First Potomac Realty Trust Reports Third Quarter 2013 Results

        First Potomac Realty Trust Reports Third Quarter 2013 Results

Executed 300,000 Square Feet of Leases Bringing the Portfolio to 87.4% Leased

PR Newswire

BETHESDA, Md., Oct. 24, 2013

BETHESDA, Md., Oct. 24, 2013 /PRNewswire/ --First Potomac Realty Trust (NYSE:
FPO), a leader in the ownership, management, development and redevelopment of
office and business park properties in the greater Washington, D.C. region,
reported results for the three and nine months ended September 30, 2013.

(Logo: http://photos.prnewswire.com/prnh/20130604/MM26388LOGO)

Third Quarter 2013 and Subsequent Highlights

  oReported Core Funds From Operations of $13.5 million, or $0.22 per diluted
    share.
  oExecuted 300,000 square feet of leases, including 213,000 square feet of
    new leases, bringing total new leasing for the year to 666,000 square
    feet.
  oIncreased leased percentage from 84.9% in the third quarter of 2012 to
    87.4% and brought occupancy up from 83.2% to 85.1%.
  oSame-property net operating income increased by 3.7% on an accrual basis
    and 2.3% on a cash basis.
  oSold 4200 Tech Court, a 34,000 square foot single-story office building
    and Triangle Business Center, a 74,000 square foot single-story business
    park, for net proceeds of $3.2 million and $2.7 million, respectively.
  oOn October 1, acquired 540 Gaither Road, the third multi-story office
    building at Redland Corporate Center, in Rockville, Maryland, for $30
    million, which completes the Company's ownership of the complex.
  oOn October 16, amended the unsecured revolving credit facility and
    unsecured term loans to increase borrowing capacity, extend the maturity,
    and reduce LIBOR spreads for each.

Douglas J. Donatelli, Chairman and CEO of First Potomac Realty Trust, stated,
"Over the last three quarters, we have made significant progress executing on
the strategic and capital plan we laid out earlier this year. We continued to
improve the operating metrics of our portfolio, increased our sequential
occupancy by 110 basis points, and delivered our seventh consecutive quarter
of positive net absorption in a very challenging D.C. market. Subsequent to
quarter end, we completed our first acquisition since late 2011 with the third
building at Redland Corporate Center, and demonstrated our commitment to
high-quality, multi-story office assets in strong submarkets where we have an
existing presence. We are pleased with the positive steps we have taken, and
are working diligently to position First Potomac as the preeminent owner of
quality office properties in the greater Washington D.C. region."

Funds From Operations ("FFO") decreased for the three months ended September
30, 2013 compared with the same period in 2012 due to a reduction in net
operating income as a result of the sale of the majority of the Company's
industrial properties in June 2013, increased personnel separation costs, and
a non-recurring non-cash gain of $4.3 million recorded in the third quarter of
2012 as a result of changed tax regulations. The decrease in FFO for the third
quarter of 2013 was partially offset by a 3.7% increase in same-property net
operating income compared with the third quarter of 2012.

FFO increased for the nine months ended September 30, 2013 compared with the
same period in 2012 primarily due to lower debt extinguishment costs and
reduced legal and accounting fees, which were partially offset by a reduction
in net operating income as a result of the sale of the majority of the
Company's industrial properties, the operations of which are presented in
discontinued operations. During the second quarter of 2012, the Company
recorded $13.2 million of debt extinguishment charges from the prepayment of
its senior notes compared with $4.7 million of debt extinguishment costs
incurred in 2013 primarily associated with the repayment of debt in
conjunction with property dispositions. FFO also increased for the nine months
ended September 30, 2013 due to a 1.7% increase in same property net operating
income.

Core FFO decreased for the three and nine months ended September 30, 2013
compared with the same periods in 2012, primarily due to a decline in net
operating income as a result of the sale of the majority of the Company's
industrial properties in June 2013, the operations of which are presented in
discontinued operations.

A reconciliation between Core FFO and FFO available to common shareholders for
the three and nine months ended September 30, 2013 and 2012 is presented below
(in thousands, except per share amounts):

                 Three Months Ended September 30,         Nine Months Ended September 30,
                 2013                2012                 2013                2012
                          Per                 Per                  Per                  Per

                 Amount   diluted    Amount   diluted     Amount   diluted    Amount    diluted

                          share^(1)           share^(1)           share^(1)            share^(1)
Core FFO         $       $        $       $   0.29  $       $        $        $  
                 13,524  0.22       15,297              45,257   0.80       46,779    0.88
 Loss on debt  (123)    -          -        -           (4,738)  (0.08)     (13,325)  (0.25)
extinguishment
 Internal
investigation    -        -          (743)    (0.01)      -        -          (3,276)   (0.06)
costs
 Deferred
abatement and    -        -          1,567    0.03        1,567    0.03       1,567     0.03
straight-line
amortization^(2)
 Acquisition   (173)    -          (8)      -           (173)    -          (49)      -
costs
Change in tax    -        -          4,327    0.08        -        -          4,327     0.08
regulation^(3)
Personnel        (1,777)  (0.03)     (397)    (0.01)      (1,777)  (0.03)     (397)     (0.01)
separation costs
 Contingent
consideration
related to       -        -          (112)    -           (75)     -          (112)     -
acquisition of
property^(4)
 Legal costs
associated with  -        -          -        -           (391)    (0.01)     -         -
informal SEC
inquiry
FFO available to $       $        $                   $       $        $        $  
common           11,451  0.19       19,931  $   0.38  39,670   0.70       35,514    0.67
shareholders
Net (loss)       $                  $                  $                  $ 
income           (1,717)             7,435               14,722              (9,261)
Net (loss)
income
attributable to  $                 $                 $                $  
common           (0.08)              0.08                0.09                (0.35)
shareholders per
diluted common
share^(5)

^(1)  Numbers may not foot due to rounding.
          Represents the accelerated amortization of the straight-line balance
          and the deferred abatement for Engineering Solutions at I-66
^(2) Commerce Center, which terminated its lease prior to completion. The
          tenant vacated the property at the end of March 2013. The property
          was sold in May 2013.
          Reflects the one-time non-cash impact of changed tax regulations
^(3)  enacted by the District of Columbia that became effective in
          September 2012.
          Reflects an increase in the Company's contingent consideration
^(4)  liability related to its acquisition of Ashburn Center in 2009. The
          Company paid $1.7 million to the seller of the property in the third
          quarter of 2013 to fulfill the obligation.
          Reflects amounts attributable to noncontrolling interests and the
^(5)  impact of dividends on the Company's preferred shares to arrive at
          net (loss) income attributable to common shareholders.

A reconciliation of net (loss) income to FFO available to common shareholders
and Core FFO, as well as definitions and statements of purpose, are included
below in the financial tables accompanying this press release and under
"Non-GAAP Financial Measures," respectively.

Operating Performance

At September 30, 2013, the Company's consolidated portfolio consisted of 145
buildings totaling approximately 9 million square feet. The Company's
consolidated portfolio was 87.4% leased and 85.1% occupied at September 30,
2013, compared with 86.5% leased and 84.0% occupied at June 30, 2013 and 84.9%
leased and 83.2% occupied at September 30, 2012, a 190 basis point occupancy
increase year over year. 

During the third quarter of 2013, the Company executed 300,000 square feet of
leases, which consisted of 213,000 square feet of new leases and 87,000 square
feet of renewal leases. The Company delivered positive net absorption of
approximately 19,741 square feet, the Company's seventh consecutive quarter of
positive net absorption, and as anticipated, had a tenant retention rate of
30%, primarily as a result of over 200,000 square feet of known move outs in
the third quarter.

Same-property net operating income ("Same-Property NOI") increased 3.7% on an
accrual basis for the three months ended September 30, 2013 and increased 1.7%
for the nine months ended September 30, 2013 compared with the same periods in
2012. The increase in Same-Property NOI in the three months ended September
30, 2013 was due to an increase in occupancy at Van Buren Office Park, Reston
Business Campus, Sterling Park Business Center and Norfolk Business Center.
The increase in Same-Property NOI during the nine months ended September 30,
2013 was primarily a result of occupancy increases at Redland Corporate
Center, Atlantic Corporate Park, Van Buren Office Park and Reston Business
Campus.

A reconciliation of net (loss) income to Same-Property NOI and a definition
and statement of purpose are included below in the financial tables
accompanying this press release and under "Non-GAAP Financial Measures,"
respectively.

A list of the Company's properties, as well as additional information
regarding the Company's results of operations can be found in the Company's
Third Quarter 2013 Supplemental Financial Report, which is posted on the
Company's website, www.first-potomac.com.

Acquisition

On October 1, 2013, the Company acquired 540 Gaither Road (Redland I), a
six-story, 134,000 square foot office building in Rockville, Maryland, for
$30.0 million. The property is located within Redland Corporate Center, which
is comprised of three multi-story, Class-A office buildings totaling 483,000
square feet. The Company acquired Redland II and III in a joint venture with
Perseus Realty, LLC in late 2010. The newly acquired property is 100% leased
to the Department of Health and Human Services (HHS) through early 2018. The
acquisition was funded with $28.2 million of proceeds from the sale of its
industrial portfolio in June 2013 that was previously placed with a qualified
intermediary to facilitate a tax-free exchange, as well as available cash.

Dispositions

Consistent with the Company's previously disclosed strategy of focusing on
high-quality, multi-story office properties, the Company continued to dispose
of certain non-core properties. Specifically, the Company sold 4200 Tech
Court, a 34,000 square foot single-story office building located in Chantilly,
Virginia, for net proceeds of approximately $3.2 million, and Triangle
Business Center, a four-building, 74,000 square foot single-story business
park property located in Baltimore, Maryland, for net proceeds of
approximately $2.7 million. The Company reported a gain on the sale of 4200
Tech Court of $0.4 million in its third quarter results. As previously
disclosed, the Company recorded an impairment charge of $1.4 million on
Triangle Business Center in the second quarter of 2013.

On September 24, 2013, the Company entered into a contract to sell Worman's
Mill Court, a 40,000 square foot office building located in Frederick,
Maryland. Based on the anticipated sales price, the Company recorded an
impairment charge of $0.5 million in the third quarter of 2013. The sale is
expected to be completed in the fourth quarter of 2013. At September 30,
2013, the Company classified the property as "held-for-sale" on its
consolidated balance sheet.

The operating results and any gains on sale of 4200 Tech Court, Triangle
Business Center and Worman's Mill Court are reflected as discontinued
operations in the Company's consolidated statements of operations for each of
the periods presented in this press release.

Financing Activity

On September 3, 2013, the Company repaid a $6.6 million mortgage loan that
encumbered Linden Business Center with available cash.

On September 30, 2013, the Company repaid a $53.9 million mortgage loan that
encumbered 840 First Street, NE, which was scheduled to mature on October 1,
2013. 840 First Street, NE is subject to a tax protection agreement, which
requires that the Company maintain a specified minimum amount of debt on the
property through March 2018. As a result of this requirement, simultaneously
with the repayment of the mortgage debt, the Company encumbered 840 First
Street, NE with a $37.3 million mortgage loan that had previously encumbered
500 First Street, NW. The transfer of the mortgage loan did not impact any
material terms of the agreement. The Company incurred $0.1 million in debt
extinguishment charges related to the transfer.

On October 16, 2013, the Company amended its unsecured revolving credit
facility and unsecured term loan. The Company increased the size of the
unsecured revolving credit facility from $255 million to $300 million and
extended the maturity date of the facility to October 2017, with a one-year
extension at the Company's option. The Company divided its unsecured term loan
into three $100 million tranches that mature in October 2018, 2019 and 2020,
which added over two years of term from the previous maturity dates. As part
of the amendments, the Company reduced its LIBOR spreads to current market
rates, eliminated the prepayment lock-outs for the unsecured term loan,
eliminated prepayment penalties associated with two tranches of the unsecured
term loan, decreased the capitalization rates used to calculate gross asset
value in the covenant calculations, and moved to a covenant package more
closely aligned with the Company's strategic plan. The Company believes the
amendments to the unsecured revolving credit facility and unsecured term loan
will reduce its borrowing costs and put the Company in a stronger position to
deploy capital in the future.

Balance Sheet

The Company had $659.0 million of debt outstanding at September 30, 2013
compared with $688.0 million of debt outstanding at June 30, 2013. Of the
Company's outstanding debt at September 30, 2013, $232.3 million was
fixed-rate debt, $350.0 million was hedged variable-rate debt, and $76.7
million was unhedged variable-rate debt.

Dividends

On October 22, 2013, the Company declared a dividend of $0.15 per common
share, equating to an annualized dividend of $0.60 per common share. The
dividend will be paid on November 15, 2013 to common shareholders of record as
of November 6, 2013. The Company also declared a dividend of $0.484375 per
share on its Series A Preferred Shares. The dividend will be paid on November
15, 2013 to preferred shareholders of record as of November 6, 2013.

Core FFO Guidance

The Company improved its full-year 2013 Core FFO guidance to $1.02 to $1.04
per diluted share. The Company's updated guidance reflects all prior
dispositions and financing activities completed during the year, as well as
the acquisition of 540 Gaither Road, which was completed in the fourth quarter
of 2013, and Worman's Mill Court, which is expected to be sold in the fourth
quarter of 2013. Among other things, guidance does not include the impact of
any potential acquisition opportunities. The following is a summary of the
assumptions that the Company used in arriving at its guidance, which were
updated based on the Company's first, second, and third quarter activity
(unaudited, amounts in thousands except percentages and per share amounts):

                                       Expected Ranges^(1)
Portfolio NOI^(2)                      $  114,000  -      $  116,000
Interest and Other Income              6,000        -      6,500
FFO from Unconsolidated Joint Ventures 5,000        -      5,500
Interest Expense                       $   34,000 -      $   35,000
G&A^(3)                                19,000       -      20,000
Preferred Dividends                                 12,400
Weighted Average Shares                57,500       -      58,000
Year-End Occupancy                     85.0%        -      86.0%
Same-Property NOI – Accrual Basis      1.5%         -      2.5%

       Company's guidance reflects the disposition of the 24 industrial
       properties, 4200 Tech Court, 4212 Tech Court, and Triangle Business
       Center, the potential sale of Worman's Mill Court, the acquisition of
       540 Gaither Road, as well as the issuance of 7,475,000 common shares
^(1)  during the second quarter of 2013, but does not take into consideration
       any additional dispositions, acquisitions or capital raising activities
       in 2013. The Company's guidance also excludes any potential gains or
       asset impairments associated with potential future property
       dispositions.
       Does not include the $1.5 million straight-line amortization rent
^(2)  impact associated with Engineering Solutions at I-66 Commerce Center.
       The tenant terminated its lease at the end of March 2013 and the
       property was sold in May 2013.
       Excludes $1.8 million of personnel separation costs related to the
^(3) departure of the Company's former Chief Operating Officer and $0.4
       million of legal costs associated with the informal SEC inquiry.

The Company's guidance is also based on a number of other assumptions, many of
which are outside the Company's control and all of which are subject to
change. The Company may change its guidance as actual and anticipated results
vary from these assumptions.

Guidance Range for 2013                                  Low Range  High Range
Net income attributable to common shareholders per       $  0.04   $ 0.06
diluted share
Real estate depreciation^(1)                             1.17       1.17
I-66 Commerce Center accelerated amortization            (0.03)     (0.03)
Net loss attributable to noncontrolling interests and    (0.16)     (0.16)
items excluded from Core FFO per diluted share^(2)
Core FFO per diluted share                               $  1.02   $  1.04

         Includes the Company's pro-rata share of depreciation from its
^(1) unconsolidated joint ventures and depreciation related to the
         Company's disposed properties.
         Items excluded from Core FFO consist of the gains associated with
         disposed properties, the costs associated with the informal SEC
^(2) inquiry, contingent consideration, impairment charges, acquisition
         costs, personnel separation costs, and debt modification and
         extinguishment charges.

Investor Conference Call and Webcast

First Potomac will host a conference call on October 25, 2013 at 9:00 AM ET to
discuss third quarter results. The conference call can be accessed by dialing
(877) 705-6003 or (201) 493-6725 for international participants. A replay of
the call will be available from 12:00 Noon ET on October 25, 2013, until
midnight ET on November 1, 2013. The replay can be accessed by dialing (877)
870-5176 or (858) 384-5517 for international callers, and entering pin number
10000324.

A live broadcast of the conference call will also be available online at the
Company's website, www.first-potomac.com, on October 25, 2013, beginning at
9:00 AM ET. An online replay will follow shortly after the call and will
continue for 90 days.

About First Potomac Realty Trust

First Potomac Realty Trust is a self-administered, self-managed real estate
investment trust that focuses on owning, operating, developing and
redeveloping office and business park properties in the greater Washington,
D.C. region. As of September 30, 2013, the Company's consolidated portfolio
totaled approximately 9 million square feet. Based on annualized cash basis
rent, the Company's portfolio consists of 51% office properties and 49%
business park and industrial properties. A key element of First Potomac's
overarching strategy is its dedication to sustainability. Nearly one million
square feet of First Potomac property is LEED Certified, with the potential
for another one million square feet in future development projects.
Approximately half of theportfolio's multi-story office square footage is
LEED or Energy Star Certified. FPO common shares (NYSE:FPO) and preferred
shares (NYSE:FPO-PA) are publicly traded on the New York Stock Exchange.

Non-GAAP Financial Measures

Funds from Operations – Funds from operations ("FFO") represents net income
(computed in accordance with U.S. generally accepted accounting principles
("GAAP")), excluding gains (losses) on sales of real estate and impairments of
real estate assets, plus real estate-related depreciation and amortization and
after adjustments for unconsolidated partnerships and joint ventures. The
Company also excludes, from its FFO calculation, any depreciation and
amortization related to third parties from its consolidated joint ventures.

The Company considers FFO a useful measure of performance for an equity REIT
because it facilitates an understanding of the operating performance of its
properties without giving effect to real estate depreciation and amortization,
which assume that the value of real estate assets diminishes predictably over
time. Since real estate values have historically risen or fallen with market
conditions, the Company believes that FFO provides a meaningful indication of
its performance. The Company also considers FFO an appropriate performance
measure given its wide use by investors and analysts. The Company computes FFO
in accordance with standards established by the Board of Governors of NAREIT
in its March 1995 White Paper (as amended in November 1999, April 2002 and
January 2012), which may differ from the methodology for calculating FFO
utilized by other equity real estate investment trusts ("REITs") and,
accordingly, may not be comparable to such other REITs. Further, FFO does not
represent amounts available for management's discretionary use because of
needed capital replacement or expansion, debt service obligations or other
commitments and uncertainties, nor is it indicative of funds available to fund
the Company's cash needs, including its ability to make distributions. The
Company presents FFO per diluted share calculations that are based on the
outstanding dilutive common shares plus the outstanding Operating Partnership
units for the periods presented.

Core FFO – Management believes that the computation of FFO in accordance with
NAREIT's definition includes certain items that are not indicative of the
results provided by the Company's operating portfolio and affect the
comparability of the Company's period-over-period performance. These items
include, but are not limited to, gains and losses on the retirement of debt,
legal and accounting costs related to the Company's prior internal
investigation and the informal SEC inquiry, personnel separations costs,
contingent consideration charges and acquisition costs.

The Company's presentation of FFO in accordance with the NAREIT white paper,
or presentation of Core FFO, should not be considered as an alternative to net
income (computed in accordance with GAAP) as an indicator of the Company's
financial performance or to cash flow from operating activities (computed in
accordance with GAAP) as an indicator of its liquidity. The Company's FFO and
Core FFO calculations are reconciled to net income in the Company's
Consolidated Statements of Operations included in this release.

NOI – The Company defines net operating income ("NOI") as operating revenues
(rental income, tenant reimbursements and other income) less property and
related expenses (property expenses, real estate taxes and insurance).
Management believes that NOI is a useful measure of the Company's property
operating performance as it provides a performance measure of the revenues and
expenses directly associated with owning, operating, developing and
redeveloping office and business park properties, and provides a perspective
not immediately apparent from net income or FFO. Other REITs may use different
methodologies for calculating NOI, and accordingly, the Company's NOI may not
be comparable to other REITs. The Company's NOI calculations are reconciled to
total revenues and total operating expenses at the end of this release.

Same-Property NOI – Same-Property Net Operating Income ("Same-Property NOI"),
defined as operating revenues (rental, tenant reimbursements and other
revenues) less operating expenses (property operating expenses, real estate
taxes and insurance) from the properties owned by the Company for the entirety
of the periods compared, is a primary performance measure the Company uses to
assess the results of operations at its properties. As an indication of the
Company's operating performance, Same-Property NOI should not be considered an
alternative to net income calculated in accordance with GAAP. A reconciliation
of the Company's Same-Property NOI to net income from its consolidated
statements of operations is presented below. The Same-Property NOI results
exclude corporate-level expenses, as well as certain transactions, such as the
collection of termination fees, as these items vary significantly
period-over-period thus impacting trends and comparability. Also, the Company
eliminates depreciation and amortization expense, which are property level
expenses, in computing Same-Property NOI as these are non-cash expenses that
are based on historical cost accounting assumptions and do not offer the
investor significant insight into the operations of the property. This
presentation allows management and investors to distinguish whether growth or
declines in net operating income are a result of increases or decreases in
property operations or the acquisition of additional properties. While this
presentation provides useful information to management and investors, the
results below should be read in conjunction with the results from the
consolidated statements of operations to provide a complete depiction of total
Company performance.

Forward Looking Statements

The forward-looking statements contained in this press release, including
statements regarding the Company's 2013 Core FFO guidance and related
assumptions, the potential sale of Worman's Mill Court and the timing of such
sale, and future acquisition and growth opportunities, are subject to various
risks and uncertainties. Although the Company believes the expectations
reflected in such forward-looking statements are based on reasonable
assumptions, there can be no assurance that its expectations will be achieved.
Certain factors that could cause actual results to differ materially from the
Company's expectations include changes in general or regional economic
conditions; the Company's ability to timely lease or re-lease space at current
or anticipated rents; changes in interest rates; changes in operating costs;
the Company's ability to complete acquisitions on acceptable terms; the
Company's ability to manage its current debt levels and repay or refinance its
indebtedness upon maturity or other required payment dates; the Company's
ability to maintain financial covenant compliance under its debt agreements;
the Company's ability to maintain effective internal controls over financial
reporting and disclosure controls and procedures; any impact of the informal
inquiry initiated by the U.S. Securities and Exchange Commission (the "SEC");
the Company's ability to obtain debt and/or financing on attractive terms, or
at all; changes in the assumptions underlying the Company's earnings and Core
FFO guidance and other risks detailed in the Company's Annual Report on Form
10-K and described from time to time in the Company's filings with the SEC.
Many of these factors are beyond the Company's ability to control or predict.
Forward-looking statements are not guarantees of performance. For
forward-looking statements herein, the Company claims the protection of the
safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. The Company assumes no obligation to update or
supplement forward-looking statements that become untrue because of subsequent
events.

Consolidated Statements of Operations

(unaudited, amounts in thousands, except per share amounts)
                         Three Months Ended        Nine Months Ended September
                         September 30,             30,
                         2013         2012         2013          2012
Revenues:
Rental                   $       $       $        $      
                          32,424      31,516     96,742     93,689
Tenant reimbursements    8,413        7,270        25,229        23,585
and other
Total revenues           40,837       38,786       121,971       117,274
Operating expenses:
Property operating       10,878       10,035       31,529        27,697
Real estate taxes and    4,240        3,741        13,104        12,253
insurance
General and              6,346        5,645        16,598        17,787
administrative
Acquisition costs        173          8            173           49
Depreciation and         14,812       14,144       43,891        41,247
amortization
Impairment of real       -            496          -             2,444
estate assets
Contingent consideration
related to acquisition   -            112          75            112
of property
Total operating expenses 36,449       34,181       105,370       101,589
Operating income         4,388        4,605        16,601        15,685
Other expenses, net:
Interest expense         7,726        9,974        27,036        30,909
Interest and other       (1,696)      (1,521)      (4,801)       (4,528)
income
Equity in (earnings)     (19)         30           (54)          52
losses of affiliates
Gain on sale of          -            (2,951)      -             (2,951)
investment
Loss on debt             123          -            324           13,221
extinguishment
Total other expenses,    6,134        5,532        22,505        36,703
net
Loss from continuing
operations before income (1,746)      (927)        (5,904)       (21,018)
taxes
Benefit from income      -            4,304        -             4,142
taxes
(Loss) income from       (1,746)      3,377        (5,904)       (16,876)
continuing operations
Discontinued operations:
 (Loss) income from   (387)        4,058        5,677         7,454
operations
 Loss on debt        -            -            (4,414)       -
extinguishment
 Gain on sale of     416          -            19,363        161
real estate property
Income from discontinued                           
operations               29           4,058                      7,615
                                                   20,626
Net (loss) income        (1,717)      7,435        14,722        (9,261)
Less: Net loss (income)                                        
attributable to          211
noncontrolling interests              (232)        (196)         876
Net (loss) income                                                
attributable to First    (1,506)      7,203        14,526
Potomac Realty Trust                                             (8,385)
Less: Dividends on       (3,100)      (3,100)      (9,300)       (8,864)
preferred shares
Net (loss) income        $       $       $        $     
attributable to common    (4,606)      4,103     5,226   (17,249)
shareholders
                         Three Months Ended        Nine Months Ended September
                         September 30,             30,
                         2013         2012         2013          2012

                         $       $       $        $     
Net (loss) income         (4,606)      4,103     5,226   (17,249)
attributable to common
shareholders
Depreciation and
amortization:
 Real estate assets    14,812       14,144       43,891        41,247
 Discontinued          104          2,489        3,928         7,728
operations
 Unconsolidated   1,332        1,487        4,001         4,456
joint ventures
 Consolidated     (46)         (46)         (150)         (129)
joint ventures
Impairment of real      474          496          1,921         3,517
estate assets
Gain on sale of real     (416)        (2,951)      (19,363)      (3,112)
estate property
Net (loss) income
attributable to
noncontrolling interests (203)        209          216           (944)
in the Operating
Partnership
Funds from operations    $       $       $        $      
available to common        11,451     19,931    39,670       35,514
shareholders





Consolidated Statements of Operations

(unaudited, amounts in thousands, except per share amounts)
                            Three Months Ended        Nine Months Ended
                            September 30,             September 30,
                            2013         2012         2013         2012
Funds from operations (FFO) $       $       $       $     
                            14,551      23,031       48,970      44,378
Less: Dividends on          (3,100)      (3,100)      (9,300)      (8,864)
preferred shares
FFO available to common     11,451       19,931       39,670       35,514
shareholders
 Personnel separation     1,777        397          1,777        397
costs
 Loss on debt             123          -            4,738        13,325
extinguishment
 Internal investigation   -            743          -            3,276
costs
 Deferred abatement and   -            (1,567)      (1,567)      (1,567)
straight-line amortization
 Change in tax regulation -            (4,327)      -            (4,327)
 Acquisition costs        173          8            173          49
 Contingent consideration
related to acquisition of   -            112          75           112
property
 Legal costs associated   -            -            391          -
with informal SEC inquiry
Core FFO                    $       $       $       $     
                            13,524      15,297       45,257       46,779
Basic and diluted earnings
per common share:
Loss from continuing        $       $       $       $     
operations availableto      (0.08)         -    (0.28)     (0.49)
common shareholders
Income from discontinued
operations available to     -            0.08         0.37         0.14
common shareholders
Net (loss) income available $       $       $       $     
to common shareholders       (0.08)      0.08        0.09     (0.35)
Weighted average common
shares outstanding:
Basic                       57,969       50,267       54,014       50,049
Diluted                     57,969       50,346       54,014       50,049
FFO available to common     $       $       $       $     
shareholders per share –       0.19     0.38       0.70      0.67
basic and diluted
Core FFO per share –        $       $       $       $     
diluted                        0.22     0.29       0.80      0.88
Weighted average common
shares and units
outstanding:
Basic                       60,561       52,869       56,610       52,802
Diluted                     60,628       52,947       56,701       52,884





Consolidated Balance Sheets

(Amounts in thousands, except per share amounts)
                                         September 30, 2013  December 31, 2012
                                         (unaudited)
Assets:
Rental property, net                     $             $      
                                         1,218,364           1,450,679
Assets held-for-sale                     3,447               -
Cash and cash equivalents                16,971              9,374
Escrows and reserves                     38,089              13,421
Accounts and other receivables, net of
allowance for doubtful accounts of       12,309              15,271
$1,698 and $1,799, respectively
Accrued straight-line rents, net of
allowance for doubtful accounts of $168  29,838              28,133
and $530, respectively
Notes receivable, net                    54,722              54,730
Investment in affiliates                 49,229              50,596
Deferred costs, net                      39,706              40,370
Prepaid expenses and other assets        11,064              8,597
Intangible assets, net                   37,544              46,577
Total assets                             $             $      
                                         1,511,283           1,717,748
Liabilities:
Mortgage loans                           $            $       
                                         275,974            418,864
Secured term loan                        -                   10,000
Unsecured term loan                      300,000             300,000
Unsecured revolving credit facility      83,000              205,000
Accounts payable and other liabilities   44,704              64,920
Accrued interest                         1,697               2,653
Rents received in advance                6,969               9,948
Tenant security deposits                 5,799               5,968
Deferred market rent, net                1,746               3,535
Total liabilities                        719,889             1,020,888
Noncontrolling interests in the          33,972              34,367
Operating Partnership
Equity:
Preferred Shares, $0.001 par value,
50,000 shares authorized; Series A       $            $       
Preferred Shares, $25 liquidation        160,000             160,000
preference, 6,400 shares issued and
outstanding
Common shares, $0.001 par value,
150,000 shares

 authorized; 58,772 and 51,047 shares 59                  51
issued and

 outstanding, respectively
Additional paid-in capital               912,444             804,584
Noncontrolling interests in consolidated 3,957               3,728
partnerships
Accumulated other comprehensive loss     (5,150)             (10,917)
Dividends in excess of accumulated       (313,888)           (294,953)
earnings
 Total equity                          757,422             662,493
Total liabilities, noncontrolling        $             $      
interests and equity                     1,511,283           1,717,748





Same-Property Analysis

(unaudited, dollars in thousands)
                           Three Months Ended        Nine Months Ended
                            September 30,             September 30,
Same-Property NOI^(1)
                            2013         2012         2013         2012
Total base rent             $       $       $       $     
                             30,863     30,389      92,073       90,767
Tenant reimbursements and   7,833        6,961        23,059       21,157
other
Property operating expenses (9,825)      (9,553)      (28,571)     (27,159)
Real estate taxes and       (3,857)      (3,679)      (11,931)     (11,377)
insurance
Same-Property NOI - accrual                                        
basis                       25,014       24,118       74,630
                                                                   73,388
Straight-line revenue, net  (432)        (298)        (1,148)      (1,229)
Deferred market rental      50           258          74           366
revenue, net
Same-Property NOI - cash    $       $       $       $     
basis                        24,632     24,078      73,556       72,525

                            3.7%                      1.7%
Change in same-property NOI
- accrual basis
Change in same-property NOI 2.3%                      1.4%
- cash basis
Same-property percentage of 97.0%                     97.0%
total portfolio (sf)
                                                    

Reconciliation of           Three Months Ended        Nine Months Ended
Consolidated NOI to         September 30,             September 30,
Same-Property NOI
                            2013         2012         2013         2012
Total revenues              $       $       $        $    
                             40,837     38,786      121,971      117,274
Property operating expenses (10,878)     (10,035)     (31,529)     (27,697)
Real estate taxes and       (4,240)      (3,741)      (13,104)     (12,253)
insurance
NOI                         25,719       25,010       77,338       77,324
Less: Non-same property     (705)        (892)        (2,708)      (3,936)
NOI^(2)
Same-Property NOI – accrual $       $       $       $     
basis                        25,014     24,118      74,630       73,388



                          Three Months              Nine Months

Change in Same-Property   Ended        Percentage  Ended        Percentage of
NOI by Region (accrual                  of
basis)                    September                 September   Base Rent
                          30,           Base Rent   30,

                          2013                      2013
Washington, D.C.          2.5%          13%         3.1%         13%
Maryland                  (1.7)%        32%         (0.8)%       31%
Northern Virginia         12.5%         31%         4.2%         32%
Southern Virginia         0.3%          24%         0.7%         24%
Change in Same-Property
NOI by Type (accrual
basis)
Business Park /           4.7%          47%         (0.1)%       46%
Industrial
Office                    2.8%          53%         3.4%         54%

     Same-property comparisons are based upon those consolidated properties
     owned for the entirety of the periods presented. Same-property results
^(1) exclude the operating results of the following non same-properties that
     were owned as of September 30, 2013: Three Flint Hill, 440 First Street,
     NW, Davis Drive, 1005 First Street, NE and Worman's Mill Court.
     Non-same property NOI has been adjusted to reflect a normalized
^(2) management fee percentage in lieu of an administrative overhead
     allocation for comparative purposes.



CONTACT:
Jaime N. Marcus
Manager, Investor Relations
(301) 986-9200
jmarcus@first-potomac.com

SOURCE First Potomac Realty Trust

Website: www.first-potomac.com
 
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