		10,031			10,516			15,551			15,543			12,919
Diluted		10,157			10,614			15,680			15,710			13,052
FFO per share:
FFO per share and unit - Basic	$	0.24		$	0.25		$	0.29		$	0.30		$	1.11
FFO per share and unit - Diluted	$	0.24		$	0.25		$	0.29		$	0.30		$	1.10
AFFO per share and unit - Basic	$	0.23		$	0.21		$	0.22		$	0.20		$	0.84
AFFO per share and unit - Diluted	$	0.22		$	0.20		$	0.22		$	0.19		$	0.83

-5-

Quarterly Supplemental Disclosure
December 31, 2004

	NET OPERATING INCOME (NOI) SAME-PROPERTY ANALYSIS (unaudited, in thousands)
	Three Months Ended December 31,						Twelve Months Ended December 31,
	FIRST POTOMAC			FIRST POTOMAC			FIRST POTOMAC			FIRST POTOMAC
	REALTY TRUST			PREDECESSOR			REALTY TRUST			PREDECESSOR
	2004			2003			2004			2003
NOI	$	10,375		$	3,948		$	30,660		$	13,612
Less: Non-same property NOI		(7,128	)		(1,000	)		(18,406	)		(2,069	)
Same-property1 NOI - accrual basis		3,247			2,948			12,254			11,543
Straight-line revenue, net		(19	)		(74	)		(93	)		(116	)
Deferred market rental revenue		(7	)		(7	)		(35	)		(7	)
Same-property NOI - cash basis	$	3,221		$	2,867		$	12,126		$	11,420
Same-property NOI growth - accrual basis		10.1	%					6.2	%
Same-property NOI growth - cash basis		12.4	%					6.2	%

¹  Same-properties for the periods compared include Plaza 500, Van Buren Business Park, 6600 Business Parkway, 13129 Airpark Road, 4200 and 4212 Technology Court, Newington Business Park Center, Crossways Commerce Center I, Crossways Commerce Center II and the Coast Guard Building.

-6-

Quarterly Supplemental Disclosure
December 31, 2004

	CONSOLIDATED BALANCE SHEETS (in thousands)
	December 31, 2004			December 31, 2003
Assets
Rental property, net	$	463,937		$	208,335
Cash		2,532			16,308
Escrows and reserves		6,301			3,422
Accounts and other receivables, net		2,768			575
Accrued straight-line rents, net		2,310			1,806
Deferred costs, net		4,196			3,205
Prepaid expenses and other assets		2,024			773
Intangible assets, net		26,008			9,724
Total assets	$	510,076		$	244,148
Liabilities
Accounts payable and accrued expenses	$	4,058		$	1,526
Accrued interest		800			152
Rents received in advance		1,744			802
Tenant security deposits		2,804			1,026
Line of Credit		39,680			—
Mortgage loans and other debt		259,039			127,840
Deferred market rent		5,267			803
Total liabilities		313,392			132,149
Minority interest		18,991			19,867
Shareholders’ equity
Common shares, $0.001 par value, 100,000,000 common shares authorized: 14,154,000 and 8,634,000 shares issued and outstanding respectively		14			9
Additional paid-in capital		209,268			117,525
Deficit		(31,589	)		(25,402	)
Total shareholders’ equity		177,693			92,132
Total liabilities and shareholders’ equity	$	510,076		$	244,148

-7-

Quarterly Supplemental Disclosure
December 31, 2004

SELECTED OPERATING RATIOS
(unaudited, in thousands)

	December 31, 2004			September 30, 2004			June 30, 2004			March 31, 2004
COVERAGE RATIOS
Interest Coverage Ratio
EBITDA	$	9,004		$	7,792		$	4,768		$	4,608
Divided by Interest Expense		3,720			3,404			2,237			2,067
		2.42	x		2.29	x		2.13	x		2.23	x
Fixed Charge Coverage Ratio
EBITDA	$	9,004		$	7,792		$	4,768		$	4,608
Divided by Interest Expense		3,720			3,404			2,237			2,067
+ Principal Amortization		710			513			305			297
		2.03	x		1.99	x		1.88	x		1.95	x
OVERHEAD RATIO
G&A to Real Estate Revenues
General and Administrative Expense1	$	1,162		$	1,004		$	1,225		$	772
Real Estate Revenues		14,207			12,183			8,209			7,513
		10.0	%		9.7	%		15.6	%		11.0	%
LEVERAGE RATIO
Debt/Total Market Capitalization
Total Debt	$	298,719		$	210,484		$	130,209		$	120,543
Total Market Capitalization		653,099			531,768			428,322			330,191
		45.7	%		39.6	%		30.4	%		36.5	%

¹ Includes accounting fees reflected as Other Expenses on the Statement of Operations.

-8-

Quarterly Supplemental Disclosure
December 31, 2004

TOTAL MARKET CAPITALIZATION
(unaudited, in thousands)

			Percent of Total
			Market
			Capitalization
Total Common Shares Outstanding		14,154
Common Operating Partnership (“OP”) Units		1,389
Total Common Shares and OP Units		15,543
Market Price at December 31, 2004	$	22.80
Total Equity Capitalization	$	354,380		54.3	%
Debt Capitalization
Fixed-Rate Debt	$	233,539		35.7	%
Floating-Rate Debt		65,180		10.0	%
Total Debt Capitalization		298,719		45.7	%
Total Market Capitalization	$	653,099		100.0	%

-9-

Quarterly Supplemental Disclosure
December 31, 2004

DESCRIPTION OF PROPERTIES

Existing Portfolio

									Occupancy at
		Number of		Year of	Square		Annualized		December
Property	Property Type	Buildings	Location	Acquisition	Footage		Rent		31, 2004			Primary Tenants
Plaza 500	Multi-tenant Industrial	2	Alexandria, VA	1997		506,725		4,962,581		96.1	%	U.S. Government; Carolina Holdings
Van Buren Business Park	Flex	5	Herndon, VA	1997		108,990		1,345,369		73.0	%	Fibertek
6600 Business Parkway	Single-tenant Industrial	1	Elkridge, MD	1997		172,200		976,816		100.0	%	REICO Distributors
13129 Airpark Road	Multi-tenant Industrial	1	Culpeper, VA	1997		150,400		675,640		100.0	%	Hoppmann, Smurfit-Stone Container
Tech Court	Flex	2	Chantilly, VA	1998		64,064		624,988		64.4	%	Urban Engineering & Associates
Newington Business Park Center	Multi-tenant Industrial	7	Lorton, VA	1999		254,084		2,312,719		94.5	%	U.S. Government
Crossways Commerce Center I	Multi-tenant Industrial	1	Chesapeake, VA	1999		348,615		1,862,479		100.0	%	Anteon; Visteon
Crossways Commerce Center ll	Flex	2	Chesapeake, VA	1999		147,736		1,487,517		100.0	%	First Data
Coast Guard Building	Flex	1	Chesapeake, VA	1999		61,992		916,730		100.0	%	U.S. Government
Snowden Center	Flex	4	Columbia, MD	2002		140,438		1,867,461		91.2	%	Paratek Microwave
Rumsey Center	Flex	4	Columbia, MD	2002		134,654		1,369,465		87.4	%	AdvanceMed (CSC)
Greenbrier Technology Center II	Flex	1	Chesapeake, VA	2002		79,684		1,232,091		98.8	%	AMSEC
Norfolk Business Center	Flex	1	Norfolk, VA	2002		90,682		795,037		97.6	%	Dataline; Verizon
Virginia Center	Flex	1	Glen Allen, VA	2003		119,324		1,197,592		83.1	%	Service Partners; GAC
Interstate Plaza	Single-tenant Industrial	1	Alexandria, VA	2003		107,320		1,262,268		100.0	%	U.S. Government
Alexandria Corporate Park	Multi-tenant Industrial	1	Alexandria, VA	2003		278,130		4,427,774		87.9	%	U.S. Government; CACI
Herndon Corporate Center	Flex	4	Herndon, VA	2004		127,353		2,569,473		97.7	%	U.S. Government
Aquia Commerce Center I & II	Flex	2	Stafford, VA	2004		64,488		1,479,219		100.0	%	U.S. Government
Deer Park	Flex	4	Randallstown, MD	2004		171,140		1,263,918		94.3	%	Coastal Business Machines
Gateway Center	Flex	2	Gaithersburg, MD	2004		44,307		622,903		100.0	%	Montgomery County Auto Parts
Gateway West	Flex	4	Westminster, MD	2004		110,147		863,804		75.2	%	Carroll County Public Library
Girard Business Center	Flex	3	Gaithersburg, MD	2004		123,900		1,301,961		96.8	%	Aspen Systems Corporation
Girard Place	Flex	4	Gaithersburg, MD	2004		175,190		1,330,461		94.9	%	Spirent Communications
15 Worman’s Mill Court	Flex	1	Frederick, MD	2004		39,966		354,384		92.6	%	SAIC
20270 Goldenrod Lane	Flex	1	Germantown, MD	2004		24,468		368,746		100.0	%	Microlog Corporation
6900 English Muffin Way	Multi-tenant Industrial	1	Frederick, MD	2004		165,690		1,074,703		100.0	%	BP Solar; Capricorn Pharma
4451 Georgia Pacific Boulevard	Multi-tenant Industrial	1	Frederick, MD	2004		169,750		1,106,058		100.0	%	Iron Mountain Information Management
7561 Lindbergh Drive	Single-tenant Industrial	1	Gaithersburg, MD	2004		36,000		291,686		100.0	%	JK Moving and Storage
Patrick Center	Office	1	Frederick, MD	2004		66,706		1,241,828		95.5	%	Miles & Stockbridge; Merrill Lynch
West Park	Office	1	Frederick, MD	2004		28,950		438,231		89.3	%	U.S. Government; Batelle Memorial Institute
Woodlands Business Center	Office	1	Largo, MD	2004		37,940		569,202		79.7	%	SFA; Comcast Cable
Old Courthouse Square	Retail	1	Martinsburg, WV	2004		201,350		1,146,874		94.8	%	U.S. Government; Food Lion
Airpark Place	Flex	3	Gaithersburg, MD	2004		82,200		906,588		89.7	%	Dexall Biomedical Labs
15395 John Marshall Highway	Single-tenant Industrial	1	Haymarket, VA	2004		123,777		1,113,993		100.0	%	Engineering Solutions & Products
Norfolk Commerce Park II	Flex	1	Norfolk, VA	2004		127,625		1,198,437		93.7	%	Verizon Virginia; Trader Publishing
Crossways II	Flex	1	Chesapeake, VA	2004		85,004		873,140		100.0	%	Wachovia Bank, N.A.
Windsor at Battlefield	Flex	2	Manassas, VA	2004		154,226		955,693		58.6	%	CRI/AHC; SAIC
Campus at Metro Park North	Flex	4	Rockville, MD	2004		190,238		4,006,600		100.0	%	RICCSO; Montgomery County Government
4612 Navistar Drive	Single-tenant Industrial	1	Frederick, MD	2004		215,085		1,746,112		100.0	%	Crisplant
TOTAL		80				5,330,538		54,140,541		93.8	%

-10-

Quarterly Supplemental Disclosure
December 31, 2004

PORTFOLIO ANALYSIS

PORTFOLIO BY MARKET

										Percentage of
	Number of									Annualized
	Buildings		Square Feet		Occupancy Rate			Annualized Rent		Rent
Washington		54		3,541,297		93.4	%	$	38,236,054		70.6	%
Norfolk		8		941,338		98.8	%		8,365,430		15.5	%
Baltimore		17		728,579		90.9	%		6,341,465		11.7	%
Richmond		1		119,324		83.1	%		1,197,592		2.2	%
Total		80		5,330,538		93.8	%	$	54,140,541		100.0	%

PORTFOLIO BY PROPERTY TYPE

										Percentage of
	Number of									Annualized
	Buildings		Square Feet		Occupancy Rate			Annualized Rent		Rent
Single-tenant Industrial		5		654,382		100.0	%	$	5,390,876		10.0	%
Multi-tenant Industrial		14		1,873,394		96.4	%		16,421,954		30.3	%
Flex		57		2,505,756		90.1	%		28,931,576		54.5	%
Office		3		133,596		93.6	%		2,249,261		3.1	%
Retail		1		201,350		94.8	%		1,146,874		2.1	%
Total		80		5,368,478		93.8	%	$	54,140,541		100.0	%

PORTFOLIO BY LEASE TYPE

					Percentage
	Number of				of Leased
	Leases		Square Feet1		Portfolio
Triple Net		300		3,452,804		69.1	%
Industrial Gross		43		432,913		8.7	%
Full Service		123		1,111,783		22.2	%
Total		466		4,997,500		100.0	%

¹ Does not include vacant and core factor space.

-11-

Quarterly Supplemental Disclosure
December 31, 2004

Top Ten Tenants

											Weighted
								Percentage of			Average
		Number of	Total Occupied		Total Annualized			Total Annualized			Remaining
Ranking	Tenant	Leases	Square Feet		Rental Revenue1			Rental Revenue			Leases Term
1	U.S. Government	23		686,509	$	9,297,068	��		17.2	%		5.1
2	Crisplant	1		215,085		1,746,112			3.2	%		11.8
3	First Data Corporation	1		117,336		1,220,317			2.2	%		3.9
4	First Advantage Corporation	1		55,851		1,206,769			2.2	%		9.6
5	Engineering Solutions	1		123,777		1,113,993			2.1	%		7.8
6	Montgomery County Government	1		48,002		1,087,897			2.0	%		10.9
7	Carolina Holdings	1		124,501		1,071,998			2.0	%		5.2
8	CACI	3		46,207		980,284			1.8	%		6.8
9	REICO Distributors	1		172,200		976,816			1.8	%		5.0
10	Convergent Resources/AHC	2		75,759		815,878			1.5	%		4.6
	Subtotal Top 10 Tenants	35		1,665,227	$	19,517,132			36.0	%		6.4
	All Remaining Tenants	431		3,332,273	$	34,623,408			64.0	%		3.6
	Total /        Weighted        Average	466		4,997,500	$	54,140,540			100.0	%		4.6

¹ Annualized rental revenue is based on rental revenue as of December 31, 2004.

-12-

Quarterly Supplemental Disclosure
December 31, 2004

LEASE EXPIRATIONS

	Number of		Gross Leased Area					Annualized Rental Revenue
	Leases		Square		Percent of					Percent of			Average per
	Expiring		Footage		Total			Amount		Total			Sq. Ft.
Year of Lease Expiration
MTM		18		47,394		1.0	%	$	662,913		1.2	%	$	14.88
2005		87		371,157		7.4	%		4,155,799		7.7	%		11.20
2006		88		664,979		13.3	%		7,272,637		13.4	%		10.94
2007		87		848,481		17.0	%		9,387,795		17.4	%		11.06
2008		54		453,165		9.1	%		5,635,351		10.4	%		12.44
2009		66		1,108,793		22.2	%		9,885,908		18.3	%		8.92
2010		15		402,588		8.0	%		4,076,931		7.5	%		10.13
2011 and thereafter		51		1,100,943		22.0	%		13,063,205		24.1	%		11.87
Total		466		4,997,500		100.0	%	$	54,140,539		100.0	%	$	10.83

-13-

Quarterly Supplemental Disclosure
December 31, 2004

LEASING ANALYSIS

	Three months ended			Twelve months ended
	December 31, 2004			December 31, 2004
Total new and renewal leases1
Square footage of expired/early renewal leases		115,689			408,077
Square footage of terminated leases		48,341			95,477
Total - expired/early renewal/terminated leases		164,030			503,554
Square footage of new and renewal leases		157,676			637,014
Number of new and renewal leases commencing		25			84
New Leases
New square footage		84,018			295,142
Number of new leases commencing		14			41
Average rental rate - cash	$	9.91		$	9.94
Percentage change in base rent - cash		-2.5	%		2.5	%
Average rental rate - GAAP	$	10.28		$	10.51
Percentage change in base rent - GAAP		-0.5	%		6.5	%
Average capital cost per square foot	$	3.56		$	6.13
Renewal Leases
Square footage of renewal leases		73,658			341,872
Number of renewal leases commencing		11			43
Retention rate		64	%		84	%
New base rent - cash	$	8.07		$	11.66
Expiring base rent - cash	$	7.52		$	11.41
Percentage change in base rent - cash		7.2	%		2.2	%
New base rent - GAAP	$	8.24		$	7.72
Expiring base rent - GAAP	$	7.56		$	7.29
Percentage change in base rent - GAAP		9.1	%		5.8	%
Average capital cost per square foot	$	1.93		$	0.95

¹ Includes leased square footage and costs related to leases signed in 4th quarter for subsequent periods.

-14-

Quarterly Supplemental Disclosure
December 31, 2004

DEBT ANALYSIS
(unaudited, in thousands)

				Principal Balance		Annualized Debt				Balance at
Encumbered Properties	Interest Rate			December 31, 2004		Service2		Maturity Date		Maturity
Fixed Rate Debt
Plaza 500
Van Buren Business Park
6600 Business Parkway		7.26	%	$	38,720	$	3,429		11/12/2007	$	36,784
13129 Airpark Road
4200 Tech Court		8.07	%		1,818		168		01/10/2009		1,703
4212 Tech Court		8.53	%		1,765		169		01/06/2010		1,653
Crossways Commerce Center		6.70	%		26,338		2,087		01/10/2012		23,314
Newington Business Park Center		6.70	%		16,614		1,316		01/10/2012		14,706
Interstate Plaza1		5.30	%		8,795		726		01/01/2007		8,282
Herndon Corporate Center1		5.66	%		8,878		603		01/04/2008		8,548
Aquia Commerce Center I1		6.50	%		1,023		165		01/02/2013		42
Deer Park
6900 English Muffin Way
Gateway Center
Gateway West
4451 Georgia Pacific
20270 Goldenrod Lane
15 Worman’s Mills Court
Girard Business Center		5.54	%		80,129		6,433		11/09/2008		71,534
Girard Place
Old Courthouse
Patrick Center
7561 Lindbergh Drive
West Park
Woodlands Business Center
Norfolk Commerce Park II		5.28	%		7,805		648		07/08/2008		7,034
4612 Navistar Drive		5.20	%		14,754		1,131		11/07/2011		11,921
Campus at Metro Park North		5.25	%		26,900		2,028		11/02/2012		21,581
				$	233,539	$	18,903			$	207,102
Floating Rate Debt
Greenbrier/Norfolk	LIBOR + 2.45%			$	10,500	$	533		11/30/2005	$	10,500
Rumsey/Snowden	LIBOR + 2.35%				15,000		713		12/31/2006		15,000
Credit Facility	LIBOR + 1.70%				39,680		1,627		12/31/2006		39,680
				$	65,180	$	2,873			$	65,180
Subtotal at December 31, 2004				$	298,719	$	21,776			$	272,282

1

The balance at December 31, 2004 includes the fair value impacts recorded at acquisition upon assumption of the mortgages encumbering these properties. The fair value impact and actual interest rates are (i) Interstate Plaza - $0.4 million, 7.45%, (ii) Herndon Corporate Center - $0.2 million, 5.11%, (iii) Deer Park, English Muffin Way, Gateway Center, Gateway West, Georgia Pacific, Goldenrod Lane, Worman’s Mills Court, Girard Business Center, Girard Place, Old Courthouse, Patrick Center, Lindbergh Drive, West Park and Woodlands Business Center - $3.6 million, 6.71%, (iv) Norfolk Commerce Park II - $0.3 million, 6.90%, (v) 4612 Navistar Drive - $1.7 million, 7.48% and (vi) Campus at Metro Park North - $2.7 million, 7.11%. The mortgage assumed upon acquisition of Aquia Commerce Center I approximated its market value.

2

Annual debt service for floating rate loans reflects the principal balance at the end of the period multiplied by the variable interest rate in effect at the end of the period.

-15-

Quarterly Supplemental Disclosure
December 31, 2004

MANAGEMENT STATEMENTS ON NON-GAAP SUPPLEMENTAL MEASURES

Investors in and analysts following the real estate industry utilize funds from operations (“FFO”), net operating income (“NOI”), EBITDA and adjusted funds from operations (“AFFO”), variously defined, as supplemental performance measures.

While the Company believes net income available to common stockholders as defined by GAAP is the most appropriate measure, it considers FFO, NOI, EBITDA, and AFFO appropriate supplemental measures given their 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/amortization of real estate assets. NOI provides a measure of rental operations and does not factor in depreciation/amortization and non-property specific expenses such as general and administrative expenses. EBITDA provides a further tool to evaluate the ability to incur and service debt and to fund dividends and other cash needs. AFFO provides a further tool to evaluate the ability to fund dividends. In addition, FFO, NOI, EBITDA and AFFO are commonly used in various ratios, pricing multiples/yields and returns and valuation calculations used to measure financial position, performance and value.

Net Operating Income

Management believes that NOI is a useful supplemental measure of the Company’s operating performance. The Company defines NOI as operating revenues (rental income, tenant reimbursements, and other income) less property and related expenses (property expenses, real estate taxes, and insurance). Other real estate investment trust (“REITs”) may use different methodologies for calculating NOI, and accordingly, the Company’s NOI may not be comparable to other REITs.

Because NOI excludes general and administrative expenses, interest expense, depreciation and amortization, gains and losses from property dispositions, discontinued operations, and extraordinary items, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing perspective not immediately apparent from net income. The Company uses NOI to evaluate its operating performance since NOI allows the Company to evaluate the impact that factors such as occupancy levels, lease structure, lease rates, and tenant base have on the Company’s results, margins and returns. In addition, management believes that NOI provides useful information to the investment community about the Company’s financial and operating performance when compared to other REITs since NOI is generally recognized as a standard measure of performance in the real estate industry.

However, NOI should not be viewed as an alternative measure of the Company’s financial performance since it does not reflect general and administrative expenses, interest expense, depreciation and amortization costs, the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company’s properties.

EBITDA

Management believes that EBITDA is a useful supplemental measure of the Company’s operating performance. EBITDA is defined as earnings before interest, taxes, depreciation and amortization.

Management considers EBITDA to be an appropriate supplemental performance measure since it represents earnings prior to the impact of depreciation, amortization, gain (loss) from property dispositions and loss on early retirement of debt. This calculation facilitates the review of income from operations without considering the effect of non-cash depreciation and amortization or the cost of debt.

Funds From Operations

Management believes that FFO is a useful supplemental measure of the Company’s operating performance. As defined by the National Association of Real Estate Investment Trusts, or NAREIT, FFO represents net income (loss) before minority interest (computed in accordance with GAAP), including gains (or losses) from debt restructuring and excluding gain on sale of property, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. Other REITs may use different methodologies for calculating FFO and, accordingly, the Company’s FFO may not be comparable to other REITs.

Management considers FFO a useful additional measure of performance for an equity REIT because it facilitates an understanding of the operating performance of its properties without giving effect to real estate depreciation and amortization, which assumes 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 more meaningful and accurate indication of our performance. In addition, management believes that FFO provides useful information to the investment community about the Company’s financial performance when compared to other REITs since FFO is generally recognized as the industry standard for reporting the operations of REITs.

However, FFO should not be viewed as an alternative measure of the Company’s operating performance since it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company’s properties, which are significant economic costs that could materially impact the Company’s results of operations.

Adjusted Funds From Operations

Management believes that AFFO is a useful measures of the Company’s liquidity. The Company computes AFFO by adding to FFO the non-cash amortization of deferred financing costs, and then subtracting tenant improvements, leasing commissions, and recurring capital expenditures, and eliminating the net effect of straight-line rents. AFFO provides an additional perspective on the Company’s ability to fund cash needs and make distributions to shareholders by adjusting for the effect of these non-cash items included in FFO, as well as recurring capital expenditures and leasing costs. However, other REITs may use different methodologies for calculating AFFO and, accordingly, the Company’s AFFO may not be comparable to other REITs.

-16-