First Potomac Realty Trust (FPO) 8-K First Potomac Realty Trust Reports Continued Strong Results

Exhibit 99.2

Second Quarter 2005 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

June 30, 2005

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

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Quarterly Supplemental Disclosure
June 30, 2005

Company Information

First Potomac Realty Trust is a self-managed, self-administered real estate investment trust that focuses on owning and operating 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 43-property portfolio consisting of 92 buildings totaling approximately 6.2 million square feet as of June 30, 2005.

Corporate Headquarters	7200 Wisconsin Ave.	Investor Relations	Tripp Sullivan
through July 31, 2005	Suite 310 Bethesda, MD 20814		Corporate Communications, Inc. (615) 254-3376
			tripp.sullivan@cci-ir.com
Corporate Headquarters	7600 Wisconsin Ave.		Barry H. Bass
effective August 1, 2005	11th Floor		Chief Financial Officer
	Bethesda, MD 20814		(301) 986-9200 bbass@first-potomac.com
New York Stock Exchange
Web Site	www.first-potomac.com

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Quarterly Supplemental Disclosure
June 30, 2005

STATEMENTS OF OPERATIONS

(unaudited, in thousands)

	Three Months Ended
	June 30, 2005			March 31, 2005			December 31, 2004			September 30, 2004			June 30, 2004
OPERATING REVENUES
Rental revenues	$	15,857		$	14,137		$	12,247		$	10,556		$	7,157
Tenant reimbursements and other		2,175			2,291			1,960			1,627			1,053
		18,032			16,428			14,207			12,183			8,210
PROPERTY EXPENSES
Property operating		3,148			3,007			2,540			2,192			1,399
Real estate taxes and insurance		1,523			1,395			1,292			1,123			790
NET OPERATING INCOME	$	13,361		$	12,026		$	10,375		$	8,868		$	6,021
OTHER INCOME (EXPENSE)
General and administrative		(1,767	)		(1,871	)		(1,414	)		(1,184	)		(1,281	)
Interest and other income		23			15			43			107			29
EBITDA		11,617			10,170			9,004			7,791			4,769
Depreciation and amortization		(5,828	)		(5,077	)		(4,396	)		(3,811	)		(2,610	)
Interest expense		(4,674	)		(4,516	)		(3,720	)		(3,327	)		(2,237	)
Loss from early retirement of debt		—			—			(618	)		—			—
Income (loss) from continuing operations before minority interests and discontinued operations		1,115			577			270			653			(78	)
Minority interests		(77	)		(51	)		(23	)		(61	)		7
Income (loss) from continuing operations		1,038			526			247			592			(71	)
DISCONTINUED OPERATIONS
Income from operations of disposed property		—			—			56			71			15
Gain on sale of disposed property		—			—			2,092			—			—
Minority interests in discontinued operations		—			—			(193	)		(6	)		(2	)
Income from discontinued operations		—			—			1,955			65			13
NET INCOME (LOSS)	$	1,038		$	526		$	2,202		$	657		$	(58	)

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Quarterly Supplemental Disclosure
June 30, 2005

FINANCIAL MEASURES

(unaudited, in thousands, except per share data)

	Three Months Ended
	June 30, 2005			March 31, 2005			December 31, 2004			September 30, 2004			June 30, 2004
FUNDS FROM OPERATIONS (“FFO”)
Net income (loss)	$	1,038		$	526		$	2,202		$	657		$	(58	)
Add back:
Depreciation & amortization		5,828			5,077			4,396			3,811			2,610
Discontinued operations depreciation & amortization		—			—			7			51			65
Deduct:
Gain on Sale of Asset		—			—			(2,092	)		—			—
Minority interest		77			51			216			67			(5	)
FFO	$	6,943		$	5,654		$	4,729		$	4,586		$	2,612
ADJUSTED FUNDS FROM OPERATIONS (“AFFO”)
FFO	$	6,943		$	5,654		$	4,729		$	4,586		$	2,612
Straight-line rent, net		(348	)		(325	)		(180	)		(185	)		(73	)
Deferred market rent		(300	)		(265	)		(206	)		(177	)		(78	)
Non real-estate depreciation		19			17			16			13			10
Debt fair value amortization		(667	)		(352	)		(256	)		(176	)		(30	)
Amortization of finance costs		207			191			831			51			188
Tenant improvements		(722	)		(426	)		(1,198	)		(218	)		(118	)
Leasing commissions		(160	)		(286	)		(470	)		(279	)		(144	)
Capital expenditures		(513	)		(165	)		(474	)		(405	)		(229	)
AFFO	$	4,459		$	4,043		$	2,792		$	3,210		$	2,138
Total weighted average shares and OP units
Basic		17,555			15,627			15,543			15,551			10,516
Diluted		17,750			15,801			15,710			15,680			10,614
FFO per share:
FFO per share and unit — basic and diluted	$	0.39		$	0.36		$	0.30		$	0.29		$	0.25
AFFO per share and unit — basic	$	0.25		$	0.26		$	0.18		$	0.21		$	0.20
AFFO per share and unit — diluted	$	0.25		$	0.26		$	0.18		$	0.20		$	0.20

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Quarterly Supplemental Disclosure
June 30, 2005

NET OPERATING INCOME(NOI)
SAME-PROPERTY ANALYSIS

(unaudited, in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Total revenue	$	8,162		$	7,603		$	16,198		$	15,117
Property operating expenses		(1,401	)		(1,198	)		(2,893	)		(2,642	)
Real estate taxes and insurance		(684	)		(750	)		(1,372	)		(1,423	)
Same-property1 NOI — accrual basis		6,077			5,655			11,933			11,052
Straight-line revenue, net		(38	)		(54	)		(73	)		(120	)
Deferred market rental revenue		(59	)		(83	)		(117	)		(185	)
Same-property NOI — cash basis	$	5,980		$	5,518		$	11,743		$	10,747
Components of Same Property NOI Increase — accrual basis
Rental revenue increases	$	201					$	355
Occupancy increases		358						726
Expense increase		(137	)					(200	)
	$	422					$	881
Same property leased (end of period)		95.4	%		91.9	%		95.4	%		91.9	%
Same property percentage of total portfolio (sf)		44.5	%		93.5	%		44.5	%		93.5	%
Reconciliation of GAAP to Same Property NOI:
NOI	$	13,361		$	6,021		$	25,387		$	11,418
Less: Non-same property NOI		(7,284	)		(366	)		(13,454	)		(366	)
Same-property1 NOI — accrual basis		6,077			5,655			11,933			11,052
Straight-line revenue, net		(38	)		(54	)		(73	)		(120	)
Deferred market rental revenue		(59	)		(83	)		(117	)		(185	)
Same-property NOI — cash basis	$	5,980		$	5,518		$	11,743		$	10,747
Same-property NOI growth — accrual basis		7.5	%					8.0	%
Same-property NOI growth — cash basis		8.4	%					9.3	%

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, the Coast Guard Building, Rumsey Center, Snowden Center, Greenbrier Technology Center, Norfolk Business Center, Virginia Center, Interstate Plaza and Alexandria Corporate Park.

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Quarterly Supplemental Disclosure
June 30, 2005

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	June 30, 2005			December 31, 2004
	(unaudited)
Assets
Rental property, net	$	531,145		$	463,937
Cash		1,702			2,532
Escrows and reserves		10,382			6,301
Accounts and other receivables, net		3,173			2,768
Accrued straight-line rents, net		2,982			2,310
Deferred costs, net		4,543			4,196
Prepaid expenses and other assets		3,074			2,024
Intangible assets, net		26,325			26,008
Total assets	$	583,326		$	510,076
Liabilities
Accounts payable and accrued expenses	$	3,845		$	4,058
Accrued interest		1,661			800
Rents received in advance		2,761			1,744
Tenant security deposits		3,400			2,804
Line of credit		45,151			39,680
Mortgage loans		286,311			259,039
Deferred market rent		5,609			5,267
Total liabilities		348,738			313,392
Minority interest		14,745			18,991
Shareholders’ equity
Common shares, $0.001 par value, 100,000,000 common shares authorized:
16,540,584 and 14,154,000 shares issued and outstanding respectively		16			14
Additional paid-in capital		258,055			209,268
Deficit		(38,228	)		(31,589	)
Total shareholders’ equity		219,843			177,693
Total liabilities and shareholders’ equity	$	583,326		$	510,076

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Quarterly Supplemental Disclosure
June 30, 2005

SELECTED OPERATING RATIOS

(unaudited, in thousands)

	June 30, 2005			March 31, 2005			December 31, 2004			September 30, 2004			June 30, 2004
COVERAGE RATIOS
Interest Coverage Ratio
EBITDA	$	11,617		$	10,170		$	9,004		$	7,791		$	4,769
Divided by Interest Expense		4,674			4,516			3,720			3,327			2,237
		2.49x			2.25x			2.42x			2.34x			2.13x
Fixed Charge Coverage Ratio
EBITDA	$	11,617		$	10,170		$	9,004		$	7,791		$	4,769
Divided by Interest Expense		4,674			4,516			3,720			3,327			2,237
+ Principal Amortization		827			778			710			513			305
		2.11x			1.92x			2.03x			2.03x			1.88x
OVERHEAD RATIO
G&A to Real Estate Revenues
General and Administrative Expense	$	1,767		$	1,871		$	1,414		$	1,184		$	1,281
Real Estate Revenues		18,032			16,428			14,207			12,183			8,210
		9.8	%		11.4	%		10.0	%		9.7	%		15.6	%
LEVERAGE RATIO
Debt/Total Market Capitalization
Total Debt	$	331,462		$	267,902		$	298,719		$	210,484		$	130,209
Total Market Capitalization		769,331			671,342			653,099			531,768			428,322
		43.1	%		39.9	%		45.7	%		39.6	%		30.4	%

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Quarterly Supplemental Disclosure
June 30, 2005

TOTAL MARKET CAPITALIZATION

(unaudited, in thousands)

			Percent of Total					Percent of Total
	Capitalization		Market			Proforma		Market
	June 30, 2005		Capitalization			Capitalization1		Capitalization
Total common shares outstanding		16,541					16,541
Common operating partnership (“OP”) units		1,115					1,115
Total common shares and OP units		17,656					17,656
Market price at June 30, 2005	$	24.80				$	24.80
Total equity capitalization	$	437,869		56.9	%	$	437,869		56.1	%
Debt capitalization
Fixed-rate debt	$	260,811		33.9	%	$	325,811		41.8	%
Floating-rate debt		70,651		9.2	%		16,500		2.1	%
Total debt capitalization		331,462		43.1	%		342,311		43.9	%
Total market capitalization	$	769,331		100.0	%	$	780,180		100.0	%

¹ Proforma capitalization reflects the financing that closed on July 18, 2005.

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Quarterly Supplemental Disclosure
June 30, 2005

DESCRIPTION OF PROPERTIES

Existing Portfolio

											Leased at
		Number of			Year of		Square		Annualized		June 30,
Property	Property Type	Buildings		Location	Acquisition		Footage		Rent		20051			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		109,310		1,834,239		94.6	%	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		783,991		81.5	%	Urban Engineering & Associates
Newington Business Park Center	Multi-tenant Industrial		7	Lorton, VA		1999		254,084		2,338,151		96.1	%	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 II	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		1,821,109		91.4	%	Paratek Microwave
Rumsey Center	Flex		4	Columbia, MD		2002		134,654		1,395,165		88.9	%	AdvanceMed (CSC)
Greenbrier Technology Center II	Flex		1	Chesapeake, VA		2002		79,684		1,237,047		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		1,263,757		86.8	%	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		2,545,499		97.3	%	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		1,131,979		84.9	%	Coastal Business Machines
Gateway Center	Flex		2	Gaithersburg, MD		2004		44,307		636,315		100.0	%	Montgomery County Auto Parts
Gateway West	Flex		4	Westminster, MD		2004		110,147		899,393		79.7	%	General Dynamics Robotics Systems
Girard Business Center	Flex		3	Gaithersburg, MD		2004		123,900		1,301,348		96.8	%	Aspen Systems Corporation
Girard Place	Flex		4	Gaithersburg, MD		2004		175,190		1,382,857		97.9	%	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		1,249,670		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		557,702		82.3	%	Comcast Cable
Old Courthouse Square	Retail		1	Martinsburg, WV		2004		201,350		1,169,833		96.0	%	U.S. Government; Food Lion
Airpark Place	Flex		3	Gaithersburg, MD		2004		82,200		954,726		94.5	%	Dexall Biomedical Labs
John Marshall Highway	Single-tenant Industrial		1	Haymarket, VA		2004		123,777		1,113,993		100.0	%	Engineering Solutions & Products
Norfolk II	Flex		1	Norfolk, VA		2004		127,625		1,198,437		90.0	%	Verizon Virginia; Trader Publishing
Crossways II	Flex		1	Chesapeake, VA		2004		85,004		873,140		100.0	%	Wachovia Bank, N.A.
Windsor	Flex		2	Manassas, VA		2004		154,226		955,693		58.6	%	CRI/AHC; SAIC
Metro Park North	Flex		4	Rockville, MD		2004		190,238		4,006,600		100.0	%	RICCSO; Montgomery County
Navistar	Single-tenant Industrial		1	Frederick, MD		2004		215,085		1,746,112		100.0	%	FKI Logistex
Reston Business Campus	Flex		4	Reston, VA		2005		83,000		1,423,813		91.6	%	STG; Essex Corporation
Enterprise Center	Flex		4	Chantilly, VA		2005		189,116		2,969,555		90.2	%	Harris Corporation
1400 Cavalier	Multi-tenant Industrial		3	Chesapeake, VA		2005		299,963		1,253,706		100.0	%	The Burris Company
Glenn Dale	Flex		1	Glenn Dale, MD		2005		315,191		1,624,166		99.2	%	TVI Corporation; Home Depot
TOTAL			92					6,218,128		62,147,865		94.9	%

¹ Includes approximately 30,000 sf of executed leases that have not yet commenced.

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Quarterly Supplemental Disclosure
June 30, 2005

PORTFOLIO ANALYSIS

PORTFOLIO BY MARKET

										Percentage of
	Number of				Percent			Annualized		Annualized
	Buildings		Square Feet		Leased			Rent		Rent
Washington		63		4,128,924		94.9	%	$	45,035,555		72.5	%
Norfolk		11		1,241,301		98.7	%		9,624,091		15.5	%
Baltimore		17		728,579		89.7	%		6,224,461		10.0	%
Richmond		1		119,324		86.8	%		1,263,758		2.0	%
Total		92		6,218,128		94.9	%	$	62,147,865		100.0	%

PORTFOLIO BY PROPERTY TYPE

										Percentage of
	Number of				Percent			Annualized		Annualized
	Buildings		Square Feet		Leased			Rent		Rent
Single-tenant Industrial		5		654,382		100.0	%	$	5,390,876		8.7	%
Multi-tenant Industrial		17		2,173,357		97.1	%		17,701,091		28.5	%
Flex		66		3,055,443		92.3	%		35,640,462		57.3	%
Office		3		133,596		90.4	%		2,245,603		3.6	%
Retail		1		201,350		96.0	%		1,169,833		1.9	%
Total		92		6,218,128		94.9	%	$	62,147,865		100	%

PORTFOLIO BY LEASE TYPE

					Percentage of
	Number of				Leased
	Leases		Square Feet1		Portfolio
Triple Net		333		4,091,802		69.4	%
Industrial Gross		39		411,780		7.0	%
Full Service		138		1,395,347		23.6	%
Total		510		5,898,929		100.0	%

¹ Does not include vacant and core factor space.

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Quarterly Supplemental Disclosure
June 30, 2005

TOP TEN TENANTS

									Percentage of
							Total		Total			Weighted
							Annualized		Annualized			Average
			Number of		Total Leased		Rental		Rental			Remaining
Ranking		Tenant	Leases		Square Feet		Revenue1		Revenue			Lease Term
	1	U.S. Government		23		681,759	$	9,292,268		15.0	%		4.6
	2	FKI Logistex2		1		215,085		1,746,112		2.8	%		11.3
	3	First Data Corporation		1		117,336		1,220,317		2.0	%		3.4
	4	First American Registry		1		55,851		1,206,769		1.9	%		9.1
	5	Engineering Solutions		1		123,777		1,113,993		1.8	%		7.3
	6	Montgomery County		1		48,002		1,087,897		1.8	%		10.4
	7	Carolina Holdings		1		124,501		1,071,999		1.7	%		4.7
	8	REICO Distributors		2		175,195		1,021,561		1.6	%		4.4
	9	CACI		3		46,207		980,285		1.6	%		6.3
	10	Harris Corporation		2		40,305		889,043		1.4	%		4.9
		Subtotal Top 10 Tenants		36		1,628,018		19,630,244		31.6	%		6.0
		All Remaining Tenants		474		4,270,911		42,517,621		68.4	%		3.5
		Total / Weighted Average		510		5,898,929	$	62,147,865		100.0	%		4.3

1	Annualized rental revenue is based on rental revenue as of June 30, 2005.
2	Tenant name change; listed as Crisplant in prior Quarters.

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Quarterly Supplemental Disclosure
June 30, 2005

LEASE EXPIRATIONS

	Number of		Gross Leased Area					Annualized Rental Revenue
	Leases		Square		Percent					Percent			Average per
	Expiring		Footage		of Total			Amount		of Total			Sq. Ft.
Year of Lease Expiration
MTM		15		39,726		0.7	%	$	438,227		0.7	%	$	11.03
2005		51		304,343		5.2	%		3,383,460		5.4	%		11.12
2006		88		841,469		14.2	%		7,483,951		12.0	%		8.89
2007		100		1,084,841		18.4	%		11,345,436		18.3	%		10.46
2008		73		546,787		9.3	%		6,612,448		10.7	%		12.09
2009		69		1,163,686		19.7	%		10,524,155		16.9	%		9.04
2010		47		700,805		11.9	%		7,508,604		12.1	%		10.71
2011		15		271,854		4.6	%		3,270,182		5.3	%		12.03
2012		17		254,567		4.3	%		2,424,209		3.9	%		9.52
2013 and thereafter		35		690,851		11.7	%		9,157,193		14.7	%		13.25
Total		510		5,898,929		100.0	%	$	62,147,865		100.0	%	$	10.54

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Quarterly Supplemental Disclosure
June 30, 2005

LEASING ANALYSIS

	3 months ended			6 months ended
	June 30, 2005			June 30, 2005
Expired/Early Renewal/Terminated leases
Square footage of expired/early renewal leases		171,807			282,160
Square footage of terminated leases		17,092			30,966
Total — expired/early renewal/terminated leases		188,899			313,126
New and renewal leases
Square footage of new and renewal leases		222,923			389,654
Number of new and renewal leases commencing		32			70
New leases signed in advance of existing lease expiration		—			15,057
Net absorption		34,024			61,471
New Leases
New square footage		80,378			164,796
Number of new leases commencing		15			34
Rental Change — Cash
New base rent	$	10.86		$	11.63
Percentage change in base rent		18.2	%		7.6	%
Rental Change — GAAP
New base rent	$	11.71		$	12.45
Percentage change in base rent		22.7	%		14.0	%
Average capital cost per square foot	$	5.90		$	7.83
Average downtime between leases (months)		6.6			8.1
Average lease term (months)		50.7			62.7
Renewal Leases
Square footage of renewal leases		142,545			224,858
Number of renewal leases commencing		17			36
Retention rate		83	%		80	%
Rental Change — Cash
New base rent	$	15.09		$	14.21
Expiring base rent	$	14.65		$	13.79
Percentage change in base rent		3.0	%		3.0	%
Rental Change — GAAP
New base rent	$	15.79		$	14.89
Expiring base rent	$	14.82		$	13.84
Percentage change in base rent		6.5	%		7.6	%
Average capital cost per square foot	$	0.44		$	0.43
Average lease term (months)		27.4			30.6

¹ Includes leased square footage and costs related to leases signed in 2nd quarter for subsequent periods.

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Quarterly Supplemental Disclosure
June 30, 2005

DEBT ANALYSIS
(unaudited, in thousands)

					Principal Balance		Annualized				Balance at
Encumbered Properties		Interest Rate			June 30, 2005		Debt Service2		Maturity Date		Maturity
Fixed Rate Debt
Plaza 500	ü
Van Buren Business Park	ú
6600 Business Parkway	ý		7.26	%	$	38,422	$	3,429		12/11/2007	$	36,784
13129 Airpark Road	þ
4200 Tech Court			8.07	%		1,808		168		10/1/2009		1,705
4212 Tech Court			8.53	%		1,757		169		6/1/2010		1,654
Crossways Commerce Center			6.70	%		26,207		2,087		10/1/2012		23,313
Newington Business Park Center			6.70	%		16,531		1,316		10/1/2012		14,706
Interstate Plaza1			5.30	%		8,675		726		1/1/2007		8,282
Herndon Corporate Center1			5.66	%		8,817		603		4/1/2008		8,548
Aquia Commerce Center I1			6.50	%		977		165		2/1/2013		42
Deer Park1	ü
6900 English Muffin Way1	ú
Gateway Center1	ú
Gateway West1	ú
4451 Georgia Pacific1	ú
20270 Goldenrod Lane1	ú
15 Worman’s Mills Court1	ú
Girard Business Center1	ý		5.54	%		79,068		6,434		9/11/2008		71,825
Girard Place1	ú
Old Courthouse1	ú
Patrick Center1	ú
7561 Lindbergh Drive1	ú
West Park1	ú
Woodlands Business Center1	þ
Norfolk Commerce Park II1			5.28	%		7,819		648		8/7/2008		7,034
4612 Navistar Drive1			5.20	%		14,562		1,131		7/11/2011		11,921
Campus at Metro Park North1			5.25	%		26,584		2,028		2/11/2012		21,581
Enterprise Center1			5.50	%		20,307		1,479		12/1/2010		16,712
Glenn Dale Business Center1			5.13	%		9,277		780		5/1/2009		8,032
					$	260,811	$	21,163			$	232,139
Floating Rate Debt
Greenbrier/Norfolk		LIBOR + 2.45%			$	10,500	$	627		11/30/2005	$	10,500
Rumsey/Snowden		LIBOR + 2.35%				15,000		880		12/31/2006		15,000
Credit Facility3		LIBOR + 1.70%				45,151		2,355		12/31/2006		10,000
					$	70,651	$	3,862			$	35,500
Total at June 30, 2005					$	331,462	$	25,025			$	267,639

¹ The balance at June 30, 2005 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%, (vi) Campus at Metro Park North — $2.7 million, 7.11%, (vii) Enterprise Center — $2.5 million, 8.03% and (viii) Glenn Dale Business Center — $0.8 million, 7.93%. The mortgage assumed upon acquisition of Aquia Commerce Center I approximated its market value.

²Annual 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.

³As of June 30, 2005, the borrowing base for the Credit Facility included the following properties: Virginia Center, Alexandria Corporate Park, Aquia Commerce Center II, Airpark, 15395 John Marshall Highway, Crossways II, Reston Business Campus, 1400 Cavalier Boulevard, Enterprise Center and Glenn Dale Business Center.

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Quarterly Supplemental Disclosure
June 30, 2005

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.

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