First Potomac Realty Trust (FPO) 8-K First Potomac Realty Trust Reports Second Quarter 2006 Results

Exhibit 99.2

Second Quarter 2006 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, 2006

	Page
Company Information		2
Reconciliation of EBITDA to Net Income		3
Financial Measures		4
Net Operating Income (NOI) - Same Property Analysis		5
Consolidated Balance Sheets		6
Total Market Capitalization		7
Debt Analysis		8
Selected Operating Ratios		9
Description of Properties		10
Land Available for Development		11
Summary of Largest Tenants		12
Lease Expirations		13
Leasing Analysis		14
Portfolio by Size		15
Market Concentration		16
Portfolio Analysis		17
Washington Market		18
Norfolk Market		19
Baltimore Market		20
Richmond Market		21
Management Statements		22

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Quarterly Supplemental Disclosure

June 30, 2006

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.

Corporate Headquarters	7600 Wisconsin Avenue	Investor Relations	Tripp Sullivan
	11th Floor		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

Note that figures are rounded to the nearest thousand throughout this document which may impact footing and/or crossfooting of subtotals and totals.

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Quarterly Supplemental Disclosure
June 30, 2006

RECONCILIATION OF EBITDA TO NET INCOME
(unaudited, in thousands)

	Three Months Ended
	June 30, 2006			March 31, 2006			December 31, 2005			September 30, 2005			June 30, 2005
OPERATING REVENUES
Rental revenues	$	21,093		$	20,319		$	18,496		$	16,315		$	15,615
Tenant reimbursements and other		4,131			4,055			3,653			4,095			2,129
		25,224			24,374			22,149			20,410			17,744
PROPERTY EXPENSES
Property operating		4,413			4,702			4,066			3,277			3,136
Real estate taxes and insurance		2,149			2,172			1,978			1,610			1,493
NET OPERATING INCOME	$	18,662		$	17,500		$	16,105		$	15,523		$	13,115
OTHER INCOME (EXPENSE)
General and administrative		(2,530	)		(2,534	)		(2,249	)		(2,054	)		(1,767	)
Interest and other income		165			403			59			41			23
EBITDA		16,297			15,369			13,915			13,510			11,371
Depreciation and amortization		(7,957	)		(7,863	)		(7,340	)		(6,577	)		(5,793	)
Interest expense		(7,253	)		(6,590	)		(5,862	)		(5,312	)		(4,588	)
Loss on interest-rate lock agreement		(671	)		—			—			—			—
Loss on early retirement of debt		(121	)		—			(2,451	)		(95	)		—
Income (loss) from continuing operations before minority interests		295			916			(1,738	)		1,526			990
Minority interests		(15	)		(52	)		110			(95	)		(68	)
Income (loss) from continuing operations		280			864			(1,628	)		1,431			922
DISCONTINUED OPERATIONS
Income (loss) from operations of disposed property		116			259			(161	)		139			125
Gain on sale of disposed property		7,475			—			—			—			—
Minority interests in discontinued operations		(370	)		(15	)		13			(9	)		(9	)
Income (loss) from discontinued operations		7,221			244			(148	)		130			116
NET INCOME (LOSS)	$	7,501		$	1,108		$	(1,776	)	$	1,561		$	1,038

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Quarterly Supplemental Disclosure
June 30, 2006

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

	Three Months Ended
	June 30, 2006			March 31, 2006			December 31, 2005			September 30, 2005			June 30, 2005
FUNDS FROM OPERATIONS (“FFO”)
Net income (loss)	$	7,501		$	1,108		$	(1,776	)	$	1,561		$	1,038
Add back:
Depreciation & amortization of real estate assets1		7,957			7,863			7,340			6,577			5,793
Depreciation & amortization related to discontinued operations		—			3			40			36			35
Minority interest		385			67			(123	)		104			77
Deduct:
Gain on sale of asset		(7,475	)		—			—			—			—
FFO	$	8,368		$	9,041		$	5,481		$	8,278		$	6,943
Charges:
G&A		178			—			—			—			—
Debt retirement charges		121			—			2,451			95			—
Loss on interest-rate lock agreement		671			—			—			—			—
Debt retirement charges related to discontinued operations		—			—			325			—			—
FFO before charges	$	9,338		$	9,041		$	8,257		$	8,373		$	6,943
ADJUSTED FUNDS FROM OPERATIONS (“AFFO”)
FFO before charges	$	9,338		$	9,041		$	8,257		$	8,373		$	6,943
Non-cash stock-based compensation		123			460			91			82			90
Straight-line rent, net2		(398	)		(328	)		(320	)		(214	)		(348	)
Deferred market rent		(486	)		(546	)		(504	)		(319	)		(300	)
Non real-estate depreciation		108			57			46			33			19
Debt fair value amortization		(677	)		(652	)		(681	)		(599	)		(667	)
Amortization of finance costs		244			209			208			177			207
Tenant improvements4		(324	)		(379	)		(226	)		(548	)		(630	)
Leasing commissions4		(392	)		(337	)		(572	)		(360	)		(151	)
Capital expenditures3,4		(655	)		(552	)		(436	)		(520	)		(305	)
AFFO	$	6,881		$	6,973		$	5,863		$	6,105		$	4,858
Total weighted average shares and OP units
Basic		21,451			21,440			20,407			17,655			17,555
Diluted		21,661			21,675			20,627			17,895			17,750
FFO per share:
FFO per share and unit — basic	$	0.39		$	0.42		$	0.27		$	0.47		$	0.40
FFO per share and unit — diluted	$	0.39		$	0.42		$	0.27		$	0.46		$	0.39
FFO per share and unit — diluted before charges	$	0.43		$	0.42		$	0.40		$	0.47		$	0.39
AFFO per share:
AFFO per share and unit — basic	$	0.32		$	0.33		$	0.29		$	0.35		$	0.28
AFFO per share and unit — diluted	$	0.32		$	0.32		$	0.28		$	0.34		$	0.27

1	Non-real estate depreciation is classified in General and Administrative expense.
2	Straight-line rent is net of rent abatement and write-off of uncollectible accounts.
3	Capital expenditures exclude $0.4 million of non-real estate expenditures during third quarter 2005.
4	The following first-generation and development costs have been excluded from the calculation of AFFO:

Tenant improvements	$	625	$	97	$	20	$	29	$	92
Leasing commissions		131		63		51		—		9
Capital expenditures		208		348		771		384		208
Development		580		138		38		13		2
	$	1,544	$	646	$	880	$	426	$	311

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Quarterly Supplemental Disclosure
June 30, 2006

NET OPERATING INCOME (NOI)
SAME-PROPERTY ANALYSIS
(unaudited, in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
Total base rent	$	14,551		$	14,451		$	28,202		$	27,943
Tenant reimbursement and other		2,668			2,014			5,203			4,241
Property operating expenses		(2,871	)		(2,966	)		(5,890	)		(5,844	)
Real estate taxes and insurance		(1,455	)		(1,396	)		(2,886	)		(2,727	)
Same-property1 NOI — accrual basis		12,893			12,103			24,629			23,613
Straight-line revenue, net		(245	)		(339	)		(382	)		(652	)
Deferred market rental revenue		(209	)		(264	)		(462	)		(530	)
Same-property NOI — cash basis	$	12,439		$	11,500		$	23,785		$	22,431
Same-property NOI growth — accrual basis		6.5	%					4.3	%
Same-property NOI growth — cash basis		8.2	%					6.0	%
Components of Same Property NOI Increase - - accrual basis
Rental revenue increase	$	194					$	453
Tenant reimbursement and other increase		654						962
Occupancy increase / (decrease)		(94	)					(194	)
Expense decrease / (increase)		36						(205	)
	$	790					$	1,016
Same property percentage of total portfolio (sf)		57.6	%		86.4	%		57.6	%		86.4	%
Reconciliation of GAAP to Same Property NOI:
Total revenue	$	25,224		$	17,744		$	49,597		$	33,879
Property operating expenses		4,413			3,136			9,115			6,134
Real estate taxes and insurance		2,149			1,493			4,321			2,852
NOI		18,662			13,115			36,161			24,893
Less: Non-same property NOI		(5,769	)		(1,012	)		(11,532	)		(1,280	)
Same-property1 NOI — accrual basis		12,893			12,103			24,629			23,613
Straight-line revenue, net		(245	)		(339	)		(382	)		(652	)
Deferred market rental revenue		(209	)		(264	)		(462	)		(530	)
Same-property NOI — cash basis	$	12,439		$	11,500		$	23,785		$	22,431
Same-property NOI growth — accrual basis		6.5	%					4.3	%
Same-property NOI growth — cash basis		8.2	%					6.0	%

¹ Same-property comparisons are based upon those properties owned for the entirety of the periods presented. Same properties for the periods compared exclude the following non-same properties: 1400 Cavalier Boulevard, Enterprise Center, Glenn Dale Business Center, Gateway Centre Manassas, 1434 Crossways Boulevard, 2000 Gateway Boulevard, 403/405 Glenn Drive, Diamond Hill Distribution Center, Linden Business Center, Prosperity Business Center, Owings Mills Business Center, 1000 Lucas Way, River’s Bend Center, Northridge I & II, Crossways I, Sterling Park Business Center, 1408 Stephanie Way, Airpark Business Center, Chesterfield Business Center and Hanover Business Center. The three months ended June 30, 2006 and 2005 includes Reston Business Campus.

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Quarterly Supplemental Disclosure
June 30, 2006

CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

	June 30, 2006			December 31, 2005
	(unaudited)
Assets
Rental property, net	$	774,205		$	668,730
Cash and cash equivalents		4,352			3,356
Escrows and reserves		10,520			9,818
Accounts and other receivables, net		2,732			2,705
Accrued straight-line rents, net		3,967			3,638
Deferred costs, net		8,089			6,676
Prepaid expenses and other assets		3,965			3,322
Intangible assets, net		31,913			29,518
Total assets	$	839,743		$	727,763
Liabilities
Mortgage loans	$	379,390		$	369,266
Notes payable		75,000			—
Credit facility		55,000			26,999
Accounts payable and accrued expenses		4,975			4,734
Accrued interest		2,233			1,618
Rents received in advance		2,571			2,932
Tenant security deposits		4,297			3,973
Deferred market rent		8,553			7,281
Total liabilities		532,019			416,803
Minority interest		16,055			21,629
Shareholders’ equity
Common shares, $0.001 par value, 100,000,000 common shares authorized: 20,538,647 and 20,072,755 shares issued and outstanding, respectively		21			20
Additional paid-in capital		344,876			338,564
Dividends in excess of accumulated earnings		(53,228	)		(49,253	)
Total shareholders’ equity		291,669			289,331
Total liabilities and shareholders’ equity	$	839,743		$	727,763

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Quarterly Supplemental Disclosure
June 30, 2006

TOTAL MARKET CAPITALIZATION
(unaudited, in thousands)

			Percent of					��
			Total Market			Proforma
			Capitalization			Capitalization1
Total common shares outstanding		20,539					23,989
Common operating partnership (“OP”) units held by third parties		1,035					1,035
Total common shares and OP units		21,574					25,024
Market price at June 30, 2006	$	29.79				$	29.79
Total equity capitalization	$	642,689		55.8	%	$	745,465		62.1	%
Debt capitalization
Fixed-rate debt	$	454,390		39.4	%	$	454,390		37.9	%
Floating-rate debt		55,000		4.8	%		—		—
Total debt capitalization	$	509,390		44.2	%	$	454,390		37.9	%
Total market capitalization	$	1,152,079		100.0	%	$	1,199,855		100.0	%

¹ Proforma capitalization reflects the Company’s issuance of 3,450,000 common shares in July 2006. A portion of the proceeds was subsequently used to repay indebtedness on the credit facility.

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Quarterly Supplemental Disclosure
June 30, 2006

DEBT ANALYSIS
(unaudited, in thousands)

				Principal Balance		Annualized				Balance at
Encumbered Properties	GAAP Interest Rate			June 30, 2006		Debt Service2		Maturity Date		Maturity
Fixed Rate Debt
4200 Tech Court		8.07	%	$	1,786	$	168		10/1/2009	$	1,705
4212 Tech Court		8.53	%		1,739		169		6/1/2010		1,654
Crossways Commerce Center		6.70	%		25,891		2,087		10/1/2012		23,313
Newington Business Park Center		6.70	%		16,332		1,316		10/1/2012		14,706
Interstate Plaza1		5.30	%		8,411		726		1/1/2007		8,282
Herndon Corporate Center1		5.66	%		8,710		603		4/1/2008		8,548
Aquia Commerce Center I1		6.50	%		882		165		2/1/2013		42
Deer Park1
6900 English Muffin Way1
Gateway Center1
Gateway West1
4451 Georgia Pacific1
20270 Goldenrod Lane1
15 Worman’s Mills Court1
Girard Business Center1		5.54	%		76,956		6,434		9/11/2008		71,825
Girard Place1
Old Courthouse1
Patrick Center1
7561 Lindbergh Drive1
West Park1
Woodlands Business Center1
Norfolk Commerce Park II1		5.28	%		7,578		648		8/7/2008		7,034
4612 Navistar Drive1		5.20	%		14,180		1,131		7/11/2011		11,921
Campus at Metro Park North1		5.25	%		25,936		2,028		2/11/2012		21,581
Plaza 500
Van Buren Business Park
Rumsey Center		5.19	%		100,000		5,190		8/1/2015		100,000
Snowden Center
Greenbrier Technology Center II
Norfolk Business Center
Alexandria Corporate Park
Enterprise Center1		5.20	%		19,717		1,647		12/1/2010		16,712
Glenn Dale Business Center1		5.13	%		8,982		780		5/1/2009		8,033
Gateway Centre Manassas1		5.88	%		1,851		239		11/1/2016		0
1434 Crossways Boulevard1		5.38	%		20,340		1,491		8/5/2012		16,463
403 & 405 Glenn Drive1		5.50	%		9,156		746		7/1/2011		7,807
Linden Business Center1		5.58	%		7,706		559		10/1/2013		6,596
Owings Mills Business Center1		5.75	%		5,870		425		3/1/2014		5,066
Prosperity Business Center1		5.75	%		4,015		332		1/1/2013		3,242
Airpark Business Center1		6.63	%		1,640		173		6/1/2021		14
Hanover Business Center1
Hanover Building II A1		8.00	%		1,304		108		6/25/2015		1,273
Hanover Building II B1		8.00	%		1,975		154		6/15/2016		1,911
Hanover Building C1		6.63	%		1,491		161		12/1/2017		13
Hanover Building D1		6.63	%		1,094		161		8/1/2015		13
Chesterfield Business Center1		6.63	%		5,848		318		8/1/2015		26
Series A Notes		6.41	%		37,500		2,404		6/15/2013		37,500
Series B Notes		6.55	%		37,500		2,456		6/15/2016		37,500
				$	454,390	$	32,819			$	412,780
Floating Rate Debt
Credit Facility3	LIBOR + 1.20%				55,000		3,592		4/26/2009		55,000
Total at June 30, 2006				$	509,390	$	36,411			$	467,780

¹ The balance at June 30, 2006 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:

Property	Fair Value	Interest Rate
Interstate Plaza	$0.4 million		7.45	%
Herndon Corporate Center	$0.2 million		5.11	%
Deer Park through Woodlands Business Center	$3.6 million		6.71	%
Norfolk Commerce Park II	$0.3 million		6.90	%
4612 Navistar Drive	$1.7 million		7.48	%
Campus at Metro Park North	$2.7 million		7.11	%
Enterprise Center	$2.5 million		8.03	%
Glenn Dale Business Center	$0.8 million		7.83	%
Gateway Centre Manassas	$0.1 million		7.35	%
1434 Crossways I	$0.8 million		6.25	%
1434 Crossways II	$1.3 million		7.05	%
403 & 405 Glenn Drive	$0.9 million		7.60	%
Linden Business Center	$0.2 million		6.01	%
Owings Mills Business Center	$0.4 million		5.85	%
Prosperity Business Center	$0.1 million		6.25	%
Airpark Business Center	$0.1 million		7.45	%
Hanover Building II B	$7 thousand		4.00	%
Hanover Building C	$0.1 million		8.88	%
Hanover Building D	$0.1 million		8.88	%
Chesterfield Business Center	$0.1 million		7.45	%

The Company paid-off the debt associated with Hanover Building II A in July 2006. 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.

3

As of June 30, 2006, the borrowing base for the Credit Facility included the following properties: 13129 Airpark Road, Virginia Center, Aquia Commerce Center II, Airpark Place, 15395 John Marshall Highway, Gateway West II, Crossways II, Windsor @ Battlefield, Reston Business Campus, 1400 Cavalier Boulevard, Gateway Centre Manassas II, 2000 Gateway Boulevard, Diamond Hill Distribution Center, Linden II (Building I), 1000 Lucas Way, River’s Bend Center, Northridge I & II, Crossways I, Sterling Park Business Center and Sterling Park Land.

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Quarterly Supplemental Disclosure
June 30, 2006

SELECTED OPERATING RATIOS

(unaudited, in thousands)

	Three Months Ended
	June 30, 2006			March 31, 2006			December 31, 2005			September 30, 2005			June 30, 2005
COVERAGE RATIOS
Interest Coverage Ratio
EBITDA	$	16,297		$	15,369		$	13,915		$	13,510		$	11,371
Divided by Interest Expense		7,253			6,590			5,862			5,312			4,588
		2.25	x		2.33	x		2.37	x		2.54	x		2.48	x
Fixed Charge Coverage Ratio
EBITDA	$	16,297		$	15,369		$	13,915		$	13,510		$	11,371
Divided by Interest Expense		7,253			6,590			5,862			5,312			4,588
+ Principal Amortization		977			971			1,095			909			827
		1.98	x		2.03	x		2.00	x		2.17	x		2.10	x
OVERHEAD RATIO
G&A to Real Estate Revenues
General and Administrative Expense	$	2,530		$	2,534		$	2,249		$	2,054		$	1,767
Real Estate Revenues		25,224			24,374			22,149			20,410			17,744
		10.0	%		10.4	%		10.2	%		10.1	%		10.0	%
LEVERAGE RATIO
Debt/Total Market Capitalization
Total Debt	$	509,390		$	485,651		$	396,266		$	390,043		$	331,462
Total Market Capitalization		1,152,079			1,092,772			967,553			843,699			769,331
		44.2	%		44.4	%		41.0	%		46.2	%		43.1	%

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Quarterly Supplemental Disclosure
June 30, 2006

FIRST POTOMAC REALTY TRUST
DESCRIPTION OF PROPERTIES

						Annualized		Leased at
			Year of	Square		Cash Base		June 30,
Property	Property Type	Location	Acquisition	Footage		Rent		2006
Plaza 500	Multi-tenant Industrial	Alexandria, VA	1997		506,725	$	4,826,116		96.1	%
Van Buren Business Park	Flex	Herndon, VA	1997		109,310		1,734,716		96.5	%
13129 Airpark Road	Multi-tenant Industrial	Culpeper, VA	1997		150,400		761,134		100.0	%
Tech Court	Flex	Chantilly, VA	1998		64,064		743,324		74.6	%
Newington Business Park Center	Multi-tenant Industrial	Lorton, VA	1999		254,114		2,336,543		94.7	%
Crossways Commerce Center I	Multi-tenant Industrial	Chesapeake, VA	1999		348,615		1,986,682		100.0	%
Crossways Commerce Center ll	Flex	Chesapeake, VA	1999		147,736		1,518,606		100.0	%
Coast Guard Building	Flex	Chesapeake, VA	1999		61,992		826,706		100.0	%
Snowden Center	Flex	Columbia, MD	2002		140,438		1,867,068		89.7	%
Rumsey Center	Flex	Columbia, MD	2002		134,654		1,048,172		70.8	%
Greenbrier Technology Center II	Flex	Chesapeake, VA	2002		79,684		1,084,700		99.0	%
Norfolk Business Center	Flex	Norfolk, VA	2002		90,682		784,205		92.9	%
Virginia Center	Flex	Glen Allen, VA	2003		119,324		1,328,296		89.4	%
Interstate Plaza	Single-tenant Industrial	Alexandria, VA	2003		107,320		1,146,298		100.0	%
Alexandria Corporate Park	Multi-tenant Industrial	Alexandria, VA	2003		278,130		3,829,588		81.9	%
Herndon Corporate Center	Flex	Herndon, VA	2004		127,353		1,950,879		97.7	%
Aquia Commerce Center I & II	Flex	Stafford, VA	2004		64,488		1,010,176		100.0	%
Deer Park	Flex	Randallstown, MD	2004		171,140		1,112,010		79.3	%
Gateway Center	Flex	Gaithersburg, MD	2004		44,307		647,086		100.0	%
Gateway West	Flex	Westminster, MD	2004		110,147		970,002		79.7	%
Girard Business Center	Flex	Gaithersburg, MD	2004		123,900		1,180,092		85.5	%
Girard Place	Flex	Gaithersburg, MD	2004		175,217		1,450,338		100.0	%
15 Worman’s Mill Court	Flex	Frederick, MD	2004		39,966		377,810		100.0	%
20270 Goldenrod Lane	Flex	Germantown, MD	2004		24,468		347,812		75.2	%
6900 English Muffin Way	Multi-tenant Industrial	Frederick, MD	2004		165,690		1,120,757		100.0	%
4451 Georgia Pacific Boulevard	Multi-tenant Industrial	Frederick, MD	2004		169,750		1,147,833		100.0	%
7561 Lindbergh Drive	Single-tenant Industrial	Gaithersburg, MD	2004		36,000		300,437		100.0	%
Patrick Center	Office	Frederick, MD	2004		66,706		1,197,237		83.3	%
West Park	Office	Frederick, MD	2004		28,950		501,242		93.4	%
Woodlands Business Center	Office	Largo, MD	2004		37,940		464,262		60.1	%
Old Courthouse Square	Retail	Martinsburg, WV	2004		201,350		1,217,196		96.6	%
Airpark Place	Flex	Gaithersburg, MD	2004		82,200		930,360		89.1	%
15395 John Marshall Highway	Single-tenant Industrial	Haymarket, VA	2004		123,777		1,147,416		100.0	%
Norfolk Commerce Park II	Flex	Norfolk, VA	2004		128,147		1,376,118		100.0	%
Crossways II	Flex	Chesapeake, VA	2004		85,004		901,906		100.0	%
Windsor at Battlefield	Flex	Manassas, VA	2004		154,226		1,440,420		83.1	%
Campus at Metro Park North	Flex	Rockville, MD	2004		190,238		3,452,832		100.0	%
4612 Navistar Drive	Single-tenant Industrial	Frederick, MD	2004		215,085		1,781,034		100.0	%
Reston Business Campus	Flex	Reston, VA	2005		83,000		1,410,666		91.6	%
Enterprise Center	Flex	Chantilly, VA	2005		189,116		2,884,664		82.5	%
1400 Cavalier Boulevard	Multi-tenant Industrial	Chesapeake, VA	2005		299,963		1,283,179		100.0	%
Glenn Dale Business Center	Multi-tenant Industrial	Glenn Dale, MD	2005		315,191		1,727,357		99.2	%
Gateway Centre	Flex	Manassas, VA	2005		99,607		1,015,611		94.9	%
1434 Crossways Boulevard	Office	Chesapeake, VA	2005		220,501		2,447,394		100.0	%
2000 Gateway Boulevard	Multi-tenant Industrial	Hampton, VA	2005		421,100		280,000		3.8	%
403/405 Glenn Drive	Flex	Sterling, VA	2005		197,201		1,222,174		81.7	%
Diamond Hill Distribution Center	Multi-tenant Industrial	Chesapeake, VA	2005		712,550		2,737,917		90.2	%
Linden Business Center	Flex	Manassas, VA	2005		108,004		1,286,866		90.4	%
Owings Mills Business Center	Flex	Owings Mills, MD	2005		87,148		1,035,419		100.0	%
Prosperity Business Center	Multi-tenant Industrial	Merrifield, VA	2005		71,572		792,471		100.0	%
1000 Lucas Way	Flex	Hampton, VA	2005		182,175		1,069,307		91.5	%
River’s Bend Center	Multi-tenant Industrial	Richmond, VA	2006		492,400		2,834,833		93.1	%
Northridge I, II	Multi-tenant Industrial	Ashland, VA	2006		140,390		812,957		100.0	%
Crossways I	Flex	Chesapeake, VA	2006		143,398		1,635,123		85.1	%
Sterling Park Business Center	Flex	Sterling, VA	2006		127,814		1,116,642		80.8	%
1408 Stephanie Way	Flex	Chesapeake, VA	2006		51,209		—		0.0	%
Airpark Business Center	Flex	Richmond, VA	2006		42,178		350,207		100.0	%
Chesterfield Business Center	Flex	Richmond, VA	2006		190,049		1,432,828		93.1	%
Hanover Business Center	Flex	Ashland, VA	2006		183,612		1,296,923		92.8	%
Total					9,517,415	$	80,519,947		88.7	%

-10-

Quarterly Supplemental Disclosure
June 30, 2006

FIRST POTOMAC REALTY TRUST
LAND AVAILABLE FOR DEVELOPMENT

	Square Feet
1400 Cavalier Boulevard		100,000
Glenn Dale Business Center		200,000
Navistar		50,000
Plaza 500		200,000
Linden Business Center		30,000
Sterling Park Business Center		400,000
		980,000

LAND UNDER DEVELOPMENT / PRE-DEVELOPMENT

	Square Feet
John Marshall Highway1		112,300
Crossways Commerce Center I		25,000
Snowden Center		5,000
Sterling Park Phase I		100,000
		242,300

¹ Construction in progress for building addition pre-leased to Engineering Solutions & Products. Completion is anticipated in 1Q07.

-11-

Quarterly Supplemental Disclosure
June 30, 2006

TOP TEN TENANTS

									Percentage of
									Total
									Annualized			Weighted
			Number		Total				Rental			Average
			of		Leased		Total Annualized		Revenue -			Remaining
Ranking		Tenant	Leases		Square Feet		Rental Revenue1		Cash Basis			Lease Term
	1	U.S. Government		29		746,813	$	8,713,252		10.8	%		4.2
	2	EDS		2		220,501		2,447,394		3.0	%		5.0
	3	FKI Logistex		1		215,085		1,781,034		2.2	%		10.3
	4	Sentara Healthcare		5		145,019		1,492,819		1.9	%		6.7
	5	TDS Logistics, Inc		3		248,050		1,265,238		1.6	%		1.8
	6	First Data Corporation		1		117,336		1,238,622		1.5	%		2.4
	7	CACI		6		76,472		1,168,694		1.5	%		4.5
	8	Engineering Solutions		1		123,777		1,147,416		1.4	%		6.3
	9	Stock Building Supply, Inc		1		124,501		1,137,283		1.4	%		3.7
	10	Capital One Financial Corp		1		158,400		1,026,492		1.3	%		5.1
		Subtotal Top 10 Tenants		50		2,175,954	$	21,418,244		26.6	%		4.8
		All Remaining Tenants		643		6,267,007	$	59,101,703		73.4	%		3.6
		Total / Weighted Average		693		8,442,961	$	80,519,947		100.0	%		3.8

¹ Annualized rental revenue is based on triple-net equivalent rental revenue as of June 30, 2006.

-12-

Quarterly Supplemental Disclosure
June 30, 2006

FIRST POTOMAC REALTY TRUST
LEASE EXPIRATIONS

			Gross Leased Area					Annualized Cash Rental Revenue
													Average
	Number of		Square							Percent of			Base Rent1
	Leases Expiring		Footage		Percent of Total			Amount		Total			per Sq. Ft.
Year of Lease Expiration
MTM		13		65,799		0.8	%	$	433,359		0.5	%	$	6.59
2006		70		800,853		9.5	%		5,580,298		6.9	%		6.97
2007		138		1,275,440		15.1	%		12,258,787		15.2	%		9.61
2008		137		1,303,248		15.4	%		12,486,645		15.5	%		9.58
2009		120		1,323,754		15.7	%		12,253,803		15.2	%		9.26
2010		77		1,017,446		12.0	%		10,415,086		12.9	%		10.24
2011		66		1,344,904		15.9	%		12,184,620		15.2	%		9.06
2012		24		335,811		4.0	%		3,368,953		4.2	%		10.03
2013 and thereafter		48		975,706		11.6	%		11,538,396		14.4	%		11.83
Total		693		8,442,961		100.0	%	$	80,519,947		100.0	%	$	9.54
LEASE EXPIRATIONS—NEXT FOUR QUARTERS
			Gross Leased Area					Annualized Cash Rental Revenue
													Average
	Number of		Square		Percent of					Percent of			Base Rent1
	Leases Expiring		Footage		Total			Amount		Total			per Sq. Ft.
Quarter of Lease Expiration
2006 - Q3		25		126,396		1.5	%	$	1,647,463		2.0	%	$	13.03
2006 - Q4		38		643,042		7.6	%		3,615,469		4.5	%		5.62
2007 - Q1		28		250,647		3.0	%		2,276,638		2.8	%		9.08
2007 - Q2		35		237,924		2.8	%		2,478,778		3.1	%		10.42
Total		126		1,258,009		14.9	%	$	10,018,348		12.4	%	$	7.96

¹ Triple-net Equivalent

-13-

Quarterly Supplemental Disclosure
June 30, 2006

LEASING ANALYSIS

	3 months ended			6 months ended
Leasing Production1	June 30, 2006			June 30, 2006
New and Renewal Leases
Square footage of new and renewal leases		603,845			1,177,271
Number of new and renewal leases commencing		43			80
Expired/Early Renewal/Terminated leases
Square footage of expired/early renewal leases		515,033			1,036,683
Square footage of terminated leases		15,776			28,387
Total — expired/early renewal/terminated leases		530,809			1,065,070
Pre-Leasing2		112,305			112,305
2000 Gateway Boulevard3		16,000			16,000
Net Absorption		(39,269	)		(104	)
New Leases
New square footage		205,083			315,466
Number of new leases commencing		18			35
Rental Change — Cash
New base rent	$	11.88		$	10.61
Percentage change in base rent		-0.5	%		9.9	%
Rental Change — GAAP
New base rent	$	11.44		$	10.46
Percentage change in base rent		1.8	%		1.6	%
Average capital cost per square foot	$	5.30		$	5.93
Average downtime between leases (months)		3.2			5.3
Average lease term (months)		97.5			79.8
Renewal Leases
Square footage of renewal leases		398,762			861,805
Number of renewal leases commencing		25			45
Retention rate		77	%		83	%
Rental Change — Cash
New base rent	$	11.81		$	8.81
Expiring base rent	$	10.24		$	7.76
Percentage change in base rent		15.4	%		13.6	%
Rental Change — GAAP
New base rent	$	11.12		$	8.52
Expiring base rent	$	10.31		$	8.01
Percentage change in base rent		7.9	%		6.4	%
Average capital cost per square foot	$	0.36		$	0.27
Average lease term (months)		59.8			44.2

1	Includes 151,170 square feet and associated costs for leases signed in 2nd quarter for subsequent periods.
2	Leasing at John Marshall Highway; estimated construction completion in 1Q 2007.
3	Northrop Grumman — Further leasing contingent upon winning Air Force contract.

-14-

Quarterly Supplemental Disclosure
June 30, 2006

FIRST POTOMAC REALTY TRUST
PORTFOLIO BY SIZE

										% of
	Number of		Leased Square		% of Total			Annualized		Annualized			Base Rent1
Square Feet Under Lease	Leases		Feet		Square Feet			Base Rent1		Base Rent1			per SF
0-4,999		356		848,294		10.0	%	$	10,320,227		12.8	%	$	12.17
5,000-9,999		136		935,306		11.1	%		10,909,907		13.5	%		11.66
10,000-14,999		66		786,110		9.3	%		9,513,748		11.7	%		12.10
15,000-19,999		34		571,647		6.8	%		5,560,177		6.9	%		9.73
20,000-24,999		17		375,403		4.4	%		4,205,738		5.2	%		11.20
25,000-29,999		17		452,952		5.4	%		5,553,667		7.0	%		12.26
30,000-34,999		14		453,622		5.4	%		3,387,955		4.2	%		7.47
35,000-39,999		10		366,151		4.3	%		2,354,209		2.9	%		6.43
40,000-44,999		5		209,770		2.5	%		1,728,707		2.2	%		8.24
45,000-49,999		10		467,337		5.5	%		3,464,469		4.3	%		7.41
50,000-54,999		2		107,483		1.3	%		1,475,150		1.8	%		13.72
55,000-59,999		2		114,805		1.4	%		1,598,043		2.0	%		13.92
60,000-64,999		4		246,072		2.9	%		3,119,200		3.9	%		12.68
65,000-69,999		2		135,321		1.6	%		668,988		0.8	%		4.94
70,000-74,999		2		143,860		1.7	%		889,232		1.1	%		6.18
90,000-94,999		1		94,950		1.1	%		559,256		0.7	%		5.89
100,000-104,999		1		104,218		1.2	%		1,158,424		1.4	%		11.12
105,000-109,999		1		107,320		1.3	%		1,146,298		1.4	%		10.68
115,000-119,999		2		233,619		2.8	%		2,527,592		3.1	%		10.82
120,000-124,999		6		732,078		8.7	%		5,221,433		6.6	%		7.13
125,000-129,999		1		127,108		1.5	%		603,763		0.8	%		4.75
155,000-159,999		1		158,400		1.9	%		1,026,492		1.3	%		6.48
215,000-219,999		2		431,135		5.1	%		2,807,272		3.5	%		6.51
240,000-244,999		1		240,000		2.8	%		720,000		0.9	%		3.00
Total		693		8,442,961		100.0	%	$	80,519,947		100.0	%	$	9.54

¹ Triple-net Equivalent

-15-

Quarterly Supplemental Disclosure
June 30, 2006

MARKET CONCENTRATION

Market Concentration by Square Footage

	Washington						Subtotal			Norfolk			Baltimore			Richmond			Total
	Suburban			Northern
	MD			VA
Single-tenant Industrial		2.6	%		2.5	%		5.1	%		—			—			—			5.1	%
Multi-tenant Industrial		6.9	%		13.2	%		20.1	%		18.7	%		—			6.7	%		45.5	%
Flex		7.1	%		13.9	%		21.0	%		10.2	%		6.8	%		5.6	%		43.6	%
Office		1.4	%		0.0	%		1.4	%		2.3	%		—			—			3.7	%
Retail		0.0	%		2.1	%		2.1	%		—			—			—			2.1	%
		18.0	%		31.7	%		49.7	%		31.2	%		6.8	%		12.3	%		100.0	%

Market Concentration by Annualized Rent

	Washington						Subtotal			Norfolk			Baltimore			Richmond			Total
	Suburban			Northern
	MD			VA
Single-tenant Industrial		2.6	%		2.8	%		5.4	%		—			—			—			5.4	%
Multi-tenant Industrial		4.9	%		15.6	%		20.5	%		7.9	%		—			4.5	%		32.9	%
Flex		10.4	%		19.7	%		30.1	%		11.4	%		7.5	%		5.5	%		54.5	%
Office		2.7	%		0.0	%		2.7	%		3.0	%		—			—			5.7	%
Retail		0.0	%		1.5	%		1.5	%		—			—			—			1.5	%
Total		20.6	%		39.6	%		60.2	%		22.3	%		7.5	%		10.0	%		100.0	%

-16-

Quarterly Supplemental Disclosure
June 30, 2006

PORTFOLIO ANALYSIS

PORTFOLIO BY MARKET

										Percentage
								Annualized		of
	Number of				Percent			Base Rent1 -		Annualized
	Buildings		Square Feet		Leased			Cash Basis		Base Rent1
Washington		74		4,733,179		93.3	%	$	48,499,392		60.2	%
Suburban MD		26		1,715,608		96.3	%		16,626,492		20.6	%
Northern VA		48		3,017,571		91.5	%		31,872,900		39.6	%
Norfolk		22		2,972,756		80.8	%		17,931,840		22.3	%
Baltimore		20		643,527		82.7	%		6,032,671		7.5	%
Richmond		21		1,167,953		93.8	%		8,056,044		10.0	%
Total		137		9,517,415		88.7	%	$	80,519,947		100.0	%

PORTFOLIO BY PROPERTY TYPE

									��	Percentage
								Annualized		of
	Number of				Percent			Base Rent1 -		Annualized
	Buildings		Square Feet		Leased			Cash Basis		Base Rent1
Single-tenant Industrial		4		482,182		100.0	%	$	4,375,185		5.4	%
Multi-tenant Industrial		30		4,326,590		86.2	%		26,477,366		32.9	%
Flex		97		4,153,196		89.3	%		43,840,064		54.5	%
Office		5		354,097		92.0	%		4,610,136		5.7	%
Retail		1		201,350		96.6	%		1,217,196		1.5	%
Total		137		9,517,415		88.7	%	$	80,519,947		100.0	%

PORTFOLIO BY LEASE TYPE

					Percentage
	Number of				of Leased
	Leases		Square Feet2		Portfolio
Triple Net		403		5,902,661		69.9	%
Industrial Gross		138		952,051		11.3	%
Full Service		152		1,588,249		18.8	%
Total		693		8,442,961		100.0	%

1	Triple-net Equivalent
2	Does not include vacant and core factor space.

-17-

Quarterly Supplemental Disclosure
June 30, 2006

FIRST POTOMAC REALTY TRUST
WASHINGTON MARKET

Washington	Buildings		Square Feet		% of Total			% Leased
Suburban MD
15 Worman’s Mill Court		1		39,966		0.8	%		100.0	%
20270 Goldenrod Lane		1		24,468		0.5	%		75.2	%
4451 Georgia Pacific Boulevard		1		169,750		3.6	%		100.0	%
4612 Navistar Drive		1		215,085		4.6	%		100.0	%
6900 English Muffin Way		1		165,690		3.5	%		100.0	%
7561 Lindbergh Drive		1		36,000		0.8	%		100.0	%
Airpark Place		3		82,200		1.7	%		89.1	%
Campus at Metro Park North		4		190,238		4.0	%		100.0	%
Gateway Center		2		44,307		0.9	%		100.0	%
Girard Business Center		3		123,900		2.6	%		85.5	%
Girard Place		4		175,217		3.7	%		100.0	%
Glenn Dale Business Center		1		315,191		6.7	%		99.2	%
Patrick Center		1		66,706		1.4	%		83.3	%
West Park		1		28,950		0.6	%		93.4	%
Woodlands Business Center		1		37,940		0.8	%		60.1	%
Subtotal		26		1,715,608		36.2	%		96.3	%
Northern VA
13129 Airpark Road		1		150,400		3.3	%		100.0	%
15395 John Marshall Highway		1		123,777		2.6	%		100.0	%
403/405 Glenn Drive		2		197,201		4.2	%		81.7	%
Alexandria Corporate Park		1		278,130		5.9	%		81.9	%
Aquia Commerce Center I & II		2		64,488		1.4	%		100.0	%
Enterprise Center		4		189,116		4.0	%		82.5	%
Gateway Centre		3		99,607		2.1	%		94.9	%
Herndon Corporate Center		4		127,353		2.7	%		97.7	%
Interstate Plaza		1		107,320		2.3	%		100.0	%
Linden Business Center		3		108,004		2.3	%		90.4	%
Newington Business Park Center		7		254,114		5.4	%		94.7	%
Old Courthouse Square		1		201,350		4.2	%		96.6	%
Plaza 500		2		506,725		10.7	%		96.1	%
Prosperity Business Center		1		71,572		1.5	%		100.0	%
Reston Business Campus		4		83,000		1.7	%		91.6	%
Tech Court		2		64,064		1.3	%		74.6	%
Van Buren Business Park		5		109,310		2.3	%		96.5	%
Windsor at Battlefield		2		154,226		3.3	%		83.1	%
Sterling Park Business Center		2		127,814		2.7	%		80.8	%
Subtotal		48		3,017,571		63.8	%		91.5	%
Total		74		4,733,179		100.0	%		93.3	%

LEASE EXPIRATIONS

	SF of Expiring		% of Total			Annual Base		% of Annual			Base Rent1
Year of Lease Expiration	Leases		SF			Rent1		Base Rent1			per SF
Vacant		319,344		6.7	%	$	—		0.0	%	$	—
MTM		5,867		0.1	%		72,669		0.1	%		12.39
2006		251,848		5.3	%		2,669,949		5.5	%		10.60
2007		659,678		13.9	%		7,513,771		15.5	%		11.39
2008		510,171		10.8	%		6,265,729		12.9	%		12.28
2009		749,412		16.0	%		7,256,691		15.0	%		9.68
2010		733,853		15.5	%		7,889,427		16.3	%		10.75
2011		488,073		10.3	%		5,149,380		10.6	%		10.55
2012		251,887		5.3	%		2,453,602		5.1	%		9.74
2013		125,916		2.7	%		2,529,218		5.2	%		20.09
2014		213,377		4.5	%		2,509,400		5.2	%		11.76
2015		132,883		2.8	%		1,753,638		3.6	%		13.20
2016		251,693		5.3	%		2,240,033		4.6	%		8.90
2023		39,177		0.8	%		195,885		0.4	%		5.00
		4,733,179		100.0	%	$	48,499,392		100.0	%	$	10.99

¹ Triple-net Equivalent

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Quarterly Supplemental Disclosure
June 30, 2006

FIRST POTOMAC REALTY TRUST
NORFOLK MARKET

								%
Norfolk	Buildings		Square Feet		% of Total			Leased
1000 Lucas Way		2		182,175		6.1	%		91.5	%
1400 Cavalier Boulevard		3		299,963		10.1	%		100.0	%
1434 Crossways Boulevard		2		220,501		7.4	%		100.0	%
2000 Gateway Boulevard		1		421,100		14.2	%		3.8	%
Coast Guard Building		1		61,992		2.1	%		100.0	%
Crossways Commerce Center I		1		348,615		11.7	%		100.0	%
Crossways Commerce Center ll		2		147,736		5.0	%		100.0	%
Crossways I		1		143,398		4.8	%		85.1	%
Crossways II		1		85,004		2.9	%		100.0	%
Diamond Hill Distribution Center		4		712,550		24.0	%		90.2	%
Greenbrier Technology Center II		1		79,684		2.7	%		99.0	%
Norfolk Business Center		1		90,682		3.1	%		92.9	%
Norfolk Commerce Park II		1		128,147		4.3	%		100.0	%
1408 Stephanie Way		1		51,209		1.7	%		0.0	%
Total		22		2,972,756		100.0	%		80.8	%

LEASE EXPIRATIONS

								% of
	SF of							Annual
	Expiring		% of Total			Annual Base		Base			Base Rent1per
Year of Lease Expiration	Leases		SF			Rent1		Rent1			SF
Vacant		570,585		19.2	%	$	—		0.0	%	$	—
MTM		48,000		1.6	%		268,944		1.5	%		5.60
2006		421,010		14.2	%		1,973,940		11.0	%		4.69
2007		345,688		11.6	%		2,336,730		13.0	%		6.76
2008		468,771		15.8	%		3,425,770		19.1	%		7.31
2009		358,541		12.1	%		3,093,111		17.3	%		8.63
2010		39,428		1.3	%		519,941		2.9	%		13.19
2011		579,561		19.5	%		4,827,790		26.9	%		8.33
2012		27,889		0.9	%		406,018		2.3	%		14.56
2013		47,448		1.6	%		647,665		3.6	%		13.65
2014		5,835		0.2	%		87,525		0.5	%		15.00
2017		60,000		2.0	%		344,406		1.9	%		5.74
Total		2,972,756		100	%	$	17,931,840		100	%	$	7.46

¹ Triple-net Equivalent

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Quarterly Supplemental Disclosure
June 30, 2006

FIRST POTOMAC REALTY TRUST
BALTIMORE MARKET

			Square
Baltimore	Buildings		Feet		% of Total			% Leased
Deer Park		4		171,140		26.6	%		79.3	%
Gateway West		4		110,147		17.1	%		79.7	%
Owings Mills Business Center		4		87,148		13.6	%		100.0	%
Rumsey Center		4		134,654		20.9	%		70.8	%
Snowden Center		4		140,438		21.8	%		89.7	%
Total		20		643,527		100.0	%		82.7	%

LEASE EXPIRATIONS

								% of
	SF of							Annual
	Expiring		% of			Annual		Base			Base Rent1per
Year of Lease Expiration	Leases		Total SF			Base Rent1		Rent1			SF
Vacant		111,619		17.4	%	$	—		0.0	%	$	—
MTM		4,042		0.6	%		35,241		0.6	%		8.72
2006		27,306		4.2	%		343,810		5.7	%		12.59
2007		99,999		15.5	%		1,199,771		19.9	%		12.00
2008		101,844		15.8	%		1,198,101		19.9	%		11.76
2009		74,084		11.5	%		714,164		11.8	%		9.64
2010		71,207		11.1	%		678,598		11.3	%		9.53
2011		77,618		12.1	%		874,415		14.5	%		11.27
2012		16,638		2.6	%		232,024		3.8	%		13.95
2015		59,170		9.2	%		756,547		12.5	%		12.79
Total		643,527		100.0	%	$	6,032,671		100.0	%	$	11.34

¹ Triple-net Equivalent

-20-

Quarterly Supplemental Disclosure
June 30, 2006

FIRST POTOMAC REALTY TRUST
RICHMOND MARKET

			Square
Richmond	Buildings		Feet		% of Total			% Leased
Virginia Center		1		119,324		10.2	%		89.4	%
River’s Bend Center		4		492,400		42.2	%		93.1	%
Northridge I, II		2		140,390		12.0	%		100.0	%
Airpark Business Center		2		42,178		3.6	%		100.0	%
Chesterfield Business Center		2		190,049		16.3	%		93.1	%
Hanover Business Center		2		183,612		15.7	%		92.8	%
Total		13		1,167,953		100.0	%		93.8	%

LEASE EXPIRATIONS

	SF of Expiring		% of Total			Annual		% of Annual Base			Base Rent1per
Year of Lease Expiration	Leases		SF			Base Rent1		Rent1			SF
Vacant		72,906		6.3	%	$	—		0.0	%	$	—
MTM		7,890		0.7	%		56,505		0.7	%		7.16
2006		100,689		8.6	%		592,600		7.4	%		5.89
2007		170,075		14.6	%		1,208,515		15.0	%		7.11
2008		222,462		19.0	%		1,597,044		19.8	%		7.18
2009		141,717		12.1	%		1,189,837		14.8	%		8.40
2010		172,958		14.8	%		1,327,120		16.5	%		7.67
2011		199,652		17.1	%		1,333,035		16.5	%		6.68
2012		39,397		3.4	%		277,309		3.4	%		7.04
2013		3,593		0.3	%		41,319		0.5	%		11.50
2014		23,254		2.0	%		359,140		4.5	%		15.44
2015		13,360		1.1	%		73,620		0.9	%		5.51
Total		1,167,953		100.0	%	$	8,056,044		100.0	%	$	7.36

¹ Triple-net Equivalent

-21-

Quarterly Supplemental Disclosure
June 30, 2006

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 measure of the Company’s liquidity. The Company computes AFFO by adding to FFO equity based compensation expense and the non-cash amortization of deferred financing costs and non-real estate depreciation, and then subtracting cash paid for any recurring tenant improvements, leasing commissions, and recurring capital expenditures, and eliminating the net effect of straight-line rents, deferred market rent and debt fair value amortization. First generation costs exclude non-recurring tenant improvements, leasing commissions and capital expenditures that were taken into consideration when underwriting the purchase of a property or incurred to bring the property to opearting standard for its intended use. The Company also excludes development related expendiutres. 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.

-22-