Equity Commonwealth (EQC) 10-Q 2006 Q1 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2006

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-9317

HRPT PROPERTIES TRUST

Maryland	04-6558834
(State of Organization)	(IRS Employer Identification No.)

400 Centre Street, Newton, Massachusetts 02458

617-332-3990

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “large accelerated filer and accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x  Accelerated filer o   Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x

Number of registrant’s common shares of beneficial interest, $0.01 par value per share, outstanding as of May 8, 2006:  209,860,625

HRPT PROPERTIES TRUST

FORM 10-Q

MARCH 31, 2006

INDEX

PART I	Financial Information
Item 1.	Financial Statements (unaudited)
	Consolidated Balance Sheet — March 31, 2006 and December 31, 2005
	Consolidated Statement of Income — Three Months Ended March 31, 2006 and 2005
	Consolidated Statement of Cash Flows — Three Months Ended March 31, 2006 and 2005
	Notes to Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
	Warning Concerning Forward Looking Statements
	Statement Concerning Limited Liability
PART II	Other Information
Item 6.	Exhibits
	Signatures

References in this Form 10-Q to the “Company”, “we”, “us”, “our”, and “HRPT Properties” refers to HRPT Properties Trust and its consolidated subsidiaries, unless otherwise noted.

PART I          Financial Information

Item 1. Financial Statements

HRPT PROPERTIES TRUST

CONSOLIDATED BALANCE SHEET
(amounts in thousands, except share data)

	March 31,			December 31,
	2006			2005
	(unaudited)
ASSETS
Real estate properties:
Land	$	1,101,349		$	1,080,563
Buildings and improvements	4,333,819			4,144,011
	5,435,168			5,224,574
Accumulated depreciation	(579,090		)	(548,460		)
	4,856,078			4,676,114
Properties held for sale	10,726			10,779
Acquired real estate leases	177,279			161,787
Equity investments in former subsidiaries	—			194,297
Cash and cash equivalents	35,587			19,445
Restricted cash	13,316			18,348
Rents receivable, net of allowance for doubtful accounts of $3,910 and $3,767, respectively	158,022			145,385
Other assets, net	104,181			101,012
Total assets	$	5,355,189		$	5,327,167
LIABILITIES AND SHAREHOLDERS’ EQUITY
Revolving credit facility	$	193,000		$	256,000
Senior unsecured debt, net	1,940,287			1,889,991
Mortgage notes payable, net	379,959			374,165
Accounts payable and accrued expenses	67,078			80,125
Acquired real estate lease obligations	43,711			38,987
Rent collected in advance	23,114			17,858
Security deposits	14,577			13,679
Due to affiliates	9,636			10,876
Total liabilities	2,671,362			2,681,681
Shareholders’ equity:
Preferred shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized;
Series A preferred shares; 9 7/8% cumulative redeemable at par on February 22, 2006; zero and 8,000,000 shares issued and outstanding, respectively, aggregate liquidation preference $200,000	—			193,086
Series B preferred shares; 8 ¾% cumulative redeemable at par on September 12, 2007; 12,000,000 shares issued and outstanding, aggregate liquidation preference $300,000	289,849			289,849
Series C preferred shares; 7 1/8% cumulative redeemable at par on February 15, 2011; 6,000,000 and zero shares issued and outstanding, respectively, aggregate liquidation preference $150,000	145,015			—
Common shares of beneficial interest, $0.01 par value: 250,000,000 shares authorized; 209,860,625 shares issued and outstanding	2,099			2,099
Additional paid in capital	2,772,245			2,779,159
Cumulative net income	1,602,609			1,452,774
Cumulative common distributions	(1,938,889		)	(1,894,818		)
Cumulative preferred distributions	(189,101		)	(176,663		)
Total shareholders’ equity	2,683,827			2,645,486
Total liabilities and shareholders’ equity	$	5,355,189		$	5,327,167

See accompanying notes

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HRPT PROPERTIES TRUST
CONSOLIDATED STATEMENT OF INCOME
(amounts in thousands, except per share data)
(unaudited)

	Three Months Ended March 31,
	2006			2005
Rental income	$	189,559		$	166,554
Expenses:
Operating expenses	71,803			63,107
Depreciation and amortization	37,666			32,511
General and administrative	7,873			6,875
Total expenses	117,342			102,493
Operating income	72,217			64,061
Interest income	1,235			180
Interest expense (including amortization of note discounts and premiums and deferred financing fees of $1,138 and $665, respectively)	(41,294		)	(35,607		)
Loss on early extinguishment of debt	(1,659		)	—
Equity in earnings of equity investments	3,136			3,394
Gain on sale of equity investments	116,287			—
Income from continuing operations	149,922			32,028
(Loss) income from discontinued operations	(87		)	207
Net income	149,835			32,235
Preferred distributions	(11,508		)	(11,500		)
Excess redemption price paid over carrying value of preferred shares	(6,914		)	—
Net income available for common shareholders	$	131,413		$	20,735
Weighted average common shares outstanding	209,861			179,817
Basic and diluted earnings per common share:
Income from continuing operations	$	0.63		$	0.11
(Loss) income from discontinued operations	$	—		$	—
Net income available for common shareholders	$	0.63		$	0.12

See accompanying notes

2

HRPT PROPERTIES TRUST
CONSOLIDATED STATEMENT OF CASH FLOWS
(amounts in thousands)
(unaudited)

	Three Months Ended March 31,
	2006			2005
Cash flows from operating activities:
Net income	$	149,835		$	32,235
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation	30,703			27,186
Amortization of note discounts and premiums and deferred financing fees	1,138			665
Amortization of acquired real estate leases	7,675			5,197
Other amortization	2,562			2,005
Loss on early extinguishment of debt	1,659			—
Equity in earnings of equity investments	(3,136		)	(3,394		)
Gain on sale of equity investments	(116,287		)	—
Distributions of earnings from equity investments	3,136			3,394
Change in assets and liabilities:
Decrease in restricted cash	5,032			2,419
Increase in rents receivable and other assets	(19,547		)	(29,460		)
Decrease in accounts payable and accrued expenses	(13,047		)	(24,222		)
Increase in rent collected in advance	5,256			677
Increase in security deposits	898			113
Decrease in due to affiliates	(1,240		)	(9,852		)
Cash provided by operating activities	54,637			6,963
Cash flows from investing activities:
Real estate acquisitions and improvements	(221,525		)	(17,177		)
Distributions in excess of earnings from equity investments	2,251			2,257
Proceeds from sale of equity investments	308,333			—
Cash provided by (used for) investing activities	89,059			(14,920		)
Cash flows from financing activities:
Proceeds from issuance of preferred shares, net	145,015			—
Redemption of preferred shares	(200,000		)	—
Proceeds from issuance of common shares, net	—			259,017
Proceeds from borrowings	851,000			180,000
Payments on borrowings	(865,716		)	(377,136		)
Deferred financing fees	(1,344		)	(4,813		)
Distributions to common shareholders	(44,071		)	(37,237		)
Distributions to preferred shareholders	(12,438		)	(11,500		)
Cash (used for) provided by financing activities	(127,554		)	8,331
Increase in cash and cash equivalents	16,142			374
Cash and cash equivalents at beginning of period	19,445			21,961
Cash and cash equivalents at end of period	$	35,587		$	22,335
Supplemental cash flow information:
Interest paid	$	48,200		$	50,797
Non-cash investing activities:
Real estate acquisitions	($7,532		)	—
Non-cash financing activities:
Assumption of mortgage notes payable	7,532			—

See accompanying notes

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HRPT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)

Note 1. Basis of Presentation

The accompanying consolidated financial statements of HRPT Properties Trust and its subsidiaries have been prepared without audit. Certain information and footnote disclosures required by accounting principles generally accepted in the United States 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 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, 2005. In the opinion of management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included. All intercompany transactions and balances between HRPT Properties Trust and its subsidiaries have been eliminated. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. Reclassifications have been made to the prior year financial statements to conform to the current year’s presentation.

Note 2. Real Estate Properties

During the three months ended March 31, 2006, we acquired 35 office properties for $201,600, plus closing costs, and funded $23,470 of improvements to our owned properties using cash on hand, borrowings under our revolving credit facility and the assumption of $6,870 of mortgage debt.

Note 3. Indebtedness

In March 2006 we issued $400,000 of unsecured floating rate senior notes in a public offering, raising net proceeds of approximately $398,700. The notes bear interest at LIBOR plus a premium (5.5% at March 31, 2006), require quarterly interest payments and mature in March 2011. Net proceeds from this offering were used to reduce amounts outstanding under our revolving credit facility and for general business purposes. In March 2006 we also repaid our $350,000 term loan that was scheduled to mature in August 2009. We recognized a loss of $1,659 from the write off of deferred financing fees in connection with this repayment.

We have an unsecured revolving credit facility that we use for acquisitions, working capital and general business purposes. This credit facility matures in April 2009 and has a borrowing capacity of $750,000. The interest rate on this facility averaged 5.2% and 3.2% per annum for the three months ended March 31, 2006 and 2005, respectively. As of March 31, 2006, we had $193,000 outstanding and $557,000 available under our revolving credit facility. Our public debt indentures and credit facility agreement contain a number of financial and other covenants, including a credit facility covenant which limits the amount of aggregate distributions on common shares to 90% of operating cash flow available for shareholder distributions as defined in the credit facility agreement.

Note 4. Shareholders’ Equity

In February 2006 we issued 6,000,000 series C cumulative redeemable preferred shares in a public offering, raising net proceeds of $145,015. Each series C preferred share has a liquidation preference of $25.00 and requires dividends of $1.78125, 7 1/8% of the liquidation preference per annum, payable in equal quarterly payments. Our series C preferred shares are redeemable, at our option, for $25.00 each plus accrued and unpaid dividends at any time on or after February 15, 2011. Net proceeds from this offering were used to reduce amounts outstanding under our revolving credit facility. In March 2006 we redeemed all $200,000 of our 9.875% series A preferred shares by borrowing under our revolving credit facility. In connection with this redemption, the $6,914 excess of the liquidation preference of the redeemed shares over their carrying amount was deducted from net income to determine net income available for common shareholders.

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Note 5. Equity Investments

At March 31, 2006, and December 31, 2005, we had the following equity investments in Senior Housing Properties Trust, or Senior Housing, and Hospitality Properties Trust, or Hospitality Properties:

	Equity Investments				Equity in Earnings
	March 31,		December 31,		Three Months Ended March 31,
	2006		2005		2006		2005
Senior Housing	$	—	$	94,952	$	1,512	$	1,821
Hospitality Properties	—		99,345		1,624		1,573
	$	—	$	194,297	$	3,136	$	3,394

On December 31, 2005, we owned 7,710,738 common shares, or 10.7%, of Senior Housing with a carrying value of $94,952 and a market value, based on quoted market prices, of $130,389, and 4,000,000 common shares, or 5.6%, of Hospitality Properties with a carrying value of $99,345 and a market value, based on quoted market prices, of $160,400. Our two managing trustees are also managing trustees of Senior Housing and Hospitality Properties and one of our managing trustees and our executive vice president are beneficial owners of Reit Management & Research LLC, or RMR, which is the investment manager to us, Senior Housing and Hospitality Properties. We account for our investments in Senior Housing and Hospitality Properties using the equity method of accounting.

In March 2006 we sold all 7,710,738 Senior Housing common shares we owned for $17.60 per common share, raising gross proceeds of $135,709 (net $133,064) and recognizing a gain of $39,066, and we sold all 4,000,000 Hospitality Properties common shares we owned for $44.75 per common share, raising gross proceeds of $179,000 (net $175,269) and recognizing a gain of $77,221.

Note 6. Segment Information

As of March 31, 2006, we owned 337 office properties and 137 industrial properties, excluding properties under contract for sale. We account for our office and industrial properties in geographic operating segments for financial reporting purposes based on our method of internal reporting. We define these individual geographic segments as those which represent or generate 5% of more of our total square feet, revenues or property net operating income. Property level information by geographic segment and property type as of and for the three months ended March 31, 2006 and 2005, is as follows:

5

	As of March 31, 2006			As of March 31, 2005
	Office Properties	Industrial Properties	Totals	Office Properties	Industrial Properties	Totals
Property square feet:
Metro Philadelphia, PA	5,447	—	5,447	5,452	—	5,452
Metro Washington, DC	2,645	—	2,645	2,644	—	2,644
Oahu, HI	—	17,943	17,943	—	9,699	9,699
Metro Boston, MA	2,737	—	2,737	2,742	—	2,742
Southern California	1,444	—	1,444	1,444	—	1,444
Metro Atlanta, GA	2,128	—	2,128	1,777	—	1,777
Metro Austin, TX	1,490	1,316	2,806	1,490	1,316	2,806
Other Markets	17,111	4,574	21,685	12,676	4,573	17,249
Totals	33,002	23,833	56,835	28,225	15,588	43,813
Central business district, or CBD	11,327	158	11,485	10,698	158	10,856
Suburban	21,675	23,675	45,350	17,527	15,430	32,957
Total	33,002	23,833	56,835	28,225	15,588	43,813

	Three Months Ended March 31, 2006						Three Months Ended March 31, 2005
	Office Properties		Industrial Properties		Totals		Office Properties		Industrial Properties		Totals
Property rental income:
Metro Philadelphia, PA	$	31,862	$	—	$	31,862	$	30,957	$	—	$	30,957
Metro Washington, DC	19,714		—		19,714		18,589		—		18,589
Oahu, HI	—		14,092		14,092		—		10,921		10,921
Metro Boston, MA	15,032		—		15,032		14,049		—		14,049
Southern California	11,925		—		11,925		11,522		—		11,522
Metro Atlanta, GA	8,836		—		8,836		7,954		—		7,954
Metro Austin, TX	6,757		3,334		10,091		5,594		4,130		9,724
Other Markets	68,590		9,417		78,007		53,338		9,500		62,838
Totals	$	162,716	$	26,843	$	189,559	$	142,003	$	24,551	$	166,554
CBD	$	71,101	$	279	$	71,380	$	65,935	$	265	$	66,200
Suburban	91,615		26,564		118,179		76,068		24,286		100,354
Total	$	162,716	$	26,843	$	189,559	$	142,003	$	24,551	$	166,554

	Three Months Ended March 31, 2006						Three Months Ended March 31, 2005
	Office Properties		Industrial Properties		Totals		Office Properties		Industrial Properties		Totals
Property net operating income:
Metro Philadelphia, PA	$	16,855	$	—	$	16,855	$	16,242	$	—	$	16,242
Metro Washington, DC	12,468		—		12,468		12,340		—		12,340
Oahu, HI	—		11,372		11,372		—		8,700		8,700
Metro Boston, MA	9,972		—		9,972		9,474		—		9,474
Southern California	8,389		—		8,389		7,860		—		7,860
Metro Atlanta, GA	5,556		—		5,556		5,170		—		5,170
Metro Austin, TX	3,299		1,842		5,141		2,850		1,909		4,759
Other Markets	41,634		6,369		48,003		32,842		6,060		38,902
Totals	$	98,173	$	19,583	$	117,756	$	86,778	$	16,669	$	103,447
CBD	$	39,814	$	215	$	40,029	$	37,750	$	216	$	37,966
Suburban	58,359		19,368		77,727		49,028		16,453		65,481
Total	$	98,173	$	19,583	$	117,756	$	86,778	$	16,669	$	103,447

6

The table below reconciles our calculation of property net operating income, or NOI, to net income available for common shareholders, the most directly comparable GAAP financial measure reported in our consolidated financial statements for the three months ended March 31, 2006 and 2005. We consider NOI to be appropriate supplemental information to net income available for common shareholders because it helps both investors and management to understand the operations of our properties. We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our results of operations because it reflects only those income and expense items that are incurred at the property level. Our management also uses NOI to evaluate individual, regional and company wide property level performance. NOI excludes certain components from net income available for common shareholders in order to provide results that are more closely related to property results of operations. NOI does not represent cash generated by operating activities in accordance with generally accepted accounting principles, or GAAP, and should not be considered an alternative to net income, net income available for common shareholders or cash flow from operating activities as a measure of financial performance.

	2006			2005
Rental income	$	189,559		$	166,554
Operating expenses	(71,803		)	(63,107		)
Property net operating income (NOI)	$	117,756		$	103,447
Property net operating income	$	117,756		$	103,447
Depreciation and amortization	(37,666		)	(32,511		)
General and administrative	(7,873		)	(6,875		)
Operating income	72,217			64,061
Interest income	1,235			180
Interest expense	(41,294		)	(35,607		)
Loss on early extinguishment of debt	(1,659		)	—
Equity in earnings of equity investments	3,136			3,394
Gain on sale of equity investments	116,287			—
Income from continuing operations	149,922			32,028
(Loss) income from discontinued operations	(87		)	207
Net income	149,835			32,235
Preferred distributions	(11,508		)	(11,500		)
Excess redemption price paid over carrying value of preferred shares	(6,914		)	—
Net income available for common shareholders	$	131,413		$	20,735

Note 7. Subsequent Events

In April 2006 we declared a distribution of $0.21 per common share, or approximately $44,000, to be paid on or about May 24, 2006, to shareholders of record on April 24, 2006. We also announced a distribution on our series B preferred shares of $0.5469 per share, or $6,563, and a distribution on our series C preferred shares of $0.4750 per share, or $2,850, which will be paid on or about May 15, 2006, to our series B and C preferred shareholders of record as of May 1, 2006.

In April 2006 we purchased two properties with an aggregate of 504,000 square feet of space for $38,881, plus closing costs, with cash on hand, borrowings under our revolving credit facility and the assumption of mortgage debt. As of May 8, 2006, we have executed purchase agreements for nine additional properties with an aggregate of 608,000 square feet of space and an aggregate purchase price of $57,800. In addition, we have executed agreements for the sale of five properties with a total of 102,000 square feet of space and an aggregate sale price of $13,700. Properties held for sale are classified as such on our consolidated balance sheet and in discontinued operations on our consolidated statement of income. We currently expect to close on the sale of these properties within one year and gains on sales are estimated to be approximately $2,200. These potential purchase and sale transactions are subject to completion of due diligence and customary closing contingencies, and because of these contingencies we can provide no assurances that we will purchase or sell these properties.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and tables should be read in conjunction with our consolidated financial statements and notes thereto included in this quarterly report and our 2005 Annual Report on Form 10-K for the year ended December 31, 2005.

OVERVIEW

We primarily own office buildings located throughout the United States. We also own approximately 18 million square feet of leased industrial and commercial lands in Oahu, Hawaii.

Property Operations

As of March 31, 2006, 93.4% of our total square feet was leased, compared to 93.9% leased as of March 31, 2005. The decrease reflects property acquisitions and a decrease in occupancy of 0.3% at properties we owned continuously since January 1, 2005. Occupancy data is as follows (square feet in thousands):

	All Properties (1)				Comparable Properties (2)
	As of March 31,				As of March 31,
	2006		2005		2006		2005
Total properties	474		367		367		367
Total square feet	56,835		43,813		43,758		43,758
Percent leased (3)	93.4	%	93.9	%	93.7	%	94.0	%

(1)Excludes properties under contract for sale.

(2)Based on properties owned continuously since January 1, 2005, and excludes properties under contract for sale.

(3)Percent leased includes (i) space being fitted out for occupancy pursuant to signed leases and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants.

8

During the first quarter of 2006 we signed new leases for 606,000 square feet and lease renewals for 1,160,000 square feet, at weighted average rental rates that were 2% above rents previously charged for the same space. Average lease terms for leases signed during the quarter ended March 31, 2006, were 10.3 years. Commitments for tenant improvement and leasing costs for leases signed during the quarter ended March 31, 2006, totaled $10.71 per square foot on a weighted average basis.

During the past twelve months, the leasing market conditions in some of our markets have been improving. The occupancies at some of our continuously owned properties have stabilized and quoted rental rates in most of the areas where our properties are located seem to have increased. Also, required landlord funded tenant build outs and leasing commissions payable to tenant brokers for new leases and lease renewals seem to have stabilized or declined. These build out costs and leasing commissions are generally amortized as a reduction of our income during the terms of the affected leases. At this time, we believe the modest increases in effective rents will continue to improve the financial results at some of our currently owned properties during 2006. There are too many variables for us to reasonably project what the financial impact of these market conditions will be on our results for future periods.

Approximately 22% of our leased square feet are under leases scheduled to expire through December 31, 2008. Lease renewals and rental rates at which available space may be relet in the future will depend on prevailing market conditions at that time. Lease expirations by year as of March 31, 2006, are as follows (in thousands):

Year	Sq. Ft. Expiring (1)	% of Sq. Ft. Expiring		Annualized Rental Income Expiring (2)		% of Annualized Rental Income Expiring		Cumulative % of Annualized Rental Income Expiring
2006	3,389	6.4	%	$	62,592	8.0	%	8.0	%
2007	3,966	7.5	%	73,638		9.4	%	17.4	%
2008	4,423	8.3	%	79,885		10.2	%	27.6	%
2009	3,648	6.9	%	64,086		8.2	%	35.8	%
2010	4,801	9.0	%	84,883		10.8	%	46.6	%
2011	4,693	8.8	%	83,047		10.6	%	57.2	%
2012	3,221	6.1	%	66,189		8.4	%	65.6	%
2013	1,883	3.5	%	34,738		4.4	%	70.0	%
2014	1,978	3.7	%	33,768		4.3	%	74.3	%
2015	2,480	4.7	%	53,118		6.8	%	81.1	%
2016 and thereafter	18,621	35.1	%	149,288		18.9	%	100.0	%
	53,103	100.0	%	$	785,232	100.0	%
Weighted average remaining lease term (in years):
	9.7			6.6

(1)    Square feet is pursuant to signed leases as of March 31, 2006, and includes (i) space being fitted out for occupancy and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants. Excludes square feet from properties classified in discontinued operations.

(2)    Rent is rents pursuant to signed leases as of March 31, 2006, plus expense reimbursements; includes some triple net lease rents and excludes lease value amortization. Excludes rents from properties classified in discontinued operations.

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Our principal source of funds for our operations is rents from tenants at our properties. Rents are generally received from our non-government tenants monthly in advance, and from our government tenants monthly in arrears. As of March 31, 2006, tenants responsible for 1% or more of our total rent were as follows (square feet in thousands):

Tenant	Square Feet (1)	% of Total Square Feet		% of Rent (2)		Expiration
1.    U. S. Government	5,017	9.4	%	13.9	%	2006 to 2020
2.    GlaxoSmithKline plc	607	1.1	%	1.8	%	2013
3.    PNC Financial Services Group	460	0.9	%	1.4	%	2021
4.    Comcast Corporation	406	0.8	%	1.2	%	2006, 2008
5.    Tyco International Ltd.	660	1.2	%	1.2	%	2007, 2017
6.    Solectron Corporation	765	1.4	%	1.2	%	2014
7.    Towers, Perrin, Forster & Crosby, Inc.	388	0.7	%	1.2	%	2006, 2011
8.    Motorola, Inc.	770	1.5	%	1.1	%	2006, 2008, 2010
9.    Manugistics, Inc.	283	0.5	%	1.1	%	2012
10.  Ballard Spahr Andrews & Ingersoll, LLP	231	0.4	%	1.1	%	2008, 2015
11.  Westinghouse Electric Corporation	534	1.0	%	1.0	%	2010, 2011
Total	10,121	18.9	%	26.2	%

(1) Square feet is pursuant to signed leases as of March 31, 2006, and includes (i) space being fitted out for occupancy and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants. Excludes square feet from properties classified in discontinued operations.

(2) Rent is rents pursuant to signed leases as of March 31, 2006, plus expense reimbursements; includes some triple net lease rents and excludes lease value amortization. Excludes rents from properties classified in discontinued operations.

Investing Activities

During the three months ended March 31, 2006, we acquired 35 office properties for $201.6 million, plus closing costs, and funded $23.5 million of improvements to our owned properties using cash on hand, borrowings under our revolving credit facility and the assumption of $6.9 million of mortgage debt. In April 2006 we purchased two properties with an aggregate of 504,000 square feet of space for $38.9 million, plus closing costs, using cash on hand, borrowings under our revolving credit facility and the assumption of mortgage debt. As of May 8, 2006, we have executed purchase agreements for nine additional properties with an aggregate of 608,000 square feet of space for a total purchase price of $57.8 million. In addition, we have executed agreements for the sale of five properties with a total of 102,000 square feet of space for an aggregate sale price of $13.7 million. Properties held for sale are classified as such on our consolidated balance sheet and in discontinued operations on our consolidated statement of income. We currently expect to close on the sale of these properties within one year and gains on sales are estimated to be approximately $2.2 million. These potential purchase and sale transactions are subject to completion of diligence and customary closing contingencies, and because of these contingencies we can provide no assurances that we will purchase or sell these properties.

Financing Activities

In February 2006 we issued 6 million series C cumulative redeemable preferred shares in a public offering, raising net proceeds of $145.0 million. In March 2006 we issued $400 million of unsecured floating rate senior notes in a public offering, raising net proceeds of approximately $398.7 million. Net proceeds from these offerings were used to reduce amounts outstanding under our revolving credit facility and for general business purposes. In March 2006 we redeemed all $200 million of our series A preferred shares and repaid our $350 million term loan by borrowing under our revolving credit facility.

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RESULTS OF OPERATIONS

Three Months Ended March 31, 2006, Compared to Three Months Ended March 31, 2005

	Three Months Ended March 31,
	2006			2005			Change			% Change
	(in thousands, except per share data)
Rental income	$	189,559		$	166,554		$	23,005		13.8	%
Expenses:
Operating expenses	71,803			63,107			8,696			13.8	%
Depreciation and amortization	37,666			32,511			5,155			15.9	%
General and administrative	7,873			6,875			998			14.5	%
Total expenses	117,342			102,493			14,849			14.5	%
Operating income	72,217			64,061			8,156			12.7	%
Interest income	1,235			180			1,055			586.1	%
Interest expense	(41,294		)	(35,607		)	(5,687		)	(16.0	)%
Loss on early extinguishment of debt	(1,659		)	—			(1,659		)	(100.0	)%
Equity in earnings of equity investments	3,136			3,394			(258		)	(7.6	)%
Gain on sale of equity investments	116,287			—			116,287			100.0	%
Income from continuing operations	149,922			32,028			117,894			368.1	%
(Loss) income from discontinued operations	(87		)	207			(294		)	(142.0	)%
Net income	149,835			32,235			117,600			364.8	%
Preferred distributions	(11,508		)	(11,500		)	(8		)	—	%
Excess redemption price paid over carrying value of preferred shares	(6,914		)	—			(6,914		)	(100.0	)%
Net income available for common shareholders	$	131,413		$	20,735		$	110,678		533.8	%
Weighted average common shares outstanding	209,861			179,817			30,044			16.7	%
Income from continuing operations per share	$	0.63		$	0.11		$	0.52		472.7	%
(Loss) income from discontinued operations per share	$	—		$	—		$	—		—	%
Net income available for common shareholders per share	$	0.63		$	0.12		$	0.51		425.0	%

Rental income. Rental income increased for the three months ended March 31, 2006, compared to the same period in 2005, primarily due to increases in rental income from our Oahu, HI and Other Markets segments, as described in Note 6 to our consolidated financial statements. Rental income for the Oahu, HI segment increased $3.2 million, or 29%, primarily because of the acquisition of 43 properties since March 2005, and increases in weighted average rental rates for new leases and lease renewals signed during 2005 and 2006. Rental income for the Other Markets segment increased $15.2 million, or 24%, primarily because of the acquisition of 55 properties since March 2005. Rental income includes non cash straight line rent adjustments totaling $4.8 million in 2006 and $6.5 million in 2005 and amortization of acquired real estate leases and obligations totaling ($3.2 million) in 2006 and ($1.7 million) in 2005. Rental income also includes lease termination fees totaling $249,000 in 2006 and $150,000 in 2005.

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Total expenses. Total expenses increased for the three months ended March 31, 2006, compared to the same period in 2005, due to increases in operating expenses, depreciation and amortization and general and administrative expenses primarily related to the acquisition of properties in 2005 and 2006.

Interest expense. Interest expense increased for the three months ended March 31, 2006, compared to the three months ended March 31, 2005, reflecting an increase in average total debt outstanding which was used primarily to finance acquisitions in 2006 and 2005. In addition, interest rates increased on our floating rate debt to 5.4% as of March 31, 2006, from 3.3% during the three months ended March 31, 2005.

Loss on early extinguishment of debt. The loss on early extinguishment of debt in 2006 relates to the write off of deferred financing fees associated with the repayment of our $350 million term loan in March.

Gain on sale of equity investments. The gain on sale of equity investments reflects the sale in March 2006 of all of the common shares we owned in Senior Housing and Hospitality Properties.

Income from continuing operations. The increase in income from continuing operations is due primarily to the gain on sale of the common shares we owned in Senior Housing and Hospitality Properties and income from properties acquired since March 2005.

Net income and net income available for common shareholders. The increase in net income and net income available for common shareholders is due primarily to the gain on sale of Senior Housing and Hospitality Properties common shares in 2006 and property acquisitions since March 2005. Net income available for common shareholders is net income reduced by preferred distributions and the excess of the redemption price paid over the carrying value of our 9.875% series A preferred shares that we redeemed in March 2006.

LIQUIDITY AND CAPITAL RESOURCES

Our Operating Liquidity and Resources

Our principal sources of funds for current expenses and distributions to shareholders are rents from our properties. This flow of funds has historically been sufficient for us to pay our operating expenses, debt service and distributions. We believe that our operating cash flow will be sufficient to meet our operating expenses, debt service and distribution payments for the foreseeable future. Our future cash flows from operating activities will depend primarily upon the following factors:

·our ability to maintain or improve occupancies and effective rent rates at our continuously owned properties;

·our ability to restrain operating cost increases at our properties; and

·our ability to purchase new properties which produce positive cash flows from operations.

As discussed above, we believe that present leasing market conditions in some areas where our properties are located may result in modest increases in effective rents at some of our properties. Recent rises in fuel prices may cause our future operating costs to increase; however, the impact of these increases is expected to be partially offset by pass through operating cost increases to our tenants pursuant to lease terms. We generally do not engage in development activities (except on a build to suit basis for an existing tenant), and we generally do not purchase turn around properties or properties which do not generate positive cash flows. Our future purchases of properties which generate positive cash flows can not be accurately projected because such purchases depend entirely upon available opportunities which come to our attention.

Cash flows provided by (used for) operating, investing and financing activities were $54.6 million, $89.1 million and ($127.6) million, respectively, for the three months ended March 31, 2006, and $7.0 million, ($14.9) million and $8.3 million, respectively, for the three months ended March 31, 2005. Changes in all three categories between 2006 and 2005 are primarily related to property acquisitions in 2006 and 2005, our sale of all of our Senior Housing and Hospitality Properties common shares in 2006, our repayments and issuances of debt obligations and redemption and issuance of preferred shares, and our issuance of common shares in 2005.

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Our Investment and Financing Liquidity and Resources

In order to fund acquisitions and to accommodate cash needs that may result from timing differences between our receipt of rents and our desire or need to make distributions or pay operating or capital expenses, we maintain an unsecured revolving credit facility with a group of commercial banks. At March 31, 2006, there was $193 million outstanding and $557 million available on our revolving credit facility, and we had cash and cash equivalents of $35.6 million. We expect to use cash balances, borrowings under our credit facility and net proceeds of offerings of equity or debt securities to fund future property acquisitions.

Our outstanding debt maturities and weighted average interest rates as of March 31, 2006, are as follows (dollars in thousands):

	Scheduled Principal Payments During Period
	Secured		Unsecured		Unsecured				Weighted
	Fixed Rate		Floating		Fixed				Average
Year	Debt		Rate Debt		Rate Debt		Total (1)		Interest Rate
2006	$	6,745	$	—	$	—	$	6,745	7.0	%
2007	9,168		—		—		9,168		6.9	%
2008	25,261		—		—		25,261		7.0	%
2009	6,699		193,000		—		199,699		5.3	%
2010	7,047		—		50,000		57,047		8.6	%
2011	228,568		400,000		—		628,568		6.0	%
2012	29,692		—		200,000		229,692		7.0	%
2013	2,288		—		200,000		202,288		6.5	%
2014	2,466		—		250,000		252,466		5.8	%
2015	2,658		—		450,000		452,658		6.0	%
2016 and thereafter	59,642		—		400,000		459,642		6.4	%
	$	380,234	$	593,000	$	1,550,000	$	2,523,234	6.2	%

(1)Total debt outstanding as of March 31, 2006, net of unamortized premiums and discounts, equals $2,513,246.

When amounts are outstanding on our revolving credit facility and as the maturity dates of our revolving credit facility and term debts approach, we explore alternatives for the repayment of amounts due. Such alternatives usually include incurring additional term debt and issuing new equity securities. On June 28, 2004, our shelf registration statement to increase securities available for issuance to $2.7 billion became effective, and as of March 31, 2006, $1.1 billion was available. An effective shelf registration statement allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for such securities. Although there can be no assurance that we will consummate any debt or equity offerings or other financings, we believe we will have access to various types of financing, including debt or equity offerings, with which to finance future acquisitions and to pay our debt and other obligations.

The completion and the costs of our future debt transactions will depend primarily upon market conditions and our credit ratings. We have no control over market conditions, but we expect both short and long term debt costs to increase gradually for at least the next few months. Our credit ratings depend upon evaluations by credit rating agencies of our business practices and plans and, in particular, whether we appear to have the ability to maintain our earnings, to space our debt maturities and to balance our use of debt and equity capital so that our financial performance and leverage ratios afford us flexibility to withstand any reasonably anticipatable adverse changes. We intend to conduct our business activities in a manner which will continue to afford us reasonable access to capital for investment and financing activities.

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During 2006 we purchased 35 office properties for $201.6 million, plus closing costs, and funded improvements to our owned properties totaling $23.5 million. We funded all our 2006 acquisitions with cash on hand and by borrowing under our revolving credit facility. As of March 31, 2006, we had outstanding agreements to purchase two properties containing 504,000 square feet of space for $38.9 million, plus closing costs. These properties were acquired in April 2006 with cash on hand, borrowings under our revolving credit facility and the assumption of $14.1 million of mortgage debt. In March 2006 we entered agreements to acquire nine additional properties containing 608,000 square feet for $57.8 million plus closing costs. In addition, we have executed agreements for the sale of five properties with an aggregate of 102,000 square feet for $13.7 million. The acquisitions and sales of these properties are subject to various closing conditions customary in real estate transactions and no assurances can be given as to when or if we will purchase or sell these properties.

During the three months ended March 31, 2006 and 2005, cash expenditures made and capitalized for tenant improvements, leasing costs, building improvements and development and redevelopment activities were as follows (in thousands):

	Three Months Ended March 31,
	2006		2005
Tenant improvements	$	15,168	$	11,657
Leasing costs	5,050		3,090
Building improvements (1)	5,615		4,984
Development, redevelopment and other activities (2)	2,687		536

(1)Building improvements generally include recurring expenditures that are necessary to maintain the value of our properties.

(2)Development, redevelopment and other activities generally include non-recurring expenditures that increase the value of our properties.

Commitments made for expenditures in connection with leasing space during the three months ended March 31, 2006, are as follows (in thousands, except as noted):

	Total		Renewals		New Leases
Square feet leased during the quarter	1,766		1,160		606
Total commitments for tenant improvements and leasing costs	$	18,910	$	9,944	$	8,966
Leasing costs per square foot (whole dollars)	$	10.71	$	8.57	$	14.80
Average lease term (years)	10.3		11.7		6.9
Leasing costs per square foot per year (whole dollars)	$	1.04	$	0.73	$	2.14

In March 2006 we sold all 7.7 million of the common shares of beneficial interest we owned of Senior Housing, and all 4 million of the common shares of beneficial interest we owned of Hospitality Properties. Net sales proceeds of $308.3 million were used to reduce amounts outstanding on our revolving credit facility. As a result of these sales, we recognized gains of $116.3 million in 2006. We received cash distributions in 2006 before the sale of these shares totaling $2.5 million from Senior Housing and $2.9 million from Hospitality Properties. Our decision to liquidate our ownership positions in these companies was primarily based on our desire to self fund our core office and industrial properties acquisition activities. These sales are expected to initially be dilutive to our net income by less than $0.01 per share per quarter until amounts equal to the sale proceeds can be reinvested in accretive investments.

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In February 2006 we issued 6 million series C cumulative redeemable preferred shares in a public offering for net proceeds of $145.0 million. Each series C preferred share has a liquidation preference of $25.00 and requires dividends of $1.78125, 7 1/8% of the liquidation preference per annum, payable in equal quarterly payments. Our series C preferred shares are redeemable, at our option, for $25.00 each plus accrued and unpaid dividends at any time on or after February 15, 2011. We applied the net proceeds from this offering to reduce amounts outstanding on our revolving credit facility. In March 2006 we issued $400 million unsecured floating rate senior notes in a public offering raising net proceeds of approximately $398.7 million. The notes bear interest at LIBOR plus a premium (5.5% at March 31, 2006), require quarterly interest payments and mature in March 2011. Net proceeds from this offering were used to reduce amounts outstanding under our revolving credit facility and for general business purposes. In March 2006 we redeemed all $200 million of our 9.875% series A preferred shares and repaid our $350 million term loan that was scheduled to mature in August 2009 by borrowing under our revolving credit facility.

As of March 31, 2006, our contractual obligations were as follows (dollars in thousands):

	Payment Due by Period
	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Long-term debt obligations	$	2,523,234	$	6,745	$	34,429	$	256,746	$	2,225,314
Tenant related obligations (1)	58,591		46,268		12,323		—		—
Purchase obligations (2)	96,681		96,681		—		—		—
Projected interest expense (3)	1,138,702		117,674		310,886		288,866		421,276
Total	$	3,817,208	$	267,368	$	357,638	$	545,612	$	2,646,590

(1)Committed tenant related obligations include leasing commissions and tenant improvements and are based on leases executed as of March 31, 2006.

(2)Represents the purchase price to acquire 11 properties for $96.7 million, which were the subject of executed purchase agreements on March 31, 2006.

(3)Projected interest expense is attributable to only our long term debt obligations at existing rates and is not intended to project future interest costs which may result from debt prepayments, new debt issuances or changes in interest rates.

As of March 31, 2006, we have no commercial paper, derivatives, swaps, hedges, guarantees, joint ventures or off balance sheet arrangements. None of our debt documentation requires us to provide collateral security in the event of a ratings downgrade.

Debt Covenants

Our principal debt obligations at March 31, 2006, were our unsecured revolving credit facility and our $2.0 billion of publicly issued unsecured term debt. Our publicly issued debt is governed by an indenture. This indenture and related supplements and our revolving credit facility agreement contain a number of financial ratio covenants which generally restrict our ability to incur debts, including debts secured by mortgages on our properties in excess of calculated amounts, require us to maintain a minimum net worth, restrict our ability to make distributions under certain circumstances and require us to maintain other ratios. At March 31, 2006, we were in compliance with all of our covenants under our indenture and related supplements and our revolving credit facility agreement.

In addition to our unsecured debt obligations, we have $380.2 million of mortgage notes outstanding at March 31, 2006.

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None of our indenture and related supplements, our revolving credit facility or our mortgage notes contain provisions for acceleration which could be triggered by our debt ratings. However, our senior debt rating is used to determine the interest rate payable and the fees payable under our revolving credit facility.

Our public debt indenture and related supplements contain cross default provisions to any other debts of $20 million or more. Similarly, a default on our public debt indenture would be a default under our revolving credit facility.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to risks associated with market changes in interest rates. Our strategy to manage exposure to changes in interest rates is unchanged since December 31, 2005. Other than as described below, we do not foresee any significant changes in our exposure to fluctuations in interest rates or in how we manage this exposure in the near future.

Our unsecured revolving credit facility and $400 million of our senior notes bear interest at floating rates and mature in April 2009 and March 2011, respectively. As of March 31, 2006, we had $193 million outstanding and $557 million available for drawing under our revolving credit facility. Repayments under our revolving credit facility may be made at any time without penalty. Repayments under our $400 million floating rate senior notes may be made any time on or after September 16, 2006. We borrow in U.S. dollars and borrowings under our revolving credit facility and $400 million of our senior notes require interest at LIBOR plus premiums. Accordingly, we are vulnerable to changes in U.S. dollar based short term rates, specifically LIBOR. A change in interest rates would not affect the value of this floating rate debt but would affect our operating results. For example, the average interest rate payable on our $193 million outstanding on our revolving credit facility at March 31, 2006 and $400 million of our senior notes, was 5.4% per annum. The following table presents the impact a 10% change in interest rates would have on our floating rate interest expense as of March 31, 2006 (dollars in thousands):

	Impact of Changes in Interest Rates
	Interest Rate Per Year		Outstanding Debt		Total Interest Expense Per Year
At March 31, 2006	5.4	%	$	593,000	$	32,022
10% reduction	4.9	%	$	593,000	$	29,057
10% increase	5.9	%	$	593,000	$	34,987

The foregoing table shows the impact of an immediate change in floating interest rates. If interest rates were to change gradually over time, the impact would be spread over time. Our exposure to fluctuations in floating interest rates will increase or decrease in the future with increases or decreases in the outstanding amount of our floating rate debt.

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Item 4. Controls and Procedures

As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our managing trustees, President and Chief Operating Officer and Treasurer and Chief Financial Officer of the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based upon that evaluation, our managing trustees, President and Chief Operating Officer and Treasurer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2006, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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WARNING CONCERNING FORWARD LOOKING STATEMENTS

CERTAIN STATEMENTS AND IMPLICATIONS CONTAINED IN THIS QUARTERLY REPORT ON FORM 10-Q ARE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND FEDERAL SECURITIES LAWS. THESE STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS QUARTERLY REPORT ON FORM 10-Q AND INCLUDE STATEMENTS REGARDING:

·THE SECURITY OF OUR RENTAL INCOME AND OUR LEASES,

·THE CREDIT QUALITY OF OUR TENANTS,

·THE LIKELIHOOD THAT OUR TENANTS WILL PAY RENT, RENEW LEASES, OR BE AFFECTED BY CYCLICAL ECONOMIC CONDITIONS,

·OUR ACQUISITION AND SALE OF PROPERTIES,

·OUR ABILITY TO COMPETE EFFECTIVELY,

·OUR ABILITY TO PAY INTEREST ON AND PRINCIPAL OF OUR DEBT,

·OUR ABILITY TO PAY DISTRIBUTIONS TO SHAREHOLDERS,

·OUR POLICIES AND PLANS REGARDING INVESTMENTS AND FINANCINGS,

·THE FUTURE AVAILABILITY OF BORROWINGS UNDER OUR REVOLVING CREDIT FACILITY,

·OUR TAX STATUS AS A REAL ESTATE INVESTMENT TRUST,

·OUR ABILITY TO RAISE CAPITAL,

AND OTHER MATTERS. ALSO, WHENEVER WE USE WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”, “INTEND”, “PLAN”, “ESTIMATE” OR SIMILAR EXPRESSIONS, WE ARE MAKING FORWARD LOOKING STATEMENTS.

ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY THE FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. SUCH FACTORS INCLUDE, WITHOUT LIMITATION,

·CHANGES IN THE ECONOMY AND THE CAPITAL MARKETS,

·COMPETITION WITHIN THE REAL ESTATE INDUSTRY OR THOSE INDUSTRIES IN WHICH OUR TENANTS OPERATE, AND

·CHANGES IN FEDERAL, STATE AND LOCAL LEGISLATION.

FOR EXAMPLE:

·SOME OF OUR TENANTS MAY NOT RENEW EXPIRING LEASES, AND WE MAY BE UNABLE TO LOCATE NEW TENANTS TO MAINTAIN THE HISTORICAL OCCUPANCY RATES OF OUR PROPERTIES,

·RENTS THAT WE CAN CHARGE AT OUR PROPERTIES MAY DECLINE,

·OUR TENANTS MAY EXPERIENCE LOSSES AND BECOME UNABLE TO PAY OUR RENTS,

·CHANGES IN CIRCUMSTANCES COULD CAUSE THE CLOSINGS OF OUR COMMITTED ACQUISITIONS AND SALES NOT TO OCCUR OR BE DELAYED BECAUSE THE RESULTS OF VARIOUS DILIGENCE ITEMS MAY CAUSE THE TRANSACTIONS TO FAIL TO CLOSE,

·WE MAY BE UNABLE TO IDENTIFY PROPERTIES WHICH WE WANT TO BUY OR TO NEGOTIATE ACCEPTABLE PURCHASE PRICES, AND

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·OTHER RISKS MAY ADVERSELY IMPACT US, AS DESCRIBED MORE FULLY IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2005.

THESE RESULTS COULD OCCUR DUE TO MANY DIFFERENT CIRCUMSTANCES, SOME OF WHICH, SUCH AS CHANGES IN OUR TENANTS’ FINANCIAL CONDITIONS OR NEEDS FOR LEASED SPACE, OR CHANGES IN THE CAPITAL MARKETS OR THE ECONOMY GENERALLY, ARE BEYOND OUR CONTROL. SIMILARLY, OUR IMPLEMENTATION OF FAS 141 HAS REQUIRED US TO MAKE JUDGMENTS ABOUT THE ALLOCATION OF THE PURCHASE PRICES OF OUR PROPERTIES WHICH AFFECT OUR FINANCIAL STATEMENTS, INCLUDING FUTURE INCOME; THESE JUDGMENTS ARE BASED UPON OUR ESTIMATES, BELIEFS AND EXPECTATIONS ABOUT VACANT BUILDING VALUES AND RENTAL RATES, BUT SUCH ESTIMATES, BELIEFS AND EXPECTATIONS MAY PROVE TO BE INACCURATE.

FORWARD LOOKING STATEMENTS ARE ONLY EXPRESSIONS OF OUR PRESENT EXPECTATIONS AND INTENTIONS. FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS.  EXCEPT AS MAY BE REQUIRED BY LAW, WE DO NOT INTEND TO IMPLY THAT WE WILL UPDATE OR REVISE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

STATEMENT CONCERNING LIMITED LIABILITY

THE AMENDED AND RESTATED DECLARATION OF TRUST ESTABLISHING HRPT PROPERTIES TRUST, DATED JULY 1, 1994, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS AND SUPPLEMENTS THERETO, IS DULY FILED IN THE OFFICE OF THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND, PROVIDES THAT THE NAME “HRPT PROPERTIES TRUST” REFERS TO THE TRUSTEES UNDER THE DECLARATION OF TRUST, AS SO AMENDED AND SUPPLEMENTED, COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF HRPT PROPERTIES TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HRPT PROPERTIES TRUST. ALL PERSONS DEALING WITH HRPT PROPERTIES TRUST IN ANY WAY SHALL LOOK ONLY TO THE ASSETS OF HRPT PROPERTIES TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

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Part II.   Other Information

Item 6.    Exhibits

10.1Amended and Restated Master Management Agreement dated as of January 1, 2006, by and between Reit Management & Research, LLC and HRPT Properties Trust. (filed herewith)

12.1Computation of Ratio of Earnings to Fixed Charges. (filed herewith)

12.2Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Distributions. (filed herewith)

31.1Rule 13a-14(a) Certification. (filed herewith)

31.2Rule 13a-14(a) Certification. (filed herewith)

31.3Rule 13a-14(a) Certification. (filed herewith)

31.4Rule 13a-14(a) Certification. (filed herewith)

32.1Section 1350 Certification. (furnished herewith)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

HRPT PROPERTIES TRUST
By:	/s/ John A. Mannix
	John A. Mannix
	President and Chief Operating Officer
	Dated: May 9, 2006
By:	/s/ John C. Popeo
	John C. Popeo
	Treasurer and Chief Financial Officer
	(principal financial and accounting officer)
	Dated: May 9, 2006

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