EXHIBIT 99.3

FIRST POTOMAC REALTY TRUST
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

The following consolidated financial statements and schedule of First Potomac Realty Trust and Subsidiaries and report of our independent registered public accounting firm thereon are attached hereto:

		Page
FIRST POTOMAC REALTY TRUST AND SUBSIDIARIES
Report of independent registered public accounting firm			2
Consolidated Balance Sheets as of December 31, 2010 and 2009			3
Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008			4
Consolidated Statements of Equity and Comprehensive Income (Loss) for the years ended December 31, 2010, 2009 and 2008			5
Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008			6
Notes to consolidated financial statements			8
FINANCIAL STATEMENT SCHEDULE
Schedule III: Real Estate and Accumulated Depreciation			47

All other schedules are omitted because they are not applicable, or because the required information is included in the consolidated financial statements or notes thereto.

Report of Independent Registered Public Accounting Firm

The Board of Trustees and Shareholders
First Potomac Realty Trust:

We have audited the accompanying consolidated balance sheets of First Potomac Realty Trust and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, equity and comprehensive income (loss), and cash flows for each of the years in the three year period ended December 31, 2010. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule of real estate and accumulated depreciation. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Potomac Realty Trust and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

McLean, Virginia
March 10, 2011, except as to notes 1, 2, 4, 9 and 18, which are as of September 29, 2011

FIRST POTOMAC REALTY TRUST AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2010 and 2009
(Amounts in thousands, except per share amount)

		2010				2009
Assets:
Rental property, net		$	1,217,897			$	987,475
Cash and cash equivalents			33,280				9,320
Escrows and reserves			8,070				9,978
Accounts and other receivables, net of allowance for doubtful accounts of $3,246 and $2,346, respectively			7,238				7,049
Accrued straight-line rents, net of allowance for doubtful accounts of $849 and $1,185, respectively			12,771				10,967
Notes receivable, net			24,750				—
Investment in affiliates			23,721				1,819
Deferred costs, net			20,174				17,837
Prepaid expenses and other assets			14,230				6,625
Intangible assets, net			34,551				20,103
Total assets		$	1,396,682			$	1,071,173
Liabilities:
Mortgage loans		$	319,096			$	301,463
Exchangeable senior notes, net			29,936				48,718
Senior notes			75,000				75,000
Secured term loans			110,000				60,000
Unsecured revolving credit facility			191,000				159,900
Financing obligation			—				5,066
Accounts payable and other liabilities			16,827				13,100
Accrued interest			2,170				2,072
Rents received in advance			7,049				7,267
Tenant security deposits			5,390				5,235
Deferred market rent, net			6,032				6,008
Total liabilities			762,500				683,829
Noncontrolling interests in the Operating Partnership			16,122				9,585
Equity:
Series A Preferred Shares, $25 par value, 4,600 shares authorized and none outstanding			—				—
Common shares, $0.001 par value, 150,000 shares authorized; 49,922 and 30,589 shares issued and outstanding, respectively			50				31
Additional paid-in capital			794,051				517,940
Noncontrolling interests in consolidated partnerships			3,077				—
Accumulated other comprehensive loss			(545	)			(1,879	)
Dividends in excess of accumulated earnings			(178,573	)			(138,333	)
Total equity			618,060				377,759
Total liabilities, noncontrolling interests and equity		$	1,396,682			$	1,071,173

See accompanying notes to consolidated financial statements.

FIRST POTOMAC REALTY TRUST AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 2010, 2009 and 2008
(Amounts in thousands, except per share amounts)

		2010				2009				2008
Revenues:
Rental		$	109,895			$	104,127			$	96,713
Tenant reimbursements and other			26,322				24,253				21,499
Total revenues			136,217				128,380				118,212
Operating expenses:
Property operating			32,892				31,244				25,789
Real estate taxes and insurance			12,699				12,397				11,576
General and administrative			14,523				13,219				11,938
Acquisition costs			7,169				1,076				—
Depreciation and amortization			41,973				39,423				35,611
Impairment of real estate assets			2,386				—				—
Contingent consideration related to acquisition of property			710				—				—
Total operating expenses			112,352				97,359				84,914
Operating income			23,865				31,021				33,298
Other expenses, net:
Interest expense			33,725				32,369				35,381
Interest and other income			(632	)			(511	)			(654	)
Equity in losses of affiliates			124				95				—
Gains on early retirement of debt			(164	)			(6,167	)			(4,374	)
Total other expenses, net			33,053				25,786				30,353
(Loss) income from continuing operations before income taxes			(9,188	)			5,235				2,945
Provision for income taxes			(31	)			—				—
(Loss) income from continuing operations			(9,219	)			5,235				2,945
Discontinued operations:
(Loss) income from operations of disposed properties			(3,013	)			(1,179	)			2,922
Gain on sale of real estate properties			557				—				14,274
(Loss) income from discontinued operations			(2,456	)			(1,179	)			17,196
Net (loss) income			(11,675	)			4,056				20,141
Less: Net loss (income) attributable to noncontrolling Interests			232				(124	)			(615	)
Net (loss) income attributable to common shareholders		$	(11,443	)		$	3,932			$	19,526
Net (loss) income attributable to common shareholders per share — basic and diluted:
(Loss) income from continuing operations		$	(0.26	)		$	0.16			$	0.10
(Loss) income from discontinued operations			(0.07	)			(0.04	)			0.67
Net (loss) income		$	(0.33	)		$	0.12			$	0.77
Weighted average common shares outstanding — basic			36,984				27,956				24,838
Weighted average common shares outstanding — diluted			36,984				28,045				24,858

See accompanying notes to consolidated financial statements.

FIRST POTOMAC REALTY TRUST AND SUBSIDIARIES
Consolidated Statements of Equity and Comprehensive Income (Loss)
Years ended December 31, 2010, 2009 and 2008
(Amounts in thousands)

										Accumulated				Noncontrolling				Dividends in
		Common								Other				Interests in				Excess of
		Shares				Additional				Comprehensive				Consolidated				Accumulated								Comprehensive
		Par Value				Paid-in Capital				Loss				Partnerships				Earnings				Total Equity				Income (Loss)
Balance at December 31, 2007		$	24			$	438,566			$	—			$	—			$	(101,070	)		$	337,520
Net income			—				—				—								20,141				20,141			$	20,141
Other comprehensive loss			—				—				(3,931	)			—				—				(3,931	)			(3,931	)
Total comprehensive income																											16,210
Attributable to noncontrolling Interests			—				—				108				—				(615	)			(507	)			(507	)
Total comprehensive income attributable to common shareholders																										$	15,703
Dividends paid to shareholders			—				—				—				—				(34,192	)			(34,192	)
Acquisition of partnership units			—				(34	)			—				—				—				(34	)
Shares issued in exchange for Operating Partnership units			—				358				—				—				—				358
Restricted stock expense			—				1,791				—				—				—				1,791
Exercise of stock options			—				38				—				—				—				38
Stock option expense			—				201				—				—				—				201
Issuance of common stock			3				43,905				—				—				—				43,908
Balance at December 31, 2008			27				484,825				(3,823	)			—				(115,736	)			365,293
Net income			—				—				—				—				4,056				4,056			$	4,056
Other comprehensive income			—				—				1,314				—				—				1,314				1,314
Total comprehensive income																											5,370
Attributable to noncontrolling Interests			—				—				(32	)			—				(124	)			(156	)			(156	)
Total comprehensive income attributable to common shareholders																										$	5,214
Dividends paid to shareholders			—				—				—				—				(26,529	)			(26,529	)
Acquisition of partnership units			—				1				—				—				—				1
Shares issued in exchange for Operating Partnership units			—				483				—				—				—				483
Restricted stock expense			—				2,906				—				—				—				2,906
Stock option expense			—				207				—				—				—				207
Issuance of common stock			4				29,518																29,522
Deconsolidation of joint venture			—				—				662				—				—				662
Balance at December 31, 2009			31				517,940				(1,879	)			—				(138,333	)			377,759
Net loss			—				—				—				—				(11,675	)			(11,675	)		$	(11,675	)
Other comprehensive income			—				—				1,067				—				—				1,067				1,067
Total comprehensive loss																											(10,608	)
Attributable to noncontrolling Interests			—				—				(23	)			—				232				209				209
Total comprehensive loss attributable to common shareholders																										$	(10,399	)
Dividends paid to shareholders			—				—				—				—				(28,797	)			(28,797	)
Acquisition of partnership units			—				(1	)			—				—				—				(1	)
Shares issued in exchange for Operating Partnership units			—				55				—				—				—				55
Restricted stock expense			—				3,465				—				—				—				3,465
Exercise of stock options			—				44				—				—				—				44
Stock option and employee stock purchase plan expense			—				270				—				—				—				270
Issuance of common stock, net of net settlements			19				275,872				—				—				—				275,891
Adjustment of Operating Partnership units to fair value			—				(3,594	)			—				—				—				(3,594	)
Noncontrolling interest in consolidated joint venture, at acquisition			—				—				—				3,079				—				3,079
Loss attributable to noncontrolling interest in consolidated joint venture			—				—				—				(2	)			—				(2	)
Deconsolidation of joint venture			—				—				290				—				—				290
Balance at December 31, 2010		$	50			$	794,051			$	(545	)		$	3,077			$	(178,573	)		$	618,060

See accompanying notes to consolidated financial statements.

FIRST POTOMAC REALTY TRUST AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2010, 2009 and 2008
(Amounts in thousands)

		2010				2009				2008
Cash flow from operating activities:
Net (loss) income		$	(11,675	)		$	4,056			$	20,141
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Discontinued operations:
Gain on sale of properties			(557	)			—				(14,274	)
Depreciation and amortization			1,237				1,449				2,076
Impairment of real estate assets			4,013				2,541				—
Depreciation and amortization			42,799				40,288				36,482
Stock based compensation			3,735				3,113				1,985
Bad debt expense			1,290				2,302				533
Amortization of deferred market rent			(1,356	)			(1,572	)			(1,730	)
Amortization of financing costs and fair value discounts			757				445				3,208
Equity in losses of affiliates			124				95				—
Distributions from investments in affiliates			623				107				—
Contingent consideration related to acquisition of property			710				—				—
Impairment of real estate assets			2,386				—				—
Change in financing obligation			—				(378	)			(81	)
Gains on early retirement of debt			(164	)			(6,167	)			(4,374	)
Changes in assets and liabilities:
Escrows and reserves			69				(1,454	)			4,552
Accounts and other receivables			(1,844	)			(1,937	)			(2,936	)
Accrued straight-line rents			(1,711	)			(1,180	)			(1,081	)
Prepaid expenses and other assets			107				(658	)			(661	)
Tenant security deposits			382				28				(179	)
Accounts payable and accrued expenses			3,372				3,139				2,414
Accrued interest			150				(334	)			(285	)
Rents received in advance			(172	)			2,543				143
Deferred costs			(7,611	)			(6,418	)			(7,869	)
Total adjustments			48,339				35,952				17,923
Net cash provided by operating activities			36,664				40,008				38,064
Cash flows from investing activities:
Purchase deposit on future acquisitions			(7,403	)			(500	)			—
Investment in note receivable			(24,750	)			—				—
Proceeds from sale of real estate assets			11,414				—				50,573
Distributions from joint venture for contribution of real estate assets			—				—				11,572
Additions to rental property			(18,917	)			(21,928	)			(26,502	)
Additions to construction in progress			(5,793	)			(1,200	)			(10,328	)
Cash held by joint venture at deconsolidation			(896	)			—				—
Investment in unconsolidated joint ventures			(21,015	)			—				—
Acquisition of land parcel			(3,200	)			—				—
Acquisition of rental property and associated intangible assets			(279,248	)			(39,310	)			(46,377	)
Net cash used in investing activities			(349,808	)			(62,938	)			(21,062	)
Cash flows from financing activities:
Financing costs			(1,745	)			(3,234	)			(1,145	)
Issuance of debt			361,998				109,500				217,300
Issuance of stock, net			264,573				29,522				43,908
Repayments of debt			(258,331	)			(92,640	)			(230,555	)
Distributions to noncontrolling interests			(631	)			(718	)			(1,057	)
Dividends to shareholders			(28,797	)			(26,529	)			(34,192	)
Redemption of partnership units			(5	)			(3	)			(145	)
Stock option exercises			42				—				38
Net cash provided by (used in) financing activities			337,104				15,898				(5,848	)
Net increase (decrease) in cash and cash equivalents			23,960				(7,032	)			11,154
Cash and cash equivalents, beginning of year			9,320				16,352				5,198
Cash and cash equivalents, end of year		$	33,280			$	9,320			$	16,352

See accompanying notes to consolidated financial statements.

FIRST POTOMAC REALTY TRUST AND SUBSIDIARIES
Consolidated Statements of Cash Flows — Continued
Years ended December 31, 2010, 2009 and 2008

Supplemental disclosure of cash flow information (amounts in thousands):

		2010				2009				2008
Cash paid for interest, net		$	32,769			$	32,638			$	35,928
Non-cash investing and financing activities:
Debt assumed in connection with acquisitions of real estate			14,699				—				—
Conversion of Operating Partnership units into common shares			55				483				358
Issuance of Operating Partnership units in exchange for limited partnership interests			3,519				—				—

Cash paid for interest on indebtedness is net of capitalized interest of $0.8 million, $0.4 million and $1.6 million in 2010, 2009 and 2008, respectively. During 2010, the Company did not pay any cash for franchise taxes levied by the city of Washington D.C. Prior to 2010, the Company did not own any properties in Washington D.C. and, therefore was not subject to any Washington D.C franchise taxes.

During 2010, 2009 and 2008, 5 thousand, 40 thousand and 26 thousand Operating Partnership units, respectively, were redeemed for an equivalent number of the Company’s common shares.

On June 7, 2010, the Company issued 880,648 common shares in exchange for $13.03 million of Exchangeable Senior Notes.

On January 1, 2010 and March 17, 2009, the Company deconsolidated the joint ventures that own RiversPark I and II, respectively, and removed all related assets and liabilities from its consolidated balance sheets as of the date of deconsolidation. Amounts shown on the statements of cash flows represent cash held by RiversPark I, which was included in the Company’s consolidated balance sheets at December 31, 2009, and subsequently removed on its date of deconsolidation. For more information, see footnote 5 — Investment in Affiliates.

During 2010, the Company acquired eight consolidated properties at an aggregate purchase price of $286.2 million, including the assumption of $14.7 million of mortgage debt and the issuance of 230,876 Operating Partnership units valued at $3.5 million on the date of acquisition.

FIRST POTOMAC REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Description of Business

First Potomac Realty Trust (the “Company”) is a leader in the ownership, management, development and redevelopment of office and industrial properties in the greater Washington, D.C. region. The Company separates its properties into three distinct segments, which it refers to as the Maryland, Northern Virginia and Southern Virginia reporting segments. The Company strategically focuses on acquiring and redeveloping properties that it believes can benefit from its intensive property management and seeks to reposition these properties to increase their profitability and value. The Company’s portfolio contains a mix of single-tenant and multi-tenant office and industrial properties as well as business parks. Office properties are single-story and multi-story buildings that are used primarily for office use; business parks contain buildings with office features combined with some industrial property space; and industrial properties generally are used as warehouse, distribution or manufacturing facilities.

References in these financial statements to “we,” “our” or “First Potomac,” refer to the Company and its subsidiaries, on a consolidated basis, unless the context indicates otherwise.

The Company conducts its business through First Potomac Realty Investment Limited Partnership; the Company’s operating partnership (the “Operating Partnership”). At December 31, 2010, the Company was the sole general partner of, and owned a 98.1% interest in, the Operating Partnership. The remaining interests in the Operating Partnership, which are presented as noncontrolling in the Operating Partnership interests in the accompanying consolidated financial statements, are limited partnership interests, some of which are owned by several of the Company’s executive officers and trustees who contributed properties and other assets to the Company upon its formation, and other unrelated parties.

At December 31, 2010, the Company wholly-owned or had a controlling interest in properties totaling 13.2 million square feet and had an ownership interest in properties totaling an additional 0.5 million square feet through four unconsolidated joint ventures. The Company’s consolidated properties were 82.3% occupied by 592 tenants. Excluding the Company’s fourth quarter 2010 acquisitions of Atlantic Corporate Park, which was vacant at acquisition, and Redland Corporate Center II, which was 99% vacant at acquisition, the Company’s consolidated portfolio was 85.2% occupied at December 31, 2010. The Company does not include square footage that is in development or redevelopment in its occupancy calculation, which totaled 0.4 million square feet at December 31, 2010. As of December 31, 2010, the Company’s largest tenant was the U.S. Government, which along with government contractors, accounted for over 20% of the Company’s total annualized rental revenue. The Company also owned land that can accommodate approximately 1.7 million square feet of additional development. The Company derives substantially all of its revenue from leases of space within its properties. The Company operates so as to qualify as a real estate investment trust (“REIT”) for federal income tax purposes.

For the year ended December 31, 2010, the Company had consolidated net revenues of approximately $136 million and consolidated total assets of $1.4 billion. Financial information related to the Company’s three reporting segments is set forth in footnote 18, Segment Information, to the Company’s consolidated financial statements.

(2) Summary of Significant Accounting Policies

(a) Principles of Consolidation

The consolidated financial statements of the Company include the accounts of the Company, the Operating Partnership, the subsidiaries of the Operating Partnership in which it has a controlling interest and First Potomac Management LLC, a wholly-owned subsidiary that manages the majority of the Company’s properties. All intercompany balances and transactions have been eliminated in consolidation.

(b) Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management of the Company to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Estimates include the amount of accounts receivable that may be uncollectible; recoverability of notes receivable, future cash flows, discount and capitalization rate assumptions used to fair value acquired properties and to test impairment of certain long-lived assets and goodwill; market lease rates, lease-up periods, leasing and tenant improvement costs used to fair value intangible assets acquired and probability weighted cash flow analysis used to fair value contingent liabilities. Actual results could differ from those estimates.

(c) Revenue Recognition and Accounts Receivable

The Company generates substantially all of its revenue from leases on its office and industrial properties as well as business parks. The Company recognizes rental revenue on a straight-line basis over the term of its leases, which include fixed-rate renewal periods leased at below market rates at acquisition or inception. Accrued straight-line rents represent the difference between rental revenue recognized on a straight-line basis over the term of the respective lease agreements and the rental payments contractually due for leases that contain abatement or fixed periodic increases. The Company considers current information, credit quality, historical trends, economic conditions and other events regarding the tenants’ ability to pay their obligations in determining if amounts due from tenants, including accrued straight-line rents, are ultimately collectible. The uncollectible portion of the amounts due from tenants, including accrued straight-line rents, is charged to property operating expense in the period in which the determination is made. The Company considers similar criteria in assessing impairment associated with outstanding loans or notes receivable and whether any allowance for anticipated credit loss is appropriate.

Tenant leases generally contain provisions under which the tenants reimburse the Company for a portion of property operating expenses and real estate taxes incurred by the Company. Such reimbursements are recognized in the period in which the expenses are incurred. The Company records a provision for losses on estimated uncollectible accounts receivable based on its analysis of risk of loss on specific accounts. Lease termination fees are recognized on the date of termination when the related lease or portion thereof is cancelled, the collectability of the fee is reasonably assured and the Company has possession of the terminated space. The Company recognized lease termination fees included in “Tenant reimbursement and other revenues” in its consolidated statements of operations of $1.0 million, $0.4 million and $1.2 million for the years ended December 31, 2010, 2009 and 2008, respectively.

Concurrent with the Company’s August and September 2008 acquisitions of Triangle Business Center and RiversPark I, respectively, the former owner entered into master lease agreements for vacant space that was not producing rent at the time of the acquisitions. Payments received under the master lease agreements are recorded as a reduction to rental property rather than as rental income as the payments were determined to be a reduction in the purchase consideration at the time of acquisition, respectively. Payments received under these master lease agreements totaled $0.5 million and $1.4 million for the years ended December 31, 2009 and 2008, respectively.

(d) Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of 90 days or less at the date of purchase to be cash equivalents.

(e) Escrows and Reserves

Escrows and reserves represent cash restricted for debt service, real estate taxes, insurance, capital items and tenant security deposits.

(f) Deferred Costs

Financing costs related to long-term debt are deferred and amortized over the remaining life of the debt using a method that approximates the effective interest method. Leasing costs related to the execution of tenant leases are deferred and amortized over the term of the related leases. Accumulated amortization of these combined costs was $16.1 million and $11.5 million at December 31, 2010 and 2009, respectively.

The following table sets forth scheduled future amortization for deferred financing and leasing costs at December 31, 2010 (amounts in thousands):

		Deferred Financing				Leasing(1)
2011		$	2,148			$	3,565
2012			1,778				2,904
2013			412				2,247
2014			296				1,412
2015			182				1,028
Thereafter			206				2,146
		$	5,022			$	13,302

(1)		Excludes the amortization of $1.5 million of leasing costs that have yet to be placed in-service as the associated tenants have not moved into their related spaces and, therefore, the future amortization of these leasing costs have yet to be determined.

(g) Rental Property

Rental property is carried at initial cost less accumulated depreciation and, when appropriate, impairment losses. Improvements and replacements are capitalized at cost when they extend the useful life, increase capacity or improve the efficiency of the asset. Repairs and maintenance are charged to expense when incurred. Depreciation and amortization are recorded on a straight-line basis over the estimated useful lives of the assets. The estimated useful lives of the Company’s assets, by class, are as follows:

Buildings		39 years
Building improvements		5 to 20 years
Furniture, fixtures and equipment		5 to 15 years
Tenant improvements		Shorter of the useful lives of the assets or the terms of the related leases

The Company regularly reviews market conditions for possible impairment of a property’s carrying value. When circumstances such as adverse market conditions, changes in management’s intended holding period or potential sale to a third party indicate a possible impairment of the fair value of a property, an impairment analysis is performed. The Company assesses potential impairments based on an estimate of the future undiscounted cash flows (excluding interest charges) expected to result from the property’s use and eventual disposition. This estimate is based on projections of future revenues, expenses, capital improvement costs, expected holding periods and capitalization rates. These cash flows consider factors such as expected market trends and leasing prospects, as well as the effects of leasing demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a real estate investment based on forecasted undiscounted cash flows, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property. The Company is required to make estimates as to whether there are impairments in the carrying values of its investments in real estate. Further, the Company will record an impairment loss if it expects to dispose of a property, in the near term, at a price below carrying value. In such an event, the Company will record an impairment loss based on the difference between a property’s carrying value and its projected sales price less any estimated costs to sell.

The Company will classify a building as held-for-sale in the period in which it has made the decision to dispose of the building, the Company’s Board of Directors or a designated delegate has approved the sale, a binding agreement to purchase the property has been signed under which the buyer has committed a significant amount of nonrefundable cash and no significant financing contingencies exist that could cause the transaction not to be completed in a timely manner. If these criteria are met, the Company will cease depreciation of the asset and will record an impairment loss if the fair value, less anticipated selling costs, is lower than the carrying amount of the property. The Company will classify any impairment loss, together with the building’s operating results, as discontinued operations in its consolidated statements of operations for all periods presented and classify the assets and related liabilities as held-for-sale in its consolidated balance sheets in the period the sale criteria are met. Interest expense is reclassified to discontinued operations only to the extent the held-for-sale property is secured by specific mortgage debt and the mortgage debt will not be secured to another property owned by the Company after the disposition.

The Company recognizes the fair value, if sufficient information exists to reasonably estimate the fair value, of any liability for conditional asset retirement obligations when incurred, which is generally upon acquisition, construction, development or redevelopment and/or through the normal operation of the asset.

The Company capitalizes interest costs incurred on qualifying expenditures for real estate assets under development or redevelopment while being readied for their intended use in accordance with accounting requirements regarding capitalization of interest. The Company will capitalize interest when qualifying expenditures for the asset have been made, activities necessary to get the asset ready for its intended use are in progress and interest costs are being incurred. Capitalized interest also includes interest associated with expenditures incurred to acquire developable land while development activities are in progress. Capitalization of interest will end when the asset is substantially complete and ready for its intended use, but no later than one year from completion of major construction activity, if the property is not occupied. Capitalized interest is depreciated over the useful life of the underlying assets, commencing when those assets are placed into service.

(h) Purchase Accounting

Acquisitions of rental property from third parties are accounted for at fair value. Any liabilities assumed or incurred are recorded at their fair value at the time of acquisition. The fair value of the acquired property is allocated between land and building (on an as-if vacant basis) based on management’s estimate of the fair value of those components for each type of property and to tenant improvements based on the depreciated replacement cost of the tenant improvements, which approximates their fair value. The fair value of the in-place leases is recorded as follows:

•

the fair value of leases in-place on the date of acquisition is based on absorption costs for the estimated lease-up period in which vacancy and foregone revenue are avoided due to the presence of the acquired leases;

•

the fair value of above and below-market in-place leases based on the present value (using a discount rate that reflects the risks associated with the acquired leases) of the difference between the contractual rent amounts to be paid under the assumed lease and the estimated market lease rates for the corresponding spaces over the remaining non-cancelable terms of the related leases, which range from one to fifteen years; and

•

the fair value of intangible tenant or customer relationships.

The Company’s determination of these fair values requires it to estimate market rents for each of the leases and make certain other assumptions. These estimates and assumptions affect the rental revenue, and depreciation and amortization expense recognized for these leases and associated intangible assets and liabilities.

(i) Investment in Affiliates

The Company may continue to grow its portfolio by entering into ownership arrangements with third parties for which it does not have a controlling interest. The structure of the arrangement affects the Company’s accounting treatment as the Company adheres to requirements regarding consolidation of variable interest entities (“VIE”). In determining whether to consolidate an entity, the Company assesses the structure and intent of the entity relationship as well its power to direct major decisions regarding the entity’s operations and whether the Company’s portion of the earnings, distributions and liability for obligations are in accordance with the Company’s ownership percentage. When the Company’s investment in an entity meets the requirements for the equity method of accounting, it will record its initial investment in its consolidated balance sheets as “Investment in affiliates.” The initial investment in the entity is adjusted to recognize the Company’s share of earnings, losses, distributions received or additional contributions from the entity. The Company’s respective share of all earnings or losses from the entity will be recorded in its consolidated statements of operations as “Equity in earnings or losses of affiliates.”

When the Company is deemed to have a controlling interest in a partially-owned entity, it will consolidate all of the entity’s assets, liabilities and operating results within its consolidated financial statements. The cash contributed to the consolidated entity by the third party, if any, will be reflected in the permanent equity section of the Company’s consolidated balance sheets to the extent they are not mandatorily redeemable. The amount will be recorded based on the third party’s initial investment in the consolidated entity and will be adjusted to reflect the third party’s share of earnings or losses in the consolidated entity and for any distributions received or additional contributions made by the third party. The earnings or losses from the entity attributable to the third party are recorded as a component of net loss (income) attributable to non-controlling interests.

(j) Sales of Real Estate

The Company accounts for sales of real estate in accordance with the requirements for full profit recognition, which occurs when the sale is consummated, the buyer has made adequate initial and continuing investments in the property, the Company’s receivable is not subject to future subordination, and the seller does not have a substantial continuing involvement with the property, the related assets and liabilities are removed from the balance sheet and the resultant gain or loss is recorded in the period the sale is consummated. For sales transactions that do not meet the criteria for full profit recognition, the Company accounts for the transactions as partial sales or financing arrangements required by GAAP. For sales transactions with continuing involvement after the sale, if the continuing involvement with the property is limited by the terms of the sales contract, profit is recognized at the time of sale and is reduced by the maximum exposure to loss related to the nature of the continuing involvement. Sales to entities in which the Company has or receives an interest are accounted for as partial sales.

For sales transactions that do not meet sale criteria, the Company evaluates the nature of the continuing involvement, including put and call provisions, if present, and accounts for the transaction as a financing arrangement, profit-sharing arrangement, leasing arrangement or other alternate method of accounting rather than as a sale, based on the nature and extent of the continuing involvement. Some transactions may have numerous forms of continuing involvement. In those cases, the Company determines which method is most appropriate based on the substance of the transaction.

If the Company has an obligation to repurchase the property at a higher price or at a future indeterminable value (such as fair value), or it guarantees the return of the buyer’s investment or a return on that investment for an extended period, the Company accounts for such transaction as a financing transaction. If the Company has an option to repurchase the property at a higher price and it is likely it will exercise this option, the transaction is accounted for as a financing transaction. For transactions treated as financings, the Company records the amounts received from the buyer as a Financing Obligation and continues to consolidate the property and its operating results in its consolidated statements of operations. The results of operations of the property are allocated to the joint venture partner for their equity interest and reflected as “interest expense” on the Financing Obligation.

(k) Intangible Assets

Intangible assets include the fair value of acquired tenant or customer relationships and the fair value of in-place leases at acquisition. Customer relationship fair values are determined based on the Company’s evaluation of the specific characteristics of each tenant’s lease and its overall relationship with the tenant. Characteristics the Company considers include the nature and extent of its existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals. The fair value of customer relationship intangible assets is amortized to expense over the lesser of the initial lease term and any expected renewal periods or the remaining useful life of the building. The Company determines the fair value of the in-place leases at acquisition by estimating the leasing commissions avoided by having in-place tenants and the operating income that would have not been recognized during the estimated time required to lease the space occupied by existing tenants at the acquisition date. The fair value attributable to existing tenants is amortized to expense over the initial term of the respective leases. Should a tenant terminate its lease, the unamortized portion of the in-place lease fair value is charged to expense by the date of termination.

Deferred market rent liability consists of the acquired leases with below-market rents at the date of acquisition. The fair value attributed to deferred market rent assets, which consist of above-market rents at the date of acquisition, is recorded as a component of deferred costs. Above and below-market lease fair values are determined on a lease-by-lease basis based on the present value (using a discounted rate that reflects the risks associated with the acquired leases) of the difference between the contractual rent amounts to be paid under the lease and the estimated market lease rates for the corresponding spaces over the remaining non-cancelable terms of the related leases including any below-market fixed rate renewal periods. The capitalized below-market lease fair values are amortized as an increase to rental revenue over the initial term and any below-market fixed-rate renewal periods of the related leases. Capitalized above-market lease fair values are amortized as a decrease to rental revenue over the initial term of the related leases.

In conjunction with the Company’s initial public offering and related formation transactions, First Potomac Management, Inc. contributed all of the capital interests in First Potomac Management LLC. The $2.1 million fair value of the in-place workforce acquired has been classified as goodwill and is included as a component of intangible assets on the consolidated balance sheets. In accordance with accounting requirements regarding goodwill and other intangibles, all acquired goodwill that relates to the operations of a reporting unit and is used in determining the fair value of a reporting unit is allocated to the Company’s appropriate reporting unit in a reasonable and consistent manner. The Company assesses goodwill for impairment annually at the end of its fiscal year and in interim periods if certain events occur indicating the carrying value may be impaired. The Company performs its analysis for potential impairment of goodwill in accordance with GAAP, which requires that a two-step impairment test be performed on goodwill. In the first step, the fair value of the reporting unit is compared with its carrying value. If the fair value exceeds its carrying value, goodwill is not impaired, and no further testing is required. If the carrying value of the reporting unit exceeds its fair value, then a second step must be performed in order to determine the implied fair value of the goodwill and compare it to the carrying value of the goodwill. If the carrying value of goodwill exceeds its implied fair value, an impairment loss is recorded equal to the difference. No goodwill impairment losses were recognized during the years ended December 31, 2010, 2009 and 2008.

(l) Derivatives and Hedging

In the normal course of business, the Company is exposed to the effect of interest rate changes. The Company may enter into derivative agreements to mitigate exposure to unexpected changes in interest rates and may use interest rate protection or cap agreements to reduce the impact of interest rate changes. The Company does not use derivatives for trading or speculative purposes and intends to enter into derivative agreements only with counterparties that it believes have a strong credit rating to mitigate the risk of counterparty default or insolvency.

The Company may designate a derivative as either a hedge of the cash flows from a debt instrument or anticipated transaction (cash flow hedge) or a hedge of the fair value of a debt instrument (fair value hedge). All derivatives are recognized as assets or liabilities at fair value. For effective hedging relationships, the change in the fair value of the assets or liabilities is recorded within equity (cash flow hedge) or through earnings (fair value hedge). Ineffective portions of derivative transactions will result in changes in fair value recognized in earnings. For a cash flow hedge, the Company records its proportionate share of unrealized gains or losses on its derivative instruments associated with its unconsolidated joint ventures within equity and “Investment in Affiliates.” The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting any applicable credit enhancements, such as collateral postings, thresholds, mutual inputs and guarantees.

(m) Income Taxes

The Company has elected to be taxed as a REIT. To maintain its status as a REIT, the Company is required to distribute at least 90% of its ordinary taxable income annually to its shareholders and meet other organizational and operational requirements. As a REIT, the Company will not be subject to federal income tax and any non-deductible excise tax if it distributes at least 100% of its REIT taxable income to its shareholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate tax rates. The Company has certain subsidiaries, including a taxable REIT subsidiary (“TRS”) and an entity that has elected be taxed as a REIT (which indirectly owns 500 First Street, NW) that may be subject

to federal, state or local taxes, as applicable. A designated REIT will not be subject to federal income tax so long as it meets the REIT qualification requirements and distributes 100% of its REIT taxable income to its shareholders. The Company’s TRS was inactive in 2010, 2009 and 2008. During 2010, certain of the Company’s subsidiaries acquired properties located in Washington D.C., which are subject to local franchise taxes. During 2010, the Company recorded a provision for income tax of $31 thousand related to franchise taxes levied by the city of Washington D.C. Since the Company did not own any properties in Washington D.C. prior to 2010, it was not subject to any franchise taxes in 2009 and 2008.

The Company accounts for deferred income taxes using the asset and liability method. Under this method, deferred income taxes are recognized for temporary differences between the financial reporting basis of assets and liabilities and their respective tax bases and for operating losses, capital losses and tax credit carryovers based on tax rates to be effective when amounts are realized or settled. The Company will recognize deferred tax assets only to the extent that it is more likely than not that they will be realized based on available evidence, including future reversals of existing temporary differences, future projected taxable income and tax planning strategies. The Company may recognize a tax benefit from an uncertain tax position when it is more-likely-than-not (defined as a likelihood of more than 50%) that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. If a tax position does not meet the more-likely-than-not recognition threshold, despite the Company’s belief that its filing position is supportable, the benefit of that tax position is not recognized in the statements of operations. The Company recognizes interest and penalties, as applicable, related to unrecognized tax benefits as a component of income tax expense. The Company recognizes unrecognized tax benefits in the period that the uncertainty is eliminated by either affirmative agreement of the uncertain tax position by the applicable taxing authority, or by expiration of the applicable statute of limitation. For the years ended December 31, 2010, 2009 and 2008, the Company did not record any uncertain tax positions.

For federal income tax purposes, dividends to shareholders may be characterized as ordinary income, return of capital or capital gains. The characterization of the Company’s dividends for 2010, 2009 and 2008 are as follows:

		2010				2009				2008
Ordinary income			70.38	%			100.00	%			59.42	%
Return of capital			29.62	%			—				—
Long-term capital gain			—				—				40.58	%

(n) Noncontrolling Interests in Operating Partnership

Noncontrolling interests relate to the interests in the Operating Partnership not owned by the Company. Interests in the Operating Partnership are owned by limited partners who contributed buildings and other assets to the Operating Partnership in exchange for Operating Partnership units. Limited partners have the right to tender their units for redemption in exchange for, at the Company’s option, common shares of the Company on a one-for-one basis or cash based on the fair value of the Company’s common shares at the date of redemption. Unitholders receive a distribution per unit equivalent to the dividend per common share. Differences between amounts paid to redeem noncontrolling interests and their carrying values are charged or credited to equity. As a result of the redemption feature of the Operating Partnership units, the noncontrolling interests are recorded outside of permanent equity. Noncontrolling interests are presented at the greater of their fair value or their cost basis, which is comprised of their fair value at issuance, subsequently adjusted for the noncontrolling interests’ share of net income, losses, distributions received or additional contributions. Based on the closing share price of the Company’s common stock at December 31, 2010, the cost to acquire, through cash purchase or issuance of the Company’s common shares, all of the outstanding Operating Partnership units not owned by the Company would be approximately $16.1 million, which exceeded the noncontrolling interests’ cost basis by $3.6 million. At December 31, 2009, the Company presented its noncontrolling interests in the Operating Partnership at their cost basis, which exceeded their fair value basis.

The Company owned 98.1%, 97.7% and 97.3% of the outstanding Operating Partnership units at December 31, 2010, 2009 and 2008, respectively. The Company’s percentage ownership in outstanding Operating Partnership units increased in 2010 due to the Company’s common stock issuances as for each share of common stock issued, the Company issues an equivalent Operating Partnership unit. During 2010, 2009 and 2008, the Company issued shares of its common stock of 18.3 million, 2.8 million and 2.9 million, respectively.

During 2010, the Company issued 230,876 Operating Partnership units fair valued at $3.5 million to partially fund the acquisition of Battlefield Corporate Center. There were also 4,519 Operating Partnership units redeemed for 4,519 common shares fair valued at $0.1 million and 329 Operating Partnership units were acquired, from unaffiliated limited partners, for $5 thousand in cash resulting in 958,473 Operating Partnership units outstanding as of December 31, 2010. During 2009, 40,000 Operating Partnership units were redeemed for 40,000 common shares fair valued at $0.5 million and 267 Operating Partnership units were acquired, from unaffiliated limited partners, for $3 thousand in cash resulting in 732,445 Operating Partnership units outstanding as of December 31, 2009. During 2008, 26,181 Operating Partnership units were redeemed for 26,181 common shares fair valued at $0.4 million and 8,340 Operating Partnership units were acquired, from unaffiliated limited partners, for $0.1 million in cash resulting in 772,712 Operating Partnership units outstanding as of December 31, 2008.

On November 10, 2010, the Company acquired Redland Corporate Center II and III, in Rockville, Maryland for $83.1 million in a joint venture with a third party. As part of the joint venture agreement, the Company receives a preferred return as the result of its retirement, upon acquisition, of the existing $71.3 million mortgage loan that encumbered the property. The Company’s interest in the joint venture consists of a $74.5 million preferred equity interest with a preferred return of initially 8.5%, which will be reduced to 7.5% and then further to 6.5%, if occupancy increases, with the balance representing a common equity interest in the joint venture. As a result, the Company has a 97% economic interest in the joint venture and the third party has the remaining 3% interest. Since the Company has a controlling interest in the joint venture, it consolidates the joint venture’s assets, liabilities and operating results within its financial statements. The Company reflects its joint venture partner’s interest in the joint venture within the permanent equity section of its consolidated balance sheets. As of December 31, 2010, the Company recorded noncontrolling interests of $3.1 million, which reflects the third party’s common equity interest in Redland Corporate Center II and III.

(o) Earnings Per Share

Basic earnings (loss) per share (“EPS”) is calculated by dividing net (loss) income available to common shareholders by the weighted average common shares outstanding for the period. Diluted EPS is computed after adjusting the basic EPS computation for the effect of dilutive common equivalent shares outstanding during the period. The effect of stock options, non-vested shares and Exchangeable Senior Notes, if dilutive, is computed using the treasury stock method. The Company applies the two-class method for determining EPS as its outstanding unvested shares with non-forfeitable dividend rights are considered participating securities. The Company’s excess of distributions over earnings related to participating securities are shown as a reduction in total earnings (loss) attributable to common shareholders in the Company’s computation of EPS.

The following table sets forth the computation of the Company’s basic and diluted earnings (loss) per share (amounts in thousands, except per share amounts):

		2010				2009				2008
Numerator for basic and diluted (loss) earnings per share calculations:
(Loss) income from continuing operations		$	(9,219	)		$	5,235			$	2,945
(Loss) income from discontinued operations			(2,456	)			(1,179	)			17,196
Net (loss) income			(11,675	)			4,056				20,141
Less: Net loss (income) from continuing operations attributable to noncontrolling interests			185				(148	)			(87	)
Less: Net loss (income) from discontinued operations attributable to noncontrolling interests			47				24				(528	)
Net (loss) income attributable to common shareholders			(11,443	)			3,932				19,526
Less: Allocation to participating securities			(596	)			(516	)			(419	)
Total (loss) earnings attributable to common shareholders		$	(12,039	)		$	3,416			$	19,107

		2010				2009				2008
Denominator for basic and diluted (loss) earnings per share calculations:
Weighted average shares outstanding — basic			36,984				27,956				24,838
Effect of dilutive shares:
Employee stock options and non-vested shares			—				89				20
Weighted average shares outstanding — diluted			36,984				28,045				24,858
Amounts attributable to common shareholders per share — basic and diluted:
(Loss) income from continuing operations		$	(0.26	)		$	0.16			$	0.10
(Loss) income from discontinued operations			(0.07	)			(0.04	)			0.67
Net (loss) income		$	(0.33	)		$	0.12			$	0.77

In accordance with accounting requirements regarding earnings per share, the Company did not include the following potential common shares in its calculation of diluted earnings per share as they would be anti-dilutive (amounts in thousands):

		2010				2009				2008
Stock option awards			836				767				706
Non-vested share awards			323				228				88
Conversion of Exchangeable Senior Notes(1)			1,098				1,735				2,780
			2,257				2,730				3,574

(1)		At December 31, 2010, 2009 and 2008, each $1,000 principal amount of the Exchangeable Senior Notes was convertible into 28.039 shares.
(p)		Share-Based Compensation

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. For options awards, the Company uses a Black-Scholes option-pricing model. Expected volatility is based on an assessment of the Company’s realized volatility over the preceding five years, which is equivalent to the awards expected life. The expected term represents the period of time the options are anticipated to remain outstanding as well as the Company’s historical experience for groupings of employees that have similar behavior and considered separately for valuation purposes. For non-vested share awards that vest over a predetermined time period, the Company uses the outstanding share price at the date of issuance to fair value the awards. For non-vested shares awards that vest based on performance conditions, the Company uses a Monte Carlo simulation (risk-neutral approach) to determine the value and derived service period of each tranche. The expense associated with the share based awards will be recognized over the period during which an employee is required to provide services in exchange for the award — the requisite service period (usually the vesting period). The fair value for all share-based payment transactions are recognized as a component of income from continuing operations.

(q) Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation. Impairments in the amount of $2.5 million for the year ended December 31, 2009 were reclassified from income from continuing operations to loss from discontinued operations. This amount is considered immaterial to the prior period to which it relates.

(r) Application of New Accounting Standards

In June 2009, new accounting requirements became effective, which amend previous guidance regarding the consolidation of VIEs in the determination of whether a reporting entity is required to consolidate another entity based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impacts the other entity’s economic performance. The new guidance require a company to qualitatively assess the determination of the primary beneficiary of a VIE based on whether the entity (1) has the power to direct matters that most significantly impact the activities of the VIE, and (2) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Additionally, they require an ongoing reconsideration of the primary beneficiary and provide a framework for the events that trigger a reassessment of whether an entity is a VIE. These new requirements were effective for fiscal years beginning after November 15, 2009. The Company adopted the new requirements on January 1, 2010. The adoption of the new accounting requirements resulted in the deconsolidation of a joint venture that owned RiversPark I from the Company’s consolidated financial statements effective January 1, 2010. See footnote 5, Investment in Affiliates for further information. The adoption of this standard did not have a material impact on the Company’s operating results.

In January 2010, new accounting requirements became effective regarding fair-value measurements. Companies are required to make additional disclosures about recurring or nonrecurring fair value measurements and separately disclose any significant transfers into and out of measurements in the fair-value hierarchy. These new requirements also involve disclosing fair value measurements by “class” instead of “major category” and disclosing the valuation technique and the inputs used in determining the fair value for each class of assets and liabilities. Disclosure requirements regarding Level 1 and Level 2 fair-value measurements were effective for fiscal years beginning after December 15, 2009, and new disclosure requirements for Level 3 fair-value measurements were effective for fiscal years beginning after December 15, 2010. Early adoption was permitted. The Company adopted the Level 1 and Level 2 accounting requirements on January 1, 2010 and adopted Level 3 accounting requirements on January 1, 2011. See footnote 10, Fair Value Measurements for further information. The adoption of these accounting requirements did not have a material impact on the Company’s consolidated financial statements.

In February 2010, new accounting guidance was issued regarding subsequent events. This guidance removes the requirement for a Securities and Exchange Commission (“SEC”) filer to disclose the date through which subsequent events have been evaluated in both issued and revised financial statements. This amendment alleviates potential conflicts between GAAP and SEC requirements. The new guidance became effective immediately upon final issuance. The Company’s adoption of this standard did not have a material effect on its consolidated financial statements.

In July 2010, new accounting guidance regarding specific disclosures was issued that will be required for the allowance for credit losses and all finance receivables. Finance receivables include loans, lease receivables and other arrangements with a contractual right to receive money on demand or on fixed or determinable dates that is recognized as an asset on an entity’s statement of financial position. The amendment requires companies to provide disaggregated levels of disclosure by portfolio segment and class to enable users of the consolidated financial statements to understand the nature of credit risk, how the risk is analyzed in determining the related allowance for credit losses and changes to the allowance during the reporting period. The required disclosures under this amendment as of the end of a reporting period are effective for the Company’s December 31, 2010 reporting period and disclosures regarding activities during a reporting period are effective for the Company’s March 31, 2011 interim reporting period. The Company’s adoption of this standard did not have a material effect on the Company’s consolidated financial statements.

(3) Rental Property

Rental property represents property, net of accumulated depreciation, and developable land that are wholly or majority owned by the Company. All of the Company’s rental properties are located within the greater Washington, D.C. region. Rental property consists of the following at December 31 (amounts in thousands):

		2010				2009
Land		$	315,229			$	237,385
Buildings and improvements			930,077				795,901
Construction in process			41,685				9,832
Tenant improvements			92,002				75,940
Furniture, fixtures and equipment			9,894				9,898
			1,388,887				1,128,956
Less: accumulated depreciation			(170,990	)			(141,481	)
		$	1,217,897			$	987,475

Depreciation of rental property is computed on a straight-line basis over the estimated useful lives of the assets. The estimated lives of the Company’s assets range from 5 to 39 years or to the term of the underlying lease. The tax basis of the Company’s real estate assets was $1,422 million and $1,135 million at December 31, 2010 and 2009, respectively.

Development and Redevelopment Activity

The Company constructs office, business parks and/or industrial buildings on a build-to-suit basis or with the intent to lease upon completion of construction. At December 31, 2010, the Company had 0.1 million square feet under development, which consisted of 57 thousand square feet in its Northern Virginia reporting segment and 48 thousand square feet in its Southern Virginia reporting segment. At December 31, 2010, the Company had 0.3 million square feet under redevelopment, which consisted of 12 thousand square feet in its Maryland reporting segment, 279 thousand square feet in its Northern Virginia reporting segment and 39 thousand square feet in its Southern Virginia reporting segment. The Company anticipates the majority of the development and redevelopment efforts on these projects will be completed in 2011.

During 2010, the Company completed and placed in-service redevelopment efforts on 98 thousand square feet of space, which includes 30 thousand square feet in its Maryland reporting segment, 37 thousand square feet in its Northern Virginia reporting segment and 31 thousand square feet in its Southern Virginia reporting segment. No development efforts were placed in-service in 2010.

During 2009, the Company completed and placed in-service development and redevelopment efforts on 151 thousand square feet of space, which includes 16 thousand square feet in its Maryland reporting segment, 127 thousand square feet in its Northern Virginia reporting segment and 8 thousand square feet in its Southern Virginia reporting segment.

At December 31, 2010, the Company owned developable land that can accommodate approximately 1.7 million square feet of additional building space, which includes 0.1 million square feet in its Maryland reporting segment, 0.6 million square feet in its Northern Virginia reporting segment and 1.0 million square feet in its Southern Virginia reporting segment.

(4) Acquisitions

The Company acquired all or a controlling interest in the following properties, which are included in its consolidated financial statements from the date of acquisition, in 2010 and 2009 (dollars in thousands):

														Leased				Occupied				Aggregate
				Acquisition				Property						at				at				Purchase
		Location		Date				Type		Square Feet				12/31/10				12/31/10				Price
2010:
Three Flint Hill		Oakton, VA			4/28/2010			Office			173,762				0	%(1)			0	%(1)		$	13,653
500 First Street, NW		Washington, DC			6/30/2010			Office			129,035				100	%			100	%			67,838
Battlefield Corporate Center		Chesapeake, VA			10/28/2010			Office park			96,720				100	%			100	%			8,310	(2)
Redland Corporate Center		Rockville, MD			11/10/2010			Office			347,462				44	%			40	%			86,358	(3)
Atlantic Corporate Park		Sterling, VA			11/19/2010			Office			220,610				4	%(4)			0	%(4)			22,550
1211 Connecticut Ave, NW		Washington, DC			12/9/2010			Office			125,119				100	%			100	%			49,500
440 First Street, NW		Washington, DC			12/28/2010			Office			105,000				0	%(5)			0	%(5)			15,311	(5)
7458 Candlewood Road		Hanover, MD			12/29/2010			Industrial			295,673				99	%			92	%			22,641	(6)
											1,493,381											$	286,161
2009:
Cloverleaf Center		Germantown, MD			10/08/2009			Office park			173,655				100	%			100	%		$	25,310	(7)
Ashburn Center		Ashburn, VA			12/31/2009			Business park			194,183				100	%			76	%			14,688
											367,838											$	39,998

(1)		The property was vacant at acquisition. The Company began redevelopment efforts and plans to fully renovate the building.
(2)		The Company issued a new $4.3 million mortgage loan to partial fund the acquisition of the property.
(3)		The property was acquired through a consolidated joint venture in which the Company has a 97% economic interest.
(4)		The property was vacant at acquisition.
(5)		The property was vacant at acquisition. The Company intends to complete redevelopment of the property and may add an additional 13,000 square feet. On January 11, 2011, the Company purchased the fee interest in the property’s ground lease for $8.0 million of available cash. Also, on February 24, 2011, the Company acquired transferable development rights for 30 thousand square feet for approximately $0.3 million.
(6)		The Company assumed two mortgage loans totaling $14.7 million to partially fund the acquisition.
(7)		The Company issued a new $17.5 million mortgage to partially fund the acquisition.

The Company incurred $7.2 million and $1.1 million of acquisition-related due diligence and closing costs during 2010 and 2009, respectively.

As part of the consideration for Ashburn Center, the Company recorded contingent consideration arising from a fee agreement entered into with the seller in which the Company will be obligated to pay additional consideration if certain returns are achieved over the five year term of the agreement or if the property is sold within the term of the five year agreement. As of December 31, 2010, the Company had leased the entire property, but it had not achieved the specified returns identified in the agreement to be obligated to pay the seller. As a result, the Company recognized $0.7 million through its statement of operations to reflect the fair value of this obligation based on leasing activity. At December 31, 2010, the Company had accrued $1.4 million of contingent consideration, which it expects to pay the seller in 2011, upon achieving the specified returns. The fair value of the contingent consideration was determined based on several probability weighted discounted cash flow scenarios that projected stabilization being achieved at certain timeframes. The fair value was based on significant inputs, some of which are not observable in the market, thus representing a Level 3 measurement in accordance with the fair value hierarchy. The Company has classified the contingent consideration as a liability and any changes in its fair value in subsequent reporting periods will be charged to earnings. For more information on the assumptions used by the Company in determining fair value, see footnote 12, Fair Value Measurements for more information.

The fair values of the acquired assets and liabilities in 2010 and 2009 are as follows (amounts in thousands):

		2010				2009
Land		$	87,786			$	9,779
Acquired tenant improvements			9,858				3,285
Building and improvements			151,190				20,382
Construction in progress			15,311				—
In-place leases			15,736				5,578
Acquired leasing commissions			4,386				798
Customer relationships			651				—
Above-market leases acquired			712				420
Total assets acquired			285,630				40,242
Below-market leases acquired			(1,855	)			(244	)
Debt assumed			(14,699	)			—
Acquisition related contingent consideration			—				(688	)
Net assets acquired		$	269,076			$	39,310

The fair values for the 2010 acquired assets and liabilities are preliminary as the Company continues to assess its initial fair value determination of its acquired assets and liabilities. During the fourth quarter of 2010, the Company adjusted its initial land valuation of its 500 First Street property, which was acquired in June 2010, and is located in the Company’s Northern Virginia reporting segment, resulting in a $7.4 million increase in land with a corresponding reduction in building and improvements.

On December 29, 2010, the Company acquired 7458 Candlewood Road, which is located in the Company’s Maryland reporting segment, for $22.6 million. On January 6, 2011, the Company was notified that the largest tenant at the property filed for Chapter 11 bankruptcy protection. As a result, the Company recorded an impairment charge of $2.4 million associated with the non-recoverable value of the intangible assets associated with the tenant’s lease.

The weighted average amortization period of the Company’s consolidated intangible assets acquired is 6.7 years in 2010, compared with 6.2 years in 2009. The intangible assets acquired in 2010 are comprised of the following categories with their respective weighted average amortization periods: in-place leases 6.7 years; acquired leasing commissions 7.2 years; customer relationships 5.6 years; above market leases 5.8 years; and below market leases 8.3 years.

Pro Forma Financial Information

The unaudited pro forma financial information set forth below presents results as of December 31 as if all of the Company’s 2010 and 2009 acquisitions, and related financings, had occurred on January 1, 2009. The pro forma information is not necessarily indicative of the results that actually would have occurred nor does it intend to indicate future operating results (amounts in thousands, except per share amounts):

		2010				2009
Pro forma total revenues		$	150,443			$	152,839
Pro forma net loss		$	(3,883	)		$	(7,295	)
Pro forma net loss per share — basic and diluted		$	(0.08	)		$	(0.15	)

(5) Investment in Affiliates

The Company owns properties through joint ventures in which it does not own a controlling interest. As a result, the assets, liabilities and operating results of these non-controlled properties are not consolidated within the Company’s consolidated financial statements. The Company’s investment in these properties is recorded as “Investment in affiliates” in its consolidated balance sheets. The Company’s investments in affiliates consisted of the following at December 31 (dollars in thousands):

		2010
		Ownership				Company
		Interest				Investment				Debt				Recourse Debt
1750 H Street, NW			50	%		$	16,830			$	31,287			$	—
Aviation Business Park			50	%			4,190				—				—
RiversPark I and II			25	%			2,701				28,000				7,000
						$	23,721			$	59,287			$	7,000

		2009
		Ownership				Company
		Interest				Investment				Debt				Recourse Debt
RiversPark II			25	%		$	1,819			$	18,144			$	4,536

On October 28, 2010, the Company acquired 1750 H Street, NW, in Washington, D.C. for $65.0 million in an unconsolidated joint venture with AEW Capital Management, L.P., which it has a 50% interest. The property is a ten-story, 111,000 square foot Class A office building in Washington, D.C., located approximately three blocks from the White House. The property is 100% leased to six tenants, including 47,000 square feet that was leased back to the seller at closing. The acquisition was funded, in part, through the assumption of a $31.4 million mortgage loan. The balance of the purchase price was funded 50% by the Company using a draw on its unsecured revolving credit facility and available cash and 50% by AEW Capital Management, L.P.

During the third quarter of 2010, the Company used available cash to acquire a $10.6 million first mortgage loan collateralized by Aviation Business Park for $8.0 million. Aviation Business Park is a three-building, single-story, office park totaling 121,000 square feet in Glen Burnie, Maryland. On December 29, 2010, the Company entered into an unconsolidated joint venture with AEW Capital Management, L.P., which it has a 50% interest, and took title to the property through a deed-in-lieu of foreclosure in return for additional consideration to the owner if certain future leasing hurdles are met. The joint venture recognized the acquisition date fair value of $126 thousand in contingent consideration related to the expected payments due to meeting certain leasing hurdles under the terms of a fee agreement with the former owner. As of December 31, 2010, the Company remains liable, in the event of default by the joint venture, for contingent consideration of $63 thousand, or 50% of the total, which reflects its ownership percentage.

On December 12, 2008, the Company entered into separate joint venture arrangements to own a 25% interest in both RiversPark I and II, with a third party owning the remaining 75% interests. As a condition of the joint venture arrangements, the Company provided guarantees to the joint venture for four separate lease agreements entered into by the former owner for certain vacancy at RiversPark I and rental payments in the event a specified tenant did not renew its lease at RiversPark II.

On March 17, 2009, the Company deconsolidated RiversPark II, as the specified tenant renewed its lease, which effectively terminated the Company’s lease guarantee related to RiversPark II. As of January 1, 2010, three of the four lease agreement guarantees had been terminated at RiversPark I as a result of entering into third-party leases. In accordance with the adoption of new accounting standards, the Company determined that deconsolidating the joint venture that owns RiversPark I, on January 1, 2010, was appropriate based on its lack of control over major decisions through its ownership interest in the joint venture and, with the exception of the minimal remaining lease guarantee, it does not have any exposure to risks in excess of its stated ownership percentage. There was no significant gain or loss recognized upon the deconsolidation of RiversPark I or RiversPark II.

The net assets of the Company’s unconsolidated joint ventures consisted of the following at December 31(amounts in thousands):

		2010				2009
Assets:
Rental property, net		$	104,559			$	25,037
Cash and cash equivalents			1,706				357
Other assets			11,442				1,879
Total assets			117,707				27,273
Liabilities:
Mortgage loans			59,914				18,144
Other liabilities			4,316				1,443
Total liabilities			64,230				19,587
Net assets		$	53,477			$	7,686

The following table summarizes the results of operations of the Company’s unconsolidated joint ventures. The Company’s share of earnings or losses related to its unconsolidated joint ventures is recorded in its consolidated statements of operations as “Equity in Losses of Affiliates” (amounts in thousands):

						The period from
						March 17, 2009
		Year Ended				through
		December 31, 2010				December 31, 2009
Total revenues		$	5,923			$	2,121
Total operating expenses			(1,547	)			(458	)
Net operating income			4,376				1,663
Depreciation and amortization			(2,695	)			(1,087	)
Interest expense, net			(2,160	)			(955	)
Income tax expense			(24	)			—
Net loss		$	(503	)		$	(379	)

(6) Note Receivable

On December 21, 2010, the Company provided a $25.0 million subordinated loan to the owners of 950 F Street, NW, a ten-story, 287,000 square-foot, Class-A office/retail building located in Washington, D.C. The building is currently 94% leased to nine tenants and subject to a $149.7 million mortgage loan. The Company’s loan is secured by a portion of the owners’ interest in the property. The loan has a fixed interest rate of 12.5%, matures on April 1, 2017 and is repayable in full on or after December 21, 2013. The transaction was funded by a draw on the Company’s unsecured revolving credit facility. The loan is recorded, net of $0.3 million of issuance costs, as “Note receivable, net” in the Company’s consolidated balance sheets. The Company recorded interest income of $0.1 million during 2010, and payments under the loan were current at December 31, 2010. The Company records the interest received from the note receivable in “Interest and other income” and the amortization of the issuance costs in “Interest expense.” In determining the collectability of the note receivable, the Company takes into consideration the financial stability of the owners, the operations of 950 F Street and other economic conditions that could impact collectability.

(7) Intangible Assets

Intangible assets and deferred market rent liabilities consisted of the following at December 31 (amounts in thousands):

		2010												2009
		Gross				Accumulated				Net				Gross				Accumulated				Net
		Intangibles				Amortization				Intangibles				Intangibles				Amortization				Intangibles
In-place leases		$	53,974			$	(29,548	)		$	24,426			$	42,097			$	(27,706	)		$	14,391
Customer relationships			884				(248	)			636				235				(184	)			51
Leasing commissions			7,906				(2,039	)			5,867				3,887				(1,562	)			2,325
Deferred market rent asset			2,525				(1,003	)			1,522				3,059				(1,823	)			1,236
Goodwill			2,100				—				2,100				2,100				—				2,100
		$	67,389			$	(32,838	)		$	34,551			$	51,378			$	(31,275	)		$	20,103
Deferred market rent liability		$	11,822			$	(5,790	)		$	6,032			$	13,973			$	(7,965	)		$	6,008