Office Properties Income Trust (OPI) 10-Q30 Apr 142014 Q1 Quarterly reportFinancial data

Company Profile

Document_and_Entity_Informatio

Document and Entity Information	3 Months Ended
Document and Entity Information	Mar. 31, 2014	Apr. 29, 2014
Document and Entity Information	'	'
Entity Registrant Name	'Government Properties Income Trust	'
Entity Central Index Key	'0001456772	'
Document Type	'10-Q	'
Document Period End Date	31-Mar-14	'
Amendment Flag	'false	'
Current Fiscal Year End Date	'--12-31	'
Entity Current Reporting Status	'Yes	'
Entity Filer Category	'Large Accelerated Filer	'
Entity Common Stock, Shares Outstanding	'	54,731,733
Document Fiscal Year Focus	'2014	'
Document Fiscal Period Focus	'Q1	'

CONDENSED_CONSOLIDATED_BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Mar. 31, 2014	Dec. 31, 2013
In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Real estate properties:	'	'
Land	$246,649	$243,686
Buildings and improvements	1,341,443	1,324,876
Total real estate properties, at cost, gross	1,588,092	1,568,562
Accumulated depreciation	-196,360	-187,635
Total real estate properties, at cost, net	1,391,732	1,380,927
Assets of discontinued operations	23,570	25,997
Acquired real estate leases, net	139,330	142,266
Cash and cash equivalents	2,979	7,663
Restricted cash	2,344	1,689
Rents receivable, net	31,519	33,350
Deferred leasing costs, net	11,432	11,618
Deferred financing costs, net	3,556	3,911
Other assets, net	23,018	25,031
Total assets	1,629,480	1,632,452
LIABILITIES AND SHAREHOLDERS' EQUITY	'	'
Unsecured revolving credit facility	150,500	157,000
Unsecured term loan	350,000	350,000
Mortgage notes payable	104,615	90,727
Liabilities of discontinued operations	276	276
Accounts payable and accrued expenses	21,940	23,216
Due to related persons	2,420	2,474
Assumed real estate lease obligations, net	18,197	19,084
Total liabilities	647,948	642,777
Commitments and contingencies	'	'
Shareholders' equity:	'	'
Common shares of beneficial interest, $.01 par value: 70,000,000 shares authorized, 54,728,393 and 54,722,018 shares issued and outstanding, respectively	547	547
Additional paid in capital	1,105,857	1,105,679
Cumulative net income	207,103	191,913
Cumulative other comprehensive income	68	49
Cumulative common distributions	-332,043	-308,513
Total shareholders' equity	981,532	989,675
Total liabilities and shareholders' equity	$1,629,480	$1,632,452

CONDENSED_CONSOLIDATED_BALANCE1

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Mar. 31, 2014	Dec. 31, 2013
CONDENSED CONSOLIDATED BALANCE SHEETS	'	'
Common shares of beneficial interest, par value (in dollars per share)	$0.01	$0.01
Common shares of beneficial interest, shares authorized	70,000,000	70,000,000
Common shares of beneficial interest, shares issued	54,728,393	54,722,018
Common shares of beneficial interest, shares outstanding	54,728,393	54,722,018

CONDENSED_CONSOLIDATED_STATEME

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (USD $)	3 Months Ended
In Thousands, except Per Share data, unless otherwise specified	Mar. 31, 2014	Mar. 31, 2013
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME	'	'
Rental income	$59,820	$56,304
Expenses:	'	'
Real estate taxes	6,812	6,321
Utility expenses	5,696	3,849
Other operating expenses	11,041	9,321
Depreciation and amortization	15,427	13,326
Acquisition related costs	509	34
General and administrative	3,097	3,179
Total expenses	42,582	36,030
Operating income	17,238	20,274
Interest and other income	50	6
Interest expense (including net amortization of debt premiums and deferred financing fees of $330 and $331, respectively)	-4,527	-4,147
Income from continuing operations before income tax expense, and equity in earnings (losses) of an investee	12,761	16,133
Income tax expense	-22	-43
Equity in earnings (losses) of an investee	-97	76
Income from continuing operations	12,642	16,166
Income from discontinued operations	2,548	8,560
Net income	15,190	24,726
Other comprehensive income (loss):	'	'
Equity in unrealized gain (loss) of an investee	19	-8
Other comprehensive income (loss)	19	-8
Comprehensive income	$15,209	$24,718
Weighted average common shares outstanding (in shares)	54,725	54,645
Per common share amounts:	'	'
Income from continuing operations (in dollars per share)	$0.23	$0.30
Income from discontinued operations (in dollars per share)	$0.05	$0.16
Net income (in dollars per share)	$0.28	$0.45

CONDENSED_CONSOLIDATED_STATEME1

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Parenthetical) (USD $)	3 Months Ended
In Thousands, unless otherwise specified	Mar. 31, 2014	Mar. 31, 2013
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME	'	'
Amortization of debt premiums and deferred financing fees	$330	$331

CONDENSED_CONSOLIDATED_STATEME2

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	3 Months Ended
In Thousands, unless otherwise specified	Mar. 31, 2014	Mar. 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:	'	'
Net income	$15,190	$24,726
Adjustments to reconcile net income to cash provided by operating activities:	'	'
Depreciation	9,156	8,595
Net amortization of debt premium and deferred financing fees	330	331
Straight line rental income	-1,139	-909
Amortization of acquired real estate leases	6,020	5,199
Amortization of deferred leasing costs	456	196
Other non-cash expenses	354	499
Increase in carrying value of assets held for sale	-2,344	'
Net gain on sale of properties	'	-8,168
Equity in losses (earnings) of an investee	97	-76
Change in assets and liabilities:	'	'
Restricted cash	-655	-611
Deferred leasing costs	-1,179	-893
Rents receivable	3,084	-1,003
Due from related persons	'	-286
Other assets	2,041	1,124
Accounts payable and accrued expenses	-210	1,566
Due to related persons	-136	-644
Cash provided by operating activities	31,065	29,646
CASH FLOWS FROM INVESTING ACTIVITIES:	'	'
Real estate acquisitions and deposits	-5,118	'
Real estate improvements	-4,634	-3,707
Proceeds from sale of properties, net	4,644	18,374
Cash (used in) provided by investing activities	-5,108	14,667
CASH FLOWS FROM FINANCING ACTIVITIES:	'	'
Repayment of mortgage notes payable	-520	-485
Borrowings on unsecured revolving credit facility	23,500	23,500
Repayments on unsecured revolving credit facility	-30,000	-45,500
Financing fees	-91	'
Distributions to common shareholders	-23,530	-23,497
Cash used in financing activities	-30,641	-45,982
Decrease in cash and cash equivalents	-4,684	-1,669
Cash and cash equivalents at beginning of period	7,663	5,255
Cash and cash equivalents at end of period	2,979	3,586
Supplemental cash flow information:	'	'
Interest paid	4,131	3,773
Income taxes paid	43	84
Non-cash investing activities	'	'
Real estate acquisition funded with the assumption of mortgage debt	-14,524	'
Non-cash financing activities:	'	'
Assumption of mortgage debt	$14,524	'

Basis_of_Presentation

Basis of Presentation	3 Months Ended
Basis of Presentation	Mar. 31, 2014
Basis of Presentation	'
Basis of Presentation	'
	Note 1. Basis of Presentation

	The accompanying condensed consolidated financial statements of Government Properties Income Trust and its subsidiaries, or the Company, we or us, are unaudited. We operate in one business segment: ownership of properties that are primarily leased to government tenants. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2013, or our Annual Report. In the opinion of our management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Our operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.

	The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the condensed consolidated financial statements include purchase price allocations, useful lives of fixed assets and impairment of real estate and intangible assets.

Recent_Accounting_Pronouncemen

Recent Accounting Pronouncements	3 Months Ended
Recent Accounting Pronouncements	Mar. 31, 2014
Recent Accounting Pronouncements	'
Recent Accounting Pronouncements	'
	Note 2. Recent Accounting Pronouncements

	In April 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This update amends the criteria for reporting discontinued operations to, among other things, raise the threshold for disposals to qualify as discontinued operations. This update is effective for interim and annual reporting periods, beginning after December 15, 2014, with early adoption permitted. We currently expect the adoption of this update to reduce the number of future property dispositions we make, if any, to be presented as discontinued operations in our condensed consolidated financial statements.

Real_Estate_Properties

Real Estate Properties	3 Months Ended
Real Estate Properties	Mar. 31, 2014
Real Estate Properties	'
Real Estate Properties	'
	Note 3. Real Estate Properties

	As of March 31, 2014, we owned 69 properties (88 buildings), excluding two properties (two buildings) classified as discontinued operations, with an undepreciated carrying value of $1,588,092. We generally lease space in our properties on a gross lease or modified gross lease basis pursuant to fixed term operating leases expiring between 2014 and 2029. Certain of our government tenants have the right to terminate their leases before the lease term expires. Our leases generally require us to pay all or some property operating expenses and to provide all or most property management services. During the three months ended March 31, 2014, we entered into 13 leases for 62,470 rentable square feet for a weighted (by revenue) average lease term of 5.7 years and we made commitments for approximately $1,658 of leasing related costs. We have estimated unspent leasing related obligations of $14,016 as of March 31, 2014.

	Acquisition Activities

	During the three months ended March 31, 2014, we acquired one office property (one building) located in Fairfax, VA with 83,130 rentable square feet. This property is 100% leased to the U.S. Government. The purchase price was $19,775, including the assumption of $14,524 of mortgage debt and excluding acquisition costs. We allocated the purchase price of this acquisition based on the estimated fair values of the acquired assets and assumed liabilities as follows:

						Number
						of								Buildings						Acquired			Other
	Acquisition					Properties/		Square	Purchase					and			Acquired			Lease			Assumed
	Date	Location		Type		Buildings		Feet	Price(1)		Land			Improvements			Leases			Obligations			Liabilities
	March 2014	Fairfax, VA		Office		1-Jan		83,130	$	19,775	$	2,964	-2	$	12,840	-2	$	3,971	-2	$	—	-2	$	233


	(1) Purchase price excludes acquisition related costs.
	(2) The allocation of purchase price is based upon preliminary estimates and may change based upon the completion of our analysis of acquired in place leases.

	In December 2013, we entered into an agreement to acquire an office property (two buildings) located in Reston, VA with 406,388 rentable square feet. This property is 100% leased to the U.S. Government. The contract purchase price is $113,250, including the assumption of $83,000 of mortgage debt and excluding acquisition costs.

	This pending acquisition is subject to closing conditions; accordingly, we can provide no assurance that we will acquire this property or that this acquisition will not be delayed or that the terms will not change.

	Disposition Activities

	During the year ended December 31, 2013, we began marketing for sale an office property (one building) located in Phoenix, AZ with 97,145 rentable square feet and recognized a loss on asset impairment of $8,344 to reduce the carrying value of this asset to its estimated fair value of $2,300. During the three months ended March 31, 2014, we increased the carrying value of this asset by $2,344 to its estimated fair value of $4,644. In February 2014, we sold this property for $5,000, excluding closing costs. We recognized no gain or loss on this sale.

	In April 2014, we entered an agreement to sell an office property (one building) located in Falls Church, VA with 164,746 rentable square feet and a net book value of $12,548 at March 31, 2014. The contract sales price is $16,500, excluding closing costs. The closing of this disposition is subject to certain conditions, including the purchaser obtaining certain zoning entitlements, and is currently expected to occur in 2015. In addition, we continue to market for sale an office property (one building) located in San Diego, CA with 94,272 rentable square feet and a net book value of $11,008 at March 31, 2014. We can provide no assurance that sales of these two properties will occur. See Note 7 regarding the fair value of our assets and liabilities.

	Results of operations for two properties (two buildings) we sold February 2013 and March 2013, one property (one building) we sold in February 2014 and two properties (two buildings) held for sale at March 31, 2014 are included in discontinued operations in our condensed consolidated financial statements. Summarized balance sheet and income statement information for properties in discontinued operations is as follows:

	Balance Sheets:

		March 31, 2014			December 31, 2013
	Real estate properties	$	23,267		$	25,574
	Rents receivable	267			381
	Other assets	36			42
	Assets of discontinued operations	$	23,570		$	25,997

	Other liabilities	$	276		$	276
	Liabilities of discontinued operations	$	276		$	276

	Statements of Operations:

		Three Months Ended March 31,
		2014			2013
	Rental income	$	740		$	1,618
	Real estate taxes	(149		)	(218		)
	Utility expenses	(102		)	(186		)
	Other operating expenses	(226		)	(318		)
	Depreciation and amortization	—			(415		)
	General and administrative	(59		)	(89		)
	Increase in carrying value of asset held for sale	2,344			—
	Net gain on sale of properties from discontinued operations	—			8,168
	Income from discontinued operations	$	2,548		$	8,560

Revenue_Recognition

Revenue Recognition	3 Months Ended
Revenue Recognition	Mar. 31, 2014
Revenue Recognition	'
Revenue Recognition	'
	Note 4. Revenue Recognition

	Rental income from operating leases is recognized on a straight line basis over the life of lease agreements. We increased rental income to record revenue on a straight line basis by $1,142 and $738 for the three months ended March 31, 2014 and 2013, respectively. Rents receivable include $11,657 and $10,515 of straight line rent receivables at March 31, 2014 and December 31, 2013, respectively.

Concentration

Concentration	3 Months Ended
Concentration	Mar. 31, 2014
Concentration	'
Concentration	'
	Note 5. Concentration

	Tenant and Credit Concentration

	We define annualized rental income as the annualized contractual base rents from our tenants pursuant to our lease agreements with them as of the measurement date, plus straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization. The U.S. Government, 11 state governments and the United Nations combined were responsible for approximately 92.6% and 93.8% of our annualized rental income, excluding properties classified as discontinued operations, as of March 31, 2014 and 2013, respectively. The U.S. Government is our largest tenant by annualized rental income and was responsible for approximately 69.4% and 71.2% of our annualized rental income, excluding properties classified as discontinued operations, as of March 31, 2014 and 2013, respectively.

	Geographic Concentration

	At March 31, 2014, our 69 properties (88 buildings), excluding properties classified as discontinued operations, were located in 31 states and the District of Columbia. Properties located in Maryland, California, the District of Columbia, Georgia, New York and Massachusetts were responsible for approximately 13.2%, 11.3%, 10.4%, 9.4%, 8.7% and 5.7% of our annualized rental income as of March 31, 2014, respectively.

Indebtedness

Indebtedness	3 Months Ended
	Mar. 31, 2014
Indebtedness	'
Indebtedness	'
	Note 6. Indebtedness

	At March 31, 2014 and December 31, 2013, our outstanding indebtedness consisted of the following:

		March 31,		December 31,
		2014		2013

	Unsecured revolving credit facility, due in 2015	$	150,500	$	157,000
	Unsecured term loan, due in 2017	350,000		350,000
	Mortgage note payable, 5.73% interest rate, including unamortized premium of $356, due in 2015(1)	48,136		48,377
	Mortgage note payable, 6.21% interest rate, due in 2016(1)	24,065		24,147
	Mortgage note payable, 5.88% interest rate, due in 2021(1)	14,524		—
	Mortgage note payable, 7.00% interest rate, including unamortized premium of $716, due in 2019(1)	9,835		9,919
	Mortgage note payable, 8.15% interest rate, including unamortized premium of $495, due in 2021(1)	8,055		8,284
		$	605,115	$	597,727

	(1) We assumed these mortgages in connection with our acquisitions of certain properties. The stated interest rates for these mortgage debts are the contractually stated rates. We recorded the assumed mortgages at estimated fair value on the date of acquisition and we are amortizing the fair value premiums, if any, to interest expense over the respective terms of the mortgages to reduce interest expense to the estimated market interest rates as of the date of acquisition.

	In March 2014, we assumed the $14,524 of mortgage debt listed above in connection with a property acquisition. This mortgage note bears interest at 5.88% per annum and is amortized on a 30 year schedule until maturity in August 2021. We estimated the interest rate applicable to this mortgage note to be a market interest rate at the time we assumed this obligation.

	We have a $550,000 unsecured revolving credit facility that is available for general business purposes, including acquisitions. The maturity date of our revolving credit facility is October 19, 2015 and, subject to the payment of an extension fee and meeting certain other conditions, includes an option for us to extend the stated maturity date of our revolving credit facility by one year to October 19, 2016. In addition, our revolving credit facility includes a feature under which maximum borrowings may be increased to up to $1,100,000 in certain circumstances. Borrowings under our revolving credit facility bear interest at a rate of LIBOR plus a premium, which was 150 basis points as of March 31, 2014. We also pay a facility fee of 35 basis points per annum on the total amount of lending commitments under our revolving credit facility. Both the interest rate premium and the facility fee are subject to adjustment based upon changes to our credit ratings. As of March 31, 2014, the interest rate payable on borrowings under our revolving credit facility was 1.7% and the weighted average annual interest rate for borrowings under our revolving credit facility was 1.7% for the three months ended March 31, 2014. As of March 31, 2014, we had $150,500 outstanding and $399,500 available under our revolving credit facility.

	We have a $350,000 unsecured term loan. Our term loan matures on January 11, 2017, and is prepayable without penalty at any time. In addition, our term loan includes a feature under which maximum borrowings may be increased to up to $700,000 in certain circumstances. Our term loan bears interest at a rate of LIBOR plus a premium, which was 175 basis points as of March 31, 2014. The interest rate premium is subject to adjustment based upon changes to our credit ratings. As of March 31, 2014, the interest rate for the amount outstanding under our term loan was 1.9% and the weighted average interest rate for the amount outstanding under our term loan was 1.9% for the three months ended March 31, 2014.

	Our revolving credit facility agreement and our term loan agreement provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default, such as a change of control of us, which includes Reit Management & Research LLC, or RMR, ceasing to act as our business manager and property manager. Our revolving credit facility agreement and our term loan agreement also contain a number of covenants, including covenants that restrict our ability to incur debts or to make distributions under certain circumstances and require us to maintain financial ratios and a minimum net worth. We believe we were in compliance with the terms and conditions of our revolving credit facility agreement and our term loan agreement at March 31, 2014.

	At March 31, 2014, five of our properties (six buildings) with an aggregate net book value of $135,666 secured five mortgage notes that were assumed in connection with the acquisition of such properties. Our mortgage notes are non-recourse and do not contain any material financial covenants.

Fair_Value_of_Assets_and_Liabi

Fair Value of Assets and Liabilities	3 Months Ended
Fair Value of Assets and Liabilities	Mar. 31, 2014
Fair Value of Assets and Liabilities	'
Fair Value of Assets and Liabilities	'
	Note 7. Fair Value of Assets and Liabilities

	Our assets and liabilities at March 31, 2014 include cash and cash equivalents, restricted cash, rents receivable, mortgage notes payable, accounts payable, our revolving credit facility and our term loan, amounts due to related persons, other accrued expenses and security deposits. At March 31, 2014, the fair values of our financial instruments approximated their carrying values in our condensed consolidated financial statements due to their short term nature or variable interest rates, except as follows:

		Carrying Amount		Fair Value
	Mortgage note payable, 5.73% interest rate, including unamortized premium of $356, due in 2015	$	48,136	$	49,418
	Mortgage note payable, 6.21% interest rate, due in 2016	24,065		26,027
	Mortgage note payable, 5.88% interest rate, due in 2021	14,524		14,524
	Mortgage note payable, 7.00% interest rate, including unamortized premium of $716, due in 2019	9,835		10,397
	Mortgage note payable, 8.15% interest rate, including unamortized premium of $495, due in 2021	8,055		8,569
		$	104,615	$	108,935

	We estimate the fair values of our mortgage notes payable by using discounted cash flow analyses and currently prevailing market terms as of the measurement date (Level 3 inputs as defined in the fair value hierarchy under GAAP). Because Level 3 inputs are unobservable, our estimated fair value may differ materially from the actual fair value.

	The table below presents a certain asset of ours measured on a non-recurring basis at fair value at March 31, 2014, categorized by the level of inputs used in the valuation of the asset:

				Quoted Prices in				Significant
				Active Markets for		Significant Other		Unobservable
				Identical Assets		Observable Inputs		Inputs
	Description	Total		(Level 1)		(Level 2)		(Level 3)

	Property held for sale(1)	$	12,260	$	—	$	—	$	12,260


	(1) The estimated fair value at March 31, 2014 of the property for which a loss on asset impairment was recognized during the year ended December 31, 2013 is based upon broker estimates of value less estimated sales costs (Level 3 inputs as defined in the fair value hierarchy under GAAP).

	During the three months ended March 31, 2014, we increased the carrying value of a property held for sale due to an increase in its estimated fair value. We sold this property in February 2014. See Note 3 for additional information regarding this property.

Shareholders_Equity

Shareholders' Equity	3 Months Ended
Shareholders' Equity	Mar. 31, 2014
Shareholders' Equity	'
Shareholders' Equity	'
	Note 8. Shareholders’ Equity

	Distributions

	On February 21, 2014, we paid a distribution to common shareholders in the amount of $0.43 per share, or $23,530, that was declared on January 3, 2014 and was payable to shareholders of record on January 13, 2014.

	On April 8, 2014, we declared a distribution payable to common shareholders of record on April 25, 2014, in the amount of $0.43 per share, or $23,535. We expect to pay this distribution on or about May 21, 2014 using cash on hand and borrowings under our revolving credit facility.

	Share Issuances

	During the three months ended March 31, 2014 and the period April 1, 2014 to April 29, 2014, we issued 6,375 and 3,340, respectively, of our common shares to RMR as part of its compensation under our business management agreement. See Note 9 for further information regarding this agreement.

	We have no dilutive securities.

Related_Person_Transactions

Related Person Transactions	3 Months Ended
Related Person Transactions	Mar. 31, 2014
Related Person Transactions	'
Related Person Transactions	'
	Note 9. Related Person Transactions

	RMR: We have no employees. Personnel and various services we require to operate our business are provided to us by RMR. We have two agreements with RMR to provide management and administrative services to us: (i) a business management agreement, which relates to our business generally, and (ii) a property management agreement, which relates to our property level operations.

	One of our Managing Trustees, Mr. Barry Portnoy, is Chairman, majority owner and an employee of RMR. Our other Managing Trustee, Mr. Adam Portnoy, is the son of Mr. Barry Portnoy, and an owner, President, Chief Executive Officer and a director of RMR. Each of our executive officers is also an officer of RMR. Our Independent Trustees also serve as independent directors or independent trustees of other public companies to which RMR provides management services. Mr. Barry Portnoy serves as a managing director or managing trustee of a majority of those companies and Mr. Adam Portnoy serves as a managing trustee of a majority of those companies. In addition, officers of RMR serve as officers of those companies.

	Pursuant to our business management agreement with RMR, we recognized business management fees of $2,401 and $2,454 for the three months ended March 31, 2014 and 2013, respectively. These amounts are included in general and administrative expenses in our condensed consolidated financial statements. In accordance with the terms of our business management agreement, as amended in December 2013, we issued 9,715 of our common shares to RMR for the three months ended March 31, 2014 as payment for 10% of the base business management fee we recognized for such period.

	In connection with our property management agreement with RMR, the aggregate property management and construction supervision fees we recognized were $1,954 and $1,816 for the three months ended March 31, 2014 and 2013, respectively. These amounts are included in other operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements.

	RMR leases from us office space for two of its regional offices. We earned approximately $19 and $7 in rental income from RMR for the three months ended March 31, 2014 and 2013, respectively. These leases are terminable by RMR if our management agreements with RMR are terminated.

	CWH: CommonWealth REIT, or CWH, organized us as a 100% owned subsidiary. One of our Managing Trustees, Mr. Barry Portnoy, was a managing trustee of CWH until March 25, 2014. Our other Managing Trustee, Mr. Adam Portnoy, is the President of CWH and was a managing trustee of CWH until March 25, 2014. RMR provides management services to both us and CWH. CWH’s executive officers are officers of RMR.

	In 2009, we completed our initial public offering, or our IPO, pursuant to which we ceased to be a majority owned subsidiary of CWH. To facilitate our IPO, we and CWH entered into a transaction agreement that governs our separation from and relationship with CWH. Pursuant to this transaction agreement and subject to certain conditions, among other things, CWH granted us a right of first refusal to acquire any property owned by CWH that CWH determines to divest if the property is then majority leased to a government tenant, which right of first refusal will also apply in the event of an indirect sale of any such properties resulting from a change of control of CWH.

	On March 15, 2013, CWH sold all 9,950,000 of our common shares it owned in a public offering. In connection with this public offering, on March 11, 2013, we entered into a registration agreement with CWH under which CWH agreed to pay all expenses incurred by us relating to the registration and sale of our common shares owned by CWH in the offering, pursuant to which CWH paid us $310 during 2013. In addition, under the registration agreement, CWH agreed to indemnify us and our officers, Trustees and controlling persons, and we agreed to indemnify CWH and its officers, trustees and controlling persons, against certain liabilities related to the public offering, including liabilities under the Securities Act of 1933, as amended, or the Securities Act.

	AIC: We, RMR and six other companies to which RMR provides management services each currently own approximately 12.5% of Affiliates Insurance Company, or AIC, an Indiana insurance company. All of our Trustees and most of the trustees and directors of the other AIC shareholders currently serve on the board of directors of AIC. RMR provides management and administrative services to AIC pursuant to a management and administrative services agreement with AIC.

	We and the other shareholders of AIC have purchased property insurance providing $500,000 of coverage pursuant to an insurance program arranged by AIC and with respect to which AIC is a reinsurer of certain coverage amounts. This program currently expires in June 2014, and we may determine to renew our participation in this program at that time. As of March 31, 2014, we have invested $5,194 in AIC since we became an equity owner of AIC in 2009. Although we own less than 20% of AIC, we use the equity method to account for this investment because we believe that we have significant influence over AIC as all of our Trustees are also directors of AIC. Our investment in AIC had a carrying value of $5,954 and $6,031 as of March 31, 2014 and December 31, 2013, respectively, which amounts are included in other assets on our condensed consolidated balance sheet. We recognized a loss of $97 and income of $76 related to our investment in AIC for the three months ended March 31, 2014 and 2013, respectively.

	On March 25, 2014, as a result of the removal, without cause, of all of the trustees of CWH, CWH underwent a change in control, as defined in the shareholders agreement among us, the other shareholders of AIC and AIC. In April 2014, as a result of the change in control of CWH and in accordance with the terms of the shareholders agreement, we provided notice of exercise of our right to purchase shares of AIC CWH then owned. We expect that we and the other non-CWH shareholders will purchase pro rata all of the AIC shares CWH owns. As such, we expect to purchase 2,857 of those shares for $825, and that following these purchases, we and the other remaining six shareholders will then each own approximately 14.3% of AIC.

Real_Estate_Properties_Tables

Real Estate Properties (Tables)	3 Months Ended
Real Estate Properties (Tables)	Mar. 31, 2014
Real Estate Properties	'
Purchase prices of acquisitions allocated based on the estimated fair values of the acquired assets and assumed liabilities	'
						Number
						of								Buildings						Acquired			Other
	Acquisition					Properties/		Square	Purchase					and			Acquired			Lease			Assumed
	Date	Location		Type		Buildings		Feet	Price(1)		Land			Improvements			Leases			Obligations			Liabilities
	March 2014	Fairfax, VA		Office		1-Jan		83,130	$	19,775	$	2,964	-2	$	12,840	-2	$	3,971	-2	$	—	-2	$	233


	(1) Purchase price excludes acquisition related costs.
	(2) The allocation of purchase price is based upon preliminary estimates and may change based upon the completion of our analysis of acquired in place leases.
Summarized balance sheet and income statement information for properties in discontinued operations	'


	Balance Sheets:

		March 31, 2014			December 31, 2013
	Real estate properties	$	23,267		$	25,574
	Rents receivable	267			381
	Other assets	36			42
	Assets of discontinued operations	$	23,570		$	25,997

	Other liabilities	$	276		$	276
	Liabilities of discontinued operations	$	276		$	276

	Statements of Operations:

		Three Months Ended March 31,
		2014			2013
	Rental income	$	740		$	1,618
	Real estate taxes	(149		)	(218		)
	Utility expenses	(102		)	(186		)
	Other operating expenses	(226		)	(318		)
	Depreciation and amortization	—			(415		)
	General and administrative	(59		)	(89		)
	Increase in carrying value of asset held for sale	2,344			—
	Net gain on sale of properties from discontinued operations	—			8,168
	Income from discontinued operations	$	2,548		$	8,560

Indebtedness_Tables

Indebtedness (Tables)	3 Months Ended
	Mar. 31, 2014
Indebtedness	'
Composition of outstanding indebtedness	'


		March 31,		December 31,
		2014		2013

	Unsecured revolving credit facility, due in 2015	$	150,500	$	157,000
	Unsecured term loan, due in 2017	350,000		350,000
	Mortgage note payable, 5.73% interest rate, including unamortized premium of $356, due in 2015(1)	48,136		48,377
	Mortgage note payable, 6.21% interest rate, due in 2016(1)	24,065		24,147
	Mortgage note payable, 5.88% interest rate, due in 2021(1)	14,524		—
	Mortgage note payable, 7.00% interest rate, including unamortized premium of $716, due in 2019(1)	9,835		9,919
	Mortgage note payable, 8.15% interest rate, including unamortized premium of $495, due in 2021(1)	8,055		8,284
		$	605,115	$	597,727

	(1) We assumed these mortgages in connection with our acquisitions of certain properties. The stated interest rates for these mortgage debts are the contractually stated rates. We recorded the assumed mortgages at estimated fair value on the date of acquisition and we are amortizing the fair value premiums, if any, to interest expense over the respective terms of the mortgages to reduce interest expense to the estimated market interest rates as of the date of acquisition.

Fair_Value_of_Assets_and_Liabi1

Fair Value of Assets and Liabilities (Tables)	3 Months Ended
Fair Value of Assets and Liabilities (Tables)	Mar. 31, 2014
Fair Value of Assets and Liabilities	'
Schedule of fair value and carrying value of financial instruments	'


		Carrying Amount		Fair Value
	Mortgage note payable, 5.73% interest rate, including unamortized premium of $356, due in 2015	$	48,136	$	49,418
	Mortgage note payable, 6.21% interest rate, due in 2016	24,065		26,027
	Mortgage note payable, 5.88% interest rate, due in 2021	14,524		14,524
	Mortgage note payable, 7.00% interest rate, including unamortized premium of $716, due in 2019	9,835		10,397
	Mortgage note payable, 8.15% interest rate, including unamortized premium of $495, due in 2021	8,055		8,569
		$	104,615	$	108,935

Schedule of assets measured on a non-recurring basis at fair value, categorized by the level of inputs used in the valuation assets	'
	The table below presents a certain asset of ours measured on a non-recurring basis at fair value at March 31, 2014, categorized by the level of inputs used in the valuation of the asset:

				Quoted Prices in				Significant
				Active Markets for		Significant Other		Unobservable
				Identical Assets		Observable Inputs		Inputs
	Description	Total		(Level 1)		(Level 2)		(Level 3)

	Property held for sale(1)	$	12,260	$	—	$	—	$	12,260


	(1) The estimated fair value at March 31, 2014 of the property for which a loss on asset impairment was recognized during the year ended December 31, 2013 is based upon broker estimates of value less estimated sales costs (Level 3 inputs as defined in the fair value hierarchy under GAAP).

Basis_of_Presentation_Details

Basis of Presentation (Details)	3 Months Ended
	Mar. 31, 2014
	segment
Basis of Presentation	'
Number of business segments	1

Real_Estate_Properties_Details

Real Estate Properties (Details) (USD $)

3 Months Ended

1 Months Ended

3 Months Ended

12 Months Ended

In Thousands, unless otherwise specified

Mar. 31, 2014

Mar. 31, 2013

Dec. 31, 2013

Mar. 31, 2014

Dec. 31, 2013

Feb. 28, 2014

Mar. 31, 2014

Dec. 31, 2013

Apr. 30, 2014

property

Continuing operations

Discontinued operations

Fairfax, VA

Reston, VA

Phoenix, AZ

Falls Church, VA

San Diego, CA

San Diego, CA and Falls Church, VA

sqft

property

item

One building

Two buildings

One building

Sale of properties

One building

Sale of properties

One building

Sale of properties

state

item

property

Office property

Subsequent event

Office property

item

sqft

U.S. Government

sqft

U.S. Government

item

sqft

Subsequent event

property

item

sqft

item

sqft

item

property

item

Real estate properties

Number of properties owned

Number of buildings

Aggregate investment in properties

$1,588,092

$1,568,562

$1,588,092

Number of leases entered

Weighted average lease term

'5 years 8 months 12 days

Expenditures committed on leases

1,658

Committed but unspent tenant related obligations estimated

14,016

Number of properties acquired or agreed to be acquired

Number of buildings acquired or agreed to be acquired

Square Feet

62,470

83,130

406,388

Purchase Price

19,775

113,250

Land

2,964

Buildings and Improvements

12,840

Acquired Leases

3,971

Other Assumed Liabilities

233

Percentage of property leased

100.00%

Amount of mortgage debt assumed in contract purchase price

14,524

83,000

Rentable square feet of Properties

97,145

164,746

94,272

Number of states in which acquired properties located

Loss on impairment recognized

8,344

Carrying value

1,391,732

1,380,927

4,644

2,300

12,548

11,008

Increase in carrying value of assets held for sale

2,344

Aggregate sale price of properties sold, excluding closing costs

5,000

16,500

Gain (loss) on sale of properties

$8,168

Real_Estate_Properties_Details1

Real Estate Properties (Details 2) (USD $)	1 Months Ended			3 Months Ended
In Thousands, unless otherwise specified	Feb. 28, 2014	Mar. 31, 2013	Feb. 28, 2013	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
	property	property	property	property	Mar. 31, 2013	Dec. 31, 2013
Real estate properties	'	'	'	'	'	'
Number of properties sold	1	2	2	'	'	'
Number of properties held for sale	'	'	'	2	'	'
Balance Sheets:	'	'	'	'	'	'
Real estate properties	'	'	'	$1,391,732	'	$1,380,927
Rents receivable	'	'	'	31,519	'	33,350
Other assets	'	'	'	23,018	'	25,031
Total assets	'	'	'	1,629,480	'	1,632,452
Other liabilities	'	'	'	21,940	'	23,216
Total liabilities	'	'	'	647,948	'	642,777
Statement of Operations:	'	'	'	'	'	'
Rental income	'	'	'	59,820	56,304	'
Real estate taxes	'	'	'	-6,812	-6,321	'
Utility expenses	'	'	'	-5,696	-3,849	'
Other operating expenses	'	'	'	-11,041	-9,321	'
Depreciation and amortization	'	'	'	-15,427	-13,326	'
General and administrative	'	'	'	-3,097	-3,179	'
Increase in carrying value of assets held for sale	'	'	'	2,344	'	'
Income from discontinued operations	'	'	'	2,548	8,560	'
Discontinued operations	'	'	'	'	'	'
Balance Sheets:	'	'	'	'	'	'
Real estate properties	'	'	'	23,267	'	25,574
Rents receivable	'	'	'	267	'	381
Other assets	'	'	'	36	'	42
Total assets	'	'	'	23,570	'	25,997
Other liabilities	'	'	'	276	'	276
Total liabilities	'	'	'	276	'	276
Statement of Operations:	'	'	'	'	'	'
Rental income	'	'	'	740	1,618	'
Real estate taxes	'	'	'	-149	-218	'
Utility expenses	'	'	'	-102	-186	'
Other operating expenses	'	'	'	-226	-318	'
Depreciation and amortization	'	'	'	'	-415	'
General and administrative	'	'	'	-59	-89	'
Increase in carrying value of assets held for sale	'	'	'	2,344	'	'
Net gain on sale of properties from discontinued operations	'	'	'	'	8,168	'
Income from discontinued operations	'	'	'	$2,548	$8,560	'
One building	'	'	'	'	'	'
Real estate properties	'	'	'	'	'	'
Number of properties sold	1	'	'	'	'	'
Two buildings	'	'	'	'	'	'
Real estate properties	'	'	'	'	'	'
Number of properties sold	'	2	2	'	'	'
Number of properties held for sale	'	'	'	2	'	'

Revenue_Recognition_Details

Revenue Recognition (Details) (USD $)	3 Months Ended
In Thousands, unless otherwise specified	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Revenue Recognition	'	'	'
Increase in rental income to record revenue on straight line basis	$1,142	$738	'
Straight line rent receivables	$11,657	'	$10,515

Concentration_Details

Concentration (Details)	3 Months Ended
Concentration (Details)	Mar. 31, 2014	Mar. 31, 2013
Concentration	'	'
Number of properties owned	69	'
Number of buildings	88	'
Number of states in which acquired properties located	31	'
Concentration	'	'
Number of state governments	11	'
Annualized rental income, excluding properties classified as discontinued operations \| Maryland	'	'
Concentration	'	'
Annualized Rental income percent	0.132	'
Annualized rental income, excluding properties classified as discontinued operations \| California	'	'
Concentration	'	'
Annualized Rental income percent	0.113	'
Annualized rental income, excluding properties classified as discontinued operations \| District of Columbia	'	'
Concentration	'	'
Annualized Rental income percent	0.104	'
Annualized rental income, excluding properties classified as discontinued operations \| Georgia	'	'
Concentration	'	'
Annualized Rental income percent	0.094	'
Annualized rental income, excluding properties classified as discontinued operations \| New York	'	'
Concentration	'	'
Annualized Rental income percent	0.087	'
Annualized rental income, excluding properties classified as discontinued operations \| Massachusetts	'	'
Concentration	'	'
Annualized Rental income percent	0.057	'
Annualized rental income, excluding properties classified as discontinued operations \| Tenant concentration \| U.S. Government, state governments and the United Nations	'	'
Concentration	'	'
Concentration risk, percentage	92.60%	93.80%
Annualized rental income, excluding properties classified as discontinued operations \| Tenant concentration \| U.S. Government	'	'
Concentration	'	'
Concentration risk, percentage	69.40%	71.20%

Indebtedness_Details

Indebtedness (Details) (USD $)

3 Months Ended

1 Months Ended

In Thousands, unless otherwise specified

Mar. 31, 2014

Dec. 31, 2013

Mar. 31, 2014

Dec. 31, 2013

Mar. 31, 2014

Dec. 31, 2013

Mar. 31, 2014

Dec. 31, 2013

Mar. 31, 2014

Dec. 31, 2013

Mar. 31, 2014

Dec. 31, 2013

Mar. 31, 2014

Dec. 31, 2013

loan

Unsecured revolving credit facility due in 2015

Unsecured term loan, due in 2017

5.73% Mortgage notes due in 2015

6.21% Mortgage notes due in 2016

Mortgage note payable, 5.88% interest rate, due in 2021

7% Mortgage notes due in 2019

8.15% Mortgage notes due in 2021

item

property

Indebtedness

Unsecured revolving credit facility

$150,500

$157,000

$150,500

$157,000

Term loan

350,000

Mortgage notes payable

104,615

90,727

48,136

48,377

24,065

24,147

14,524

9,835

9,919

8,055

8,284

Total

605,115

597,727

Interest rate (as a percent)

5.73%

6.21%

5.88%

7.00%

8.15%

Unamortized fair value premium included in mortgage notes

356

716

495

Term of loan

'30 years

Maximum borrowing capacity on revolving credit facility

550,000

Revolving credit facility, interest rate basis

'LIBOR

Maximum borrowing capacity on debt instruments may be increased under certain conditions

1,100,000

700,000

Option to extend the maturity date subject to certain conditions and the payment of a fee

'1 year

Term loan, interest rate basis

'LIBOR

Interest rate premium (as a percent)

1.50%

1.75%

Facility fee (as a percent)

0.35%

Interest rate (as a percent)

1.70%

1.90%

The weighted average annual interest rate (as a percent)

1.70%

1.90%

Amount available to be drawn

399,500

Number of assumed secured mortgage loans

Aggregate net book value of secured properties

$135,666

Number of properties secured by mortgage notes

Number of buildings secured by mortgage notes

Fair_Value_of_Assets_and_Liabi2

Fair Value of Assets and Liabilities (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Fair Value of Financial Instruments	'	'
Mortgage notes payable	$104,615	$90,727
5.73% Mortgage notes due in 2015	'	'
Fair Value of Financial Instruments	'	'
Mortgage notes payable	48,136	48,377
Interest rate (as a percent)	5.73%	5.73%
Unamortized fair value premium included in mortgage notes	356	356
6.21% Mortgage notes due in 2016	'	'
Fair Value of Financial Instruments	'	'
Mortgage notes payable	24,065	24,147
Interest rate (as a percent)	6.21%	6.21%
Mortgage note payable, 5.88% interest rate, due in 2021	'	'
Fair Value of Financial Instruments	'	'
Mortgage notes payable	14,524	'
Interest rate (as a percent)	5.88%	'
7% Mortgage notes due in 2019	'	'
Fair Value of Financial Instruments	'	'
Mortgage notes payable	9,835	9,919
Interest rate (as a percent)	7.00%	7.00%
Unamortized fair value premium included in mortgage notes	716	716
8.15% Mortgage notes due in 2021	'	'
Fair Value of Financial Instruments	'	'
Mortgage notes payable	8,055	8,284
Interest rate (as a percent)	8.15%	8.15%
Unamortized fair value premium included in mortgage notes	495	495
Carrying Amount	'	'
Fair Value of Financial Instruments	'	'
Mortgage notes payable	104,615	'
Carrying Amount \| 5.73% Mortgage notes due in 2015	'	'
Fair Value of Financial Instruments	'	'
Mortgage notes payable	48,136	'
Carrying Amount \| 6.21% Mortgage notes due in 2016	'	'
Fair Value of Financial Instruments	'	'
Mortgage notes payable	24,065	'
Carrying Amount \| Mortgage note payable, 5.88% interest rate, due in 2021	'	'
Fair Value of Financial Instruments	'	'
Mortgage notes payable	14,524	'
Carrying Amount \| 7% Mortgage notes due in 2019	'	'
Fair Value of Financial Instruments	'	'
Mortgage notes payable	9,835	'
Carrying Amount \| 8.15% Mortgage notes due in 2021	'	'
Fair Value of Financial Instruments	'	'
Mortgage notes payable	8,055	'
Fair Value	'	'
Fair Value of Financial Instruments	'	'
Mortgage notes payable	108,935	'
Fair Value \| 5.73% Mortgage notes due in 2015	'	'
Fair Value of Financial Instruments	'	'
Mortgage notes payable	49,418	'
Fair Value \| 6.21% Mortgage notes due in 2016	'	'
Fair Value of Financial Instruments	'	'
Mortgage notes payable	26,027	'
Fair Value \| Mortgage note payable, 5.88% interest rate, due in 2021	'	'
Fair Value of Financial Instruments	'	'
Mortgage notes payable	14,524	'
Fair Value \| 7% Mortgage notes due in 2019	'	'
Fair Value of Financial Instruments	'	'
Mortgage notes payable	10,397	'
Fair Value \| 8.15% Mortgage notes due in 2021	'	'
Fair Value of Financial Instruments	'	'
Mortgage notes payable	$8,569	'

Fair_Value_of_Assets_and_Liabi3

Fair Value of Assets and Liabilities (Details 2) (USD $)	Mar. 31, 2014	Dec. 31, 2013
In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Fair Value of Assets and Liabilities	'	'
Property held for sale	$1,391,732	$1,380,927
Nonrecurring \| Total	'	'
Fair Value of Assets and Liabilities	'	'
Property held for sale	12,260	'
Nonrecurring \| Significant Unobservable Inputs (Level 3)	'	'
Fair Value of Assets and Liabilities	'	'
Property held for sale	$12,260	'

Shareholders_Equity_Details

Shareholders' Equity (Details) (USD $)	0 Months Ended		1 Months Ended	3 Months Ended
In Thousands, except Per Share data, unless otherwise specified	Apr. 08, 2014	Feb. 21, 2014	Apr. 29, 2014	Mar. 31, 2014
Distributions	'	'	'	'
Cash distribution to common shareholders (in dollars per share)	'	$0.43	'	'
Distribution payable to common shareholders (in dollars per share)	'	$23,530	'	'
Distribution payable to common shareholders (in dollars per share)	$0.43	'	'	'
Distributions to common shareholders	-23,535	'	'	'
Shares issued as part of compensation agreement	'	'	3,340	6,375
Share Issuances	'	'	'	'
Dilutive securities	'	'	'	$0

Related_Person_Transactions_De

Related Person Transactions (Details) (USD $)

3 Months Ended

0 Months Ended

3 Months Ended

12 Months Ended

3 Months Ended

1 Months Ended

In Thousands, except Share data, unless otherwise specified

Mar. 31, 2014

Mar. 31, 2013

Mar. 31, 2014

Mar. 31, 2013

Mar. 31, 2014

Mar. 31, 2013

Mar. 15, 2013

Mar. 31, 2014

Dec. 31, 2013

Mar. 31, 2014

Mar. 31, 2013

Dec. 31, 2013

Apr. 30, 2014

Mar. 31, 2014

RMR

CWH

AIC

agreement

Office

item

Subsequent event

Maximum

item

Related Party Transaction

Number of employees

Number of agreements to avail management and administrative services

Business management fees

$2,401

$2,454

Number of shares issued

9,715,000

Base business management fee payable in common shares (as a percent)

10.00%

Property management and construction supervision fees

1,954

1,816

Number of regional offices leased

Rental income earned

Percentage of interest in subsidiaries

100.00%

Percentage of interest

12.50%

14.30%

20.00%

Shares sold by former parent company

9,950,000

Common shares registration and sale expenses paid by related party

310

Number of other companies owning interest in equity method investment

Investment at carrying value

5,954

6,031

Recognized income (loss) related to investment in AIC

-97

Coverage of purchased property insurance

500,000

Amount invested in equity investee

5,194

Shares of related party expected to be purchased, formerly owned by former parent company

2,857,000

Value of shares of related party expected to purchase, formerly owned by former parent company

$825