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Table of Contents Form 10-K
CORPORATE OFFICE PROPERTIES TRUST AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark one)    

ý

 

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

For the fiscal year ended December 31, 2011

or

o

 

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

For the transition period from                        to                       

Commission file number 1-14023

LOGO

Corporate Office Properties Trust
(Exact name of registrant as specified in its charter)

Maryland   23-2947217
(State or other jurisdiction of
incorporation or organization)
  (IRS Employer
Identification No.)

6711 Columbia Gateway Drive, Suite 300
Columbia, MD

 

21046
(Address of principal executive offices)   (Zip Code)

Registrant's telephone number, including area code: (443) 285-5400



Securities registered pursuant to Section 12(b) of the Act:

(Title of Each Class)   (Name of Exchange on Which Registered)
Common Shares of beneficial interest, $0.01 par value   New York Stock Exchange
Series G Cumulative Redeemable Preferred Shares of beneficial interest, $0.01 par value   New York Stock Exchange
Series H Cumulative Redeemable Preferred Shares of beneficial interest, $0.01 par value   New York Stock Exchange
Series J Cumulative Redeemable Preferred Shares of beneficial interest, $0.01 par value   New York Stock Exchange

           Securities registered pursuant to Section 12(g) of the Act: None

           Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ý Yes    o No

           Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. o Yes    ý No

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

           Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes    o No

           Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

           Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a
smaller reporting company)
  Smaller reporting company o

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

           The aggregate market value of the voting and nonvoting common equity held by non-affiliates of the registrant was approximately $2.2 billion, as calculated using the closing price of the common shares of beneficial interest on the New York Stock Exchange and our outstanding shares as of June 30, 2011. For purposes of calculating this amount only, affiliates are defined as Trustees, executive owners and beneficial owners of more than 10% of the registrant's outstanding common shares of beneficial interest, $0.01 par value. At January 27, 2012, 72,019,987 of the registrant's common shares of beneficial interest were outstanding.

           Portions of the annual shareholders' report of the registrant for the year ended December 31, 2011 are incorporated by reference into Parts I and II of this Form 10-K and portions of the proxy statement of the registrant for its 2012 Annual Meeting of Shareholders to be filed within 120 days after the end of the fiscal year covered by this Form 10-K are incorporated by reference into Part III of this Form 10-K.

   


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Table of Contents

Form 10-K

PART I

       

ITEM 1.

 

BUSINESS

 
4

ITEM 1A.

 

RISK FACTORS

  9

ITEM 1B.

 

UNRESOLVED STAFF COMMENTS

  21

ITEM 2.

 

PROPERTIES

  22

ITEM 3.

 

LEGAL PROCEEDINGS

  35

ITEM 4.

 

MINE SAFETY DISCLOSURES

  35

PART II

       

ITEM 5.

 

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 
36

ITEM 6.

 

SELECTED FINANCIAL DATA

  38

ITEM 7.

 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

  40

ITEM 7A.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  71

ITEM 8.

 

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

  72

ITEM 9.

 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

  72

ITEM 9A.

 

CONTROLS AND PROCEDURES

  72

ITEM 9B.

 

OTHER INFORMATION

  72

PART III

       

ITEM 10.

 

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 
72

ITEM 11.

 

EXECUTIVE COMPENSATION

  72

ITEM 12.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

  72

ITEM 13.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

  72

ITEM 14.

 

PRINCIPAL ACCOUNTANT FEES AND SERVICES

  72

PART IV

       

ITEM 15.

 

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 
73

 

SIGNATURES

 
81

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FORWARD-LOOKING STATEMENTS

        This Form 10-K contains "forward-looking" statements, as defined in the Private Securities Litigation Reform Act of 1995, that are based on our current expectations, estimates and projections about future events and financial trends affecting the financial condition and operations of our business. Forward-looking statements can be identified by the use of words such as "may," "will," "should," "could," "believe," "anticipate," "expect," "estimate," "plan" or other comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate. Although we believe that the expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, we can give no assurance that these expectations, estimates and projections will be achieved. Future events and actual results may differ materially from those discussed in the forward-looking statements. Important factors that may affect these expectations, estimates and projections include, but are not limited to:

        For further information on factors that could affect the company and the statements contained herein, you should refer to the section below entitled "Item 1A. Risk Factors." We undertake no obligation to update or supplement forward-looking statements.

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PART I

Item 1.    Business

OUR COMPANY

        General.    We are an office real estate investment trust ("REIT") that focuses primarily on serving the specialized requirements of strategic customers in the United States Government and defense information technology sectors. We acquire, develop, manage and lease office and data center properties that are typically concentrated in large office parks primarily located adjacent to government demand drivers and/or in office markets that we believe possess growth opportunities. As of December 31, 2011, our investments in real estate included the following:

        We conduct almost all of our operations through our operating partnership, Corporate Office Properties, L.P. (the "Operating Partnership"), a Delaware limited partnership, of which we are the managing general partner. The Operating Partnership owns real estate both directly and through subsidiary partnerships and limited liability companies ("LLCs"). The Operating Partnership also owns 100% of a number of entities that provide real estate services such as property management, construction and development services primarily for our properties but also for third parties.

        Interests in our Operating Partnership are in the form of common and preferred units. As of December 31, 2011, we owned 94.4% of the outstanding common units and 95.8% of the outstanding preferred units in our Operating Partnership. The remaining common and preferred units in our Operating Partnership were owned by third parties, which included certain of our Trustees.

        We believe that we are organized and have operated in a manner that permits us to satisfy the requirements for taxation as a REIT under the Internal Revenue Code of 1986, as amended, and we intend to continue to operate in such a manner. Provided we continue to qualify for taxation as a REIT, we generally will not be subject to Federal income tax on our taxable income that is distributed to our shareholders. A REIT is subject to a number of organizational and operational requirements, including a requirement that it distribute to its shareholders at least 90% of its annual taxable income (excluding net capital gains).

        Our executive offices are located at 6711 Columbia Gateway Drive, Suite 300, Columbia, Maryland 21046 and our telephone number is (443) 285-5400.

        Our Internet address is www.copt.com. We make available on our Internet website free of charge our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") as soon as reasonably possible after we file such material with the Securities and Exchange Commission (the "SEC"). In addition, we have made available on our Internet website under the heading "Corporate Governance" the charters for our Board of Trustees' Audit, Nominating and Corporate Governance, Compensation and Investment Committees, as well as our Corporate Governance Guidelines, Code of Business Conduct and Ethics

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and Code of Ethics for Financial Officers. We intend to make available on our website any future amendments or waivers to our Code of Business Conduct and Ethics and Code of Ethics for Financial Officers within four business days after any such amendments or waivers. The information on our Internet site is not part of this report.

        The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. This Internet website can be accessed at www.sec.gov. The public may also read and copy paper filings that we have made with the SEC at the SEC's Public Reference Room, located at 100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.

Significant 2011 Developments

        During 2011, we:

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Business and Growth Strategies

        Our primary objectives are to achieve sustainable long-term growth in results of operations and to maximize long-term shareholder value. This section sets forth key components of our business and growth strategies that we have in place to support these objectives.

Business Strategies

        Customer Strategy:    We believe that we differentiate ourselves by being a real estate company that does not view space in properties merely as a commodity. We focus on providing a level of service that exceeds customer expectations both in terms of the quality of the space we provide and our level of responsiveness to their needs. We believe that operating with such an emphasis on service enables us to be the landlord of choice with high quality customers and contributes to high levels of customer loyalty and retention.

        Our focus on customers in the United States Government and defense information technology sectors is a key aspect of our customer strategy. A high percentage of our revenue is concentrated with these customers, and we expect to further increase this concentration level through our:

        Market Strategy:    We focus on owning properties where our tenants need to be, which in the case of the United States Government and defense information technology customers is mostly near government demand drivers. We also concentrate our operations in markets and submarkets that are located where we believe we already possess, or can effectively achieve, the critical mass necessary to maximize management efficiencies, operating synergies and competitive advantages through our acquisition, property management, leasing and development activities. The attributes we look for in selecting markets and submarkets include, among others: (1) proximity to large demand drivers; (2) strong demographics; (3) attractiveness to high quality tenants; (4) potential for growth and stability in economic down cycles; (5) future acquisition and development opportunities; and (6) minimal competition from other property owners. We typically focus on owning and operating office properties in large business parks located outside of central business districts. We believe that such parks generally attract long-term, high-quality tenants seeking to attract and retain quality work forces because they are typically situated along major transportation routes with easy access to support services, amenities and residential communities.

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        Capital Strategy:    Our capital strategy is aimed at maintaining a flexible capital structure in order to facilitate growth and performance in the face of differing market conditions in the most cost-effective manner by:

        Sustainability Strategy:    We are focused on developing and operating our properties in a manner that minimizes global impact for the environment and have been committed to this effort since 2003. Our strategy includes:

We believe that our commitment to sustainability is evident in that as of December 31, 2011, we had 15 buildings certified LEED Gold, 13 buildings certified LEED Silver, two buildings certified LEED and three buildings certified LEED-EB, and all of our buildings that were under construction or redevelopment were registered in the LEED program. In addition, we had 18 professionals on staff who hold the LEED Accredited Professional designation at December 31, 2011. We believe that this strategy is important not just because our customers will demand it, but also because it is the right thing to do.

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Growth Strategies

        Acquisition and Property Development Strategy:    We pursue acquisition and property development opportunities for properties that support our customer and market strategies discussed above. As a result, the focus of our acquisition and development activities includes properties that are either: (1) located near demand drivers that we believe are attractive to customers in the United States Government and defense information technology sectors or (2) located in markets or submarkets that we believe meet the criteria set forth above in our market strategy. We may also acquire or develop properties that do not align with our customer or market strategies but which we believe provide opportunity for favorable returns on investment given the associated risks.

        We typically seek to make acquisitions at attractive yields and below replacement cost, or that otherwise meet our strategic objectives. We also seek to increase operating cash flow of certain acquisitions by repositioning the properties and capitalizing on existing below market leases and expansion opportunities. We pursue development activities as market conditions and leasing opportunities support favorable risk-adjusted returns on investment.

        Disposition Strategy:    In 2011, we implemented our Strategic Reallocation Plan to dispose of office properties and land that are no longer closely aligned with our strategy. We believe that the timely disposition of assets that no longer meet our strategic objectives is important for us to maximize our return on invested capital and be better positioned for long term growth.

        Internal Growth Strategy:    We aggressively manage our portfolio to maximize the operating performance of each property through: (1) proactive property management and leasing; (2) achieving operating efficiencies through increasing economies of scale and, where possible, aggregating vendor contracts to achieve volume pricing discounts; and (3) renewing tenant leases and re-tenanting at increased rents where market conditions permit.

Industry Segments

        We operate in two primary industries: commercial office properties and our wholesale data center. We classify our properties containing data center space as commercial office real estate when tenants significantly funded the data center infrastructure costs. At December 31, 2011, our commercial office real estate operations were in geographical segments, as set forth below:

As of December 31, 2011, 203 of our office properties, or 83% of our square feet in operations, were located in the Greater Washington, DC/Baltimore region, which includes all the segments set forth

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above except for San Antonio, Colorado Springs and Greater Philadelphia. Our wholesale data center, which is comprised of one property in Manassas, Virginia, is reported as a separate segment.

        For information relating to our segments, you should refer to Note 16 to our consolidated financial statements, which is included in a separate section at the end of this Annual Report on Form 10-K beginning on page F-1.

Employees

        As of December 31, 2011, we had 428 employees, none of whom were parties to collective bargaining agreements. We believe that our relations with our employees are good.

Competition

        The commercial real estate market is highly competitive. Numerous commercial properties compete with our properties for tenants. Some of the properties competing with ours may be newer or in more desirable locations, or the competing properties' owners may be willing to accept lower rents than are acceptable to us. We also compete with our own tenants, many of whom have the right to sublease their space. The competitive environment for leasing is affected considerably by a number of factors including, among other things, changes in economic factors and supply of and demand for space. These factors may make it difficult for us to lease existing vacant space and space associated with future lease expirations at rental rates that are sufficient to meeting our short-term capital needs.

        We also compete for the acquisition of commercial properties with many entities, including other publicly-traded commercial REITs. Many of our competitors for such acquisitions have substantially greater financial resources than ours. In addition, our competitors may be willing to accept lower returns on their investments. If our competitors prevent us from buying properties that we have targeted for acquisition, we may not be able to meet our property acquisition goals.

        In addition, we also compete with other sellers of commercial properties for a limited number of buyers of properties. This competition could adversely affect our ability to complete property dispositions under the Strategic Reallocation Plan.

Item 1A.    Risk Factors

        Set forth below are risks and uncertainties relating to our business and the ownership of our securities. You should carefully consider each of these risks and uncertainties and all of the information in this Annual Report on Form 10-K and its Exhibits, including our consolidated financial statements and notes thereto for the year ended December 31, 2011, which are included in a separate section at the end of this report beginning on page F-1.

        Our performance and value are subject to risks associated with our properties and with the real estate industry.    Real estate investments are subject to various risks and fluctuations in value and demand, many of which are beyond our control. Our economic performance and the value of our real estate assets may decline due to conditions in the general economy and the real estate business which, in turn, could have an adverse effect on our financial position, results of operations, cash flows and ability to make expected distributions to our shareholders. These conditions include, but are not limited to:

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        We may suffer adverse consequences as a result of adverse economic conditions.    Our business may be affected by adverse economic conditions in the United States economy or real estate industry as a whole or by the local economic conditions in the markets in which our properties are located, including the impact of high unemployment and constrained credit. Adverse economic conditions could increase the likelihood of tenants encountering financial difficulties, including bankruptcy, insolvency or general downturn of business, and as a result could increase the likelihood of tenants defaulting in their lease obligations to us. Such conditions also could increase the likelihood of our being unsuccessful in renewing tenants, renewing tenants on terms less favorable to us or being unable to lease newly constructed properties. In addition, such conditions could increase the level of risk that we may not be able to obtain new financing for development activities, acquisitions, refinancing of existing debt or other capital requirements at reasonable terms, if at all. As a result, adverse economic conditions could collectively have an adverse effect on our financial position, results of operations, cash flows and ability to make expected distributions to our shareholders.

        We may suffer adverse consequences as a result of our reliance on rental revenues for our income.    We earn revenue from renting our properties. Our operating costs do not necessarily fluctuate in relation to changes in our rental revenue. This means that our costs will not necessarily decline and may increase even if our revenues decline.

        For new tenants or upon lease expiration for existing tenants, we generally must make improvements and pay other leasing costs for which we may not receive increased rents. We also make building-related capital improvements for which tenants may not reimburse us.

        If our properties do not generate revenue sufficient to meeting our operating expenses and capital costs, we may have to borrow additional amounts to cover these costs. In such circumstances, we would likely have lower profits or possibly incur losses. We may also find in such circumstances that we are unable to borrow to cover such costs, in which case our operations could be adversely affected. Moreover, there may be less or no cash available for distributions to our shareholders.

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        In addition, the competitive environment for leasing is affected considerably by a number of factors including, among other things, changes due to economic factors such as supply and demand. These factors may make it difficult for us to lease existing vacant space and space associated with future lease expirations at rental rates that are sufficient to meeting our short-term capital needs.

        We rely on the ability of our tenants to pay rent and would be harmed by their inability to do so.    Our performance depends on the ability of our tenants to fulfill their lease obligations by paying their rental payments in a timely manner. If one or more of our major tenants, or a number of our smaller tenants, were to experience financial difficulties, including bankruptcy, insolvency, government shutdown, or general downturn of business, there could be an adverse effect on financial position, results of operations, cash flows and ability to make expected distributions to our shareholders.

        We may be adversely affected by developments concerning some of our major tenants and sector concentrations, including shutdowns of the United States Government and actual, or potential, reductions in government spending targeting tenants in the United States Government and defense information technology sectors.    As of December 31, 2011, our 20 largest tenants accounted for 60.3% of the total annualized rental revenue of our office properties, and the four largest of these tenants accounted for 65% of that total. We computed the annualized rental revenue by multiplying by 12 the sum of monthly contractual base rents and estimated monthly expense reimbursements under active leases in our portfolio of office properties as of December 31, 2011. Information regarding our four largest tenants is set forth below:

Tenant
  Annualized
Rental Revenue at
December 31, 2011
  Percentage of Total
Annualized Rental
Revenue of
Office Properties
  Number
of Leases
 
 
  (in thousands)
   
   
 

United States of America

  $ 104,517     22.2 %   79  

Northrop Grumman Corporation(1)

    32,326     6.9 %   17  

Booz Allen Hamilton, Inc. 

    24,178     5.1 %   8  

Computer Sciences Corporation(1)

    22,355     4.8 %   7  

(1)
Includes affiliated organizations and agencies and predecessor companies.

        Most of our leases with the United States Government provide for a series of one-year terms or provide for early termination rights. The United States Government may terminate its leases if, among other reasons, the United States Congress fails to provide funding. If any of our four largest tenants fail to make rental payments to us, including as a result of a government shutdown, or if the United States Government elects to terminate some or all of its leases and the space cannot be re-leased on satisfactory terms, there would be an adverse effect on our financial performance and ability to make distributions to our shareholders.

        As of December 31, 2011, our properties that were occupied primarily by tenants in the United States Government and defense information technology sectors accounted for 59.9% of the total annualized rental revenue of our office properties. We expect to increase our reliance on these sectors for revenue. A reduction in government spending targeting these sectors could affect the ability of these tenants to fulfill lease obligations, decrease the likelihood that these tenants will renew their leases or enter into new leases and limit our future growth from these sectors. Moreover, uncertainty regarding the potential for future reduction in government spending targeting these sectors could also decrease or delay leasing activity from tenants in these sectors. The Budget Control Act passed in 2011, which imposed caps on the Federal budget in order to achieve targeted spending levels over the 2013-2021 fiscal years, has fueled further uncertainty regarding future government spending reductions. A reduction in government spending targeting the United States Government and defense information technology sectors and/or uncertainty regarding the potential for future spending reductions could have

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an adverse effect on our results of operations, financial condition, cash flows and ability to make distributions to our shareholders.

        We generally classify the revenue from our leases into this sector grouping based solely on our management's knowledge of the tenants' operations in leased space. Occasionally, classifications require subjective and complex judgments. We do not use independent sources such as Standard Industrial Classification codes for classifying our revenue into sector groupings and if we did, the resulting groupings would be materially different.

        We may be unable to successfully execute plans to dispose of properties, such as our Strategic Reallocation Plan.    In 2011, we implemented our Strategic Reallocation Plan to dispose of office properties and land that are no longer closely aligned with our strategy. We expect to complete the office property dispositions by the end of 2013 and use the proceeds to invest in properties that will serve customers in the United States Government, defense information technology and related data sectors, to repay borrowings and for general corporate purposes. Current economic conditions overall, and for suburban office properties in particular, could make it difficult for us to locate buyers for the properties on favorable terms, if at all. We also do not have significant experience in completing property disposition plans of the scale contemplated under the Strategic Reallocation Plan. Our failure to successfully execute the Strategic Reallocation Plan, and other similar property disposition plans, could adversely affect our ability to effectively execute our business strategy, which in turn could affect our financial position, results of operations, cash flows and ability to make expected distributions to shareholders.

        We may suffer adverse consequences due to our inexperience in developing, managing and leasing wholesale data centers.    We have significant experience in developing, managing and leasing single user data center space. However, we do not have the same depth and length of experience in relation to wholesale data centers, having acquired our one existing wholesale data center in 2010 and having completed no new leasing on that center through December 31, 2011. This may increase the likelihood of us being unsuccessful in executing our plans with respect to our existing wholesale data center or any such centers that we may acquire or develop in the future. If we are unsuccessful in executing our wholesale data center plans, it could adversely affect our financial position, results of operations, cash flows and ability to make expected distributions to our shareholders.

        Most of our properties are geographically concentrated in the Mid-Atlantic region, particularly in the Greater Washington, DC/Baltimore region, or in particular office parks. We may suffer economic harm in the event of a decline in the real estate market or general economic conditions in those regions or parks.    Most of our properties are located in the Mid-Atlantic region of the United States and, as of December 31, 2011, our properties located in the Greater Washington, DC/Baltimore region accounted for a combined 84.7% of our total annualized rental revenue from office properties. Our properties are also typically concentrated in office parks in which we own most of the properties. Consequently, we do not have a broad geographic distribution of our properties. As a result, a decline in the real estate market or general economic conditions in the Mid-Atlantic region, the Greater Washington, DC region or the office parks in which our properties are located could have an adverse effect on our financial position, results of operations, cash flows and ability to make expected distributions to our shareholders.

        We would suffer economic harm if we were unable to renew our leases on favorable terms.    When leases expire, our tenants may not renew or may renew on terms less favorable to us than the terms of their original leases. If a tenant vacates a property, we can expect to experience a vacancy for some period of time, as well as incur higher leasing costs than we would likely incur if a tenant renews. As a result, our financial performance and ability to make expected distributions to our shareholders could be adversely affected if we experience a high volume of tenant departures at the end of their lease terms.

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        We may be adversely affected by trends in the office real estate industry.    Some businesses are rapidly evolving to make employee telecommuting, flexible work schedules, open workplaces and teleconferencing increasingly common. These practices enable businesses to reduce their space requirements. A continuation of the movement towards these practices could over time erode the overall demand for office space and, in turn, place downward pressure on occupancy, rental rates and property valuations, each of which could have an adverse effect on our financial position, results of operations, cash flows and ability to make expected distributions to our shareholders.

        We may encounter a decline in the value of our real estate.    The value of our real estate could be adversely affected by general economic and market conditions connected to a specific property, a market or submarket, a broader economic region or the office real estate industry. Examples of such conditions include a broader economic recession, declining demand and decreases in market rental rates and/or market values of real estate assets. If our real estate assets decline in value, it could result in our recognition of impairment losses. Moreover, a decline in the value of our real estate could adversely affect the amount of borrowings available to us under credit facilities and other loans, which could, in turn, adversely affect our cash flows and financial condition.

        We may not be able to compete successfully with other entities that operate in our industry.    The commercial real estate market is highly competitive. We compete for the purchase of commercial property with many entities, including other publicly traded commercial REITs. Many of our competitors have substantially greater financial resources than we do. If our competitors prevent us from buying properties that we target for acquisition, we may not be able to meet our property acquisition goals. Moreover, numerous commercial properties compete for tenants with our properties. Some of the properties competing with ours may be newer or in more desirable locations, or the competing properties' owners may be willing to accept lower rates than are acceptable to us. Competition for property acquisitions, or for tenants for properties that we own, could have an adverse effect on our financial position, results of operations, cash flows and ability to make expected distributions to our shareholders.

        We are dependent on external sources of capital for future growth.    Because we are a REIT, we must distribute at least 90% of our annual taxable income to our shareholders. Due to this requirement, we are not able to significantly fund our acquisition, construction and development activities using cash flow from operations. Therefore, our ability to fund these activities is dependent on our ability to access capital funded by third parties. Such capital could be in the form of new debt, equity issuances of common shares, preferred shares, common and preferred units in our Operating Partnership or joint venture funding. These capital sources may not be available on favorable terms or at all. Moreover, additional debt financing may substantially increase our leverage and subject us to covenants that restrict management's flexibility in directing our operations, and additional equity offerings may result in substantial dilution of our shareholders' interests. Our inability to obtain capital when needed could have a material adverse effect on our ability to expand our business and fund other cash requirements.

        We use our Revolving Credit Facility to initially finance much of our investing and financing activities. We also use other credit facilities to fund a significant portion of our construction activities. Our lenders under these and other facilities could, for financial hardship or other reasons, fail to honor their commitments to fund our requests for borrowings under these facilities. In the event that one or more lenders under these facilities are not able or willing to fund a borrowing request, it would adversely affect our ability to access borrowing capacity under these facilities, which would in turn adversely affect our financial condition, cash flows and ability to make expected distributions to our shareholders.

        We may be unable to successfully execute our plans to acquire existing commercial real estate properties.    We intend to acquire existing commercial real estate properties to the extent that suitable

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acquisitions can be made on advantageous terms. Acquisitions of commercial properties entail risks, such as the risks that we may not be in a position, or have the opportunity in the future, to make suitable property acquisitions on advantageous terms and/or that such acquisitions will fail to perform as expected. The failure of our acquisitions to perform as expected could adversely affect our financial position, results of operations, cash flows and ability to make expected distributions to our shareholders.

        We may be exposed to unknown liabilities from acquired properties.    We may acquire properties that are subject to liabilities in situations where we have no recourse, or only limited recourse, against the prior owners or other third parties with respect to unknown liabilities. As a result, if a liability were asserted against us based upon ownership of those properties, we might have to pay substantial sums to settle or contest it, which could adversely affect our results of operations and cash flow. Examples of unknown liabilities with respect to acquired properties include, but are not limited to:

        We may suffer economic harm as a result of making unsuccessful acquisitions in new markets.    We may pursue selective acquisitions of properties in regions where we have not previously owned properties. These acquisitions may entail risks in addition to those we face in other acquisitions where we are familiar with the regions, such as the risk that we do not correctly anticipate conditions or trends in a new market and are therefore not able to operate the acquired property profitably. If this occurs, it could adversely affect our financial position, results of operations, cash flows and ability to make expected distributions to our shareholders.

        We may be unable to execute our plans to develop and construct additional properties.    Although the majority of our investments are in currently leased properties, we also develop, construct and redevelop properties, including some that are not fully pre-leased. When we develop, construct and redevelop properties, we assume the risk that actual costs will exceed our budgets, that we will experience conditions which delay or preclude project completion and that projected leasing will not occur, any of which could adversely affect our financial performance, results of operations and our ability to make distributions to our shareholders. In addition, we generally do not obtain construction financing commitments until the development stage of a project is complete and construction is about to commence. We may find that we are unable to obtain financing needed to continue with the construction activities for such projects.

        Our data centers may become obsolete.    Data centers are much more expensive investments on a per square foot basis than office properties due to the level of infrastructure required to operate the centers. At the same time, technology, industry standards and service requirements for data centers are rapidly evolving and, as a result, the risk of investments we make in data centers becoming obsolete is higher than office properties. Our data centers may become obsolete due to the development of new systems to deliver power to or eliminate heat from the servers housed in the properties. Our data centers could also become obsolete from new server technology that requires less critical load and heat removal than our facilities are designed to provide. In addition, we may not be able to efficiently upgrade or change power and cooling systems to meet new demands or industry standards without incurring significant costs that we may not be able to pass on to our tenants. The obsolescence of our data centers could adversely affect our financial position, results of operations, cash flows and ability to make expected distributions to our shareholders.

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        Certain of our properties containing data centers contain space not suitable for lease other than as data centers, which could make it difficult or impractical to reposition them for alternative use. Certain of our properties contain data center space, which is highly specialized space containing extensive electrical and mechanical systems that are designed uniquely to run and maintain banks of computer servers. As a result, in the event that we needed to reposition such data center space for another use, major renovations and expenditures could be required.

        Real estate investments are illiquid, and we may not be able to sell our properties on a timely basis when we determine it is appropriate to do so.    Real estate investments can be difficult to sell and convert to cash quickly, especially if market conditions are not favorable, and we may find that to be increasingly the case under the current economic conditions due to a lack of credit availability for potential buyers. Such illiquidity could limit our ability to quickly change our portfolio of properties in response to changes in economic or other conditions. Moreover, under certain circumstances, the Internal Revenue Code imposes certain penalties on a REIT that sells property held for less than two years and limits the number of properties it can sell in a given year. In addition, for certain of our properties that we acquired by issuing units in our Operating Partnership, we are restricted by agreements with the sellers of the properties for a certain period of time from entering into transactions (such as the sale or refinancing of the acquired property) that will result in a taxable gain to the sellers without the seller's consent. Due to these factors, we may be unable to sell a property at an advantageous time.

        We may suffer adverse effects as a result of the indebtedness that we carry and the terms and covenants that relate to this debt.    Some of our properties are pledged by us to support repayment on indebtedness. In addition, we rely on borrowings to fund some or all of the costs of new property acquisitions, construction and development activities and other items. Our organizational documents do not limit the amount of indebtedness that we may incur.

        Payments of principal and interest on our debt may leave us with insufficient cash to operate our properties or pay distributions to our shareholders required to maintain our qualification as a REIT. We are also subject to the risks that:

        Some of our debt is cross-defaulted, which means that failure to pay interest or principal on the debt above a threshold value will create a default on certain of our other debt. In addition, some of our debt which is cross-defaulted also contains cross-collateralization provisions, which means that the collateral of the debt can also be used as collateral for certain of our other debt. Any foreclosure of our properties could result in loss of income and asset value that would negatively affect our financial condition, results of operations, cash flows and ability to make expected distributions to our shareholders. In addition, if we are in default and the value of the properties securing a loan is less than the loan balance, we may be required to pay the resulting shortfall to the lender using other assets.

        If short-term interest rates were to rise, our debt service payments on debt with variable interest rates would increase, which would lower our net income and could decrease our distributions to our

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shareholders. We use interest rate swap agreements from time to time to reduce the impact of changes in interest rates. Decreases in interest rates would result in increased interest payments due under interest rate swap agreements in place and, in the event we decided to unwind such agreements, could result in our recognizing a loss and remitting a payment.

        We must refinance our debt in the future. As of December 31, 2011, our scheduled debt payments over the next five years, including maturities, were as follows:

Year
  Amount(1)  
 
  (in thousands)
 

2012

  $ 66,063  

2013

    163,003  

2014

    820,780  

2015

    806,104  

2016

    278,642  

(1)
Represents principal maturities only and therefore excludes net discounts of $12.2 million. Maturities include $16.8 million in 2012, $17.9 million in 2013, $662.0 million in 2014 and $405.6 million in 2015 that may each be extended for one year, subject to certain conditions.

Our operations likely will not generate enough cash flow to repay some or all of this debt without additional borrowings, equity issuances and/or property sales. If we cannot refinance our debt, extend the repayment dates, or raise additional equity prior to the dates when our debt matures, we would default on our existing debt, which would have an adverse effect on our financial position, results of operations, cash flows and ability to make expected distributions to our shareholders.

        We have certain distribution requirements that reduce cash available for other business purposes.    As a REIT, we must distribute at least 90% of our annual taxable income (excluding capital gains), which limits the amount of cash we can retain for other business purposes, including amounts to fund acquisitions and development activity. Also, it is possible that because of the differences between the time we actually receive revenue or pay expenses and the period during which we report those items for distribution purposes, we may have to borrow funds to meet the 90% distribution requirement.

        We may be unable to continue to make shareholder distributions at expected levels.    We declared a first quarter 2012 common share dividend to shareholders of record on March 31, 2012 of $0.275 per share, a 33% decrease from the fourth quarter 2011 dividend of $0.4125 per share, and expect to continue to pay dividends at this reduced rate at least through the remainder of 2012. We expect to make regular quarterly cash distributions to our shareholders. However, our ability to make such distributions depends on a number of factors, some of which are beyond our control. Some of our loan agreements contain provisions that could restrict future distributions. Our ability to make distributions at expected levels will also be dependent, in part, on other matters, including, but not limited to:

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In addition, we can make distributions to the holders of our common shares only after we make preferential distributions to holders of our preferred shares.

        Our ability to pay dividends may be limited, and we cannot provide assurance that we will be able to pay dividends regularly.    Because we conduct substantially all of our operations through our Operating Partnership, our ability to pay dividends will depend almost entirely on payments and distributions received on our interests in our Operating Partnership, the payment of which depends in turn on our ability to operate profitably and generate cash flow from our operations. We cannot guarantee that we will be able to pay dividends on a regular quarterly basis in the future. Additionally, the terms of some of the debt to which our Operating Partnership is a party limit its ability to make some types of payments and other distributions to us. This in turn limits our ability to make some types of payments, including payment of dividends on common or preferred shares, unless we meet certain financial tests or such payments or dividends are required to maintain our qualification as a REIT. As a result, if we are unable to meet the applicable financial tests, we may not be able to pay dividends on our shares in one or more periods. Furthermore, any new shares of beneficial interest issued will substantially increase the cash required to continue to pay cash dividends at current levels. Any common or preferred shares that may in the future be issued for financing acquisitions, share-based compensation arrangements or otherwise would have a similar effect.

        We may incur additional indebtedness, which may harm our financial position and cash flow and potentially impact our ability to pay dividends on any series of preferred shares.    Our governing documents do not limit us from incurring additional indebtedness and other liabilities. As of December 31, 2011, we had $2.4 billion of indebtedness outstanding. We may incur additional indebtedness and become more highly leveraged, which could harm our financial position and potentially limit our cash available to pay dividends. As a result, we may not have sufficient funds remaining to satisfy our dividend obligations relating to any series of preferred shares if we incur additional indebtedness.

        Our ability to pay dividends on preferred shares is further limited by the requirements of Maryland law.    As a Maryland REIT, we may not under applicable Maryland law make a distribution if either of the following conditions exist after giving effect to the distribution: (1) the REIT would not be able to pay its debts as the debts become due in the usual course of business; or (2) the REIT's total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the REIT were dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution. Therefore, we may not make a distribution on any series of preferred shares if either of the above described conditions exists after giving effect to the distribution.

        We may issue additional common or preferred shares that dilute our shareholders' interests.    We may issue additional common shares and preferred shares without shareholder approval. Similarly, we may cause the Operating Partnership to issue its common or preferred units for contributions of cash or property without approval by the limited partners of the Operating Partnership or our shareholders. Our existing shareholders' interests could be diluted if such additional issuances were to occur.

        We may suffer economic harm as a result of the actions of our partners in real estate joint ventures and other investments.    We invest in certain entities in which we are not the exclusive investor or principal decision maker. Investments in such entities may, under certain circumstances, involve risks not present when a third party is not involved, including the possibility that the other parties to these investments might become bankrupt or fail to fund their share of required capital contributions. Our partners in these entities may have economic, tax or other business interests or goals

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which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. Such investments may also lead to impasses, for example, as to whether to sell a property, because neither we nor the other parties to these investments may have full control over the entity. In addition, we may in certain circumstances be liable for the actions of the other parties to these investments. Each of these factors could have an adverse effect on our financial condition, results of operations, cash flows and ability to make expected distributions to our shareholders.

        We may need to make additional cash outlays to protect our investment in loans we make that are subordinate to other loans.    We have made and may in the future make loans under which we have a secured interest in the ownership of a property that is subordinate to other loans on the property. If a default were to occur under the terms of any such loans with us or under the first mortgage loans related to the properties on such loans, we may be in a position where, in order to protect our investment, we would need to either (1) purchase the other loan or (2) foreclose on the ownership interest in the property and repay the first mortgage loan, either of which could have an adverse effect on our financial condition, results of operations, cash flows and ability to make expected distributions to our shareholders.

        We may be subject to possible environmental liabilities.    We are subject to various Federal, state and local environmental laws, including air and water quality, hazardous or toxic substances and health and safety. These laws can impose liability on current and prior property owners or operators for the costs of removal or remediation of hazardous substances released on a property, even if the property owner was not responsible for, or even aware of, the release of the hazardous substances. Costs resulting from environmental liability could be substantial. The presence of hazardous substances on our properties may also adversely affect occupancy and our ability to sell or borrow against those properties. In addition to the costs of government claims under environmental laws, private plaintiffs may bring claims for personal injury or other reasons. Additionally, various laws impose liability for the costs of removal or remediation of hazardous substances at the disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances at such a facility is potentially liable under such laws. These laws often impose liability on an entity even if the facility was not owned or operated by the entity.

        Although most of our properties have been subject to varying degrees of environmental assessment, many of these assessments are limited in scope and may not include or identify all potential environmental liabilities or risks associated with the property. Identification of new compliance concerns or undiscovered areas of contamination, changes in the extent or known scope of contamination, discovery of additional sites, human exposure to the contamination or changes in cleanup or compliance requirements could result in significant costs to us that could have an adverse effect on our financial condition, results of operations, cash flows and ability to make expected distributions to our shareholders.

        Terrorist attacks, such as those of September 11, 2001, may adversely affect the value of our properties, our financial position and cash flows.    We have significant investments in properties located in large metropolitan areas and near military installations. Future terrorist attacks could directly or indirectly damage our properties or cause losses that materially exceed our insurance coverage. After such an attack, tenants in these areas may choose to relocate their businesses to areas of the United States that may be perceived to be less likely targets of future terrorist activity, and fewer customers may choose to patronize businesses in these areas. This in turn would trigger a decrease in the demand for space in these areas, which could increase vacancies in our properties and force us to lease space on less favorable terms. As a result, the occurrence of terrorist attacks could adversely affect our financial position, results of operations, cash flows and ability to make expected distributions to our shareholders.

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        We may be subject to other possible liabilities that would adversely affect our financial position and cash flows.    Our properties may be subject to other risks related to current or future laws, including laws benefiting disabled persons, state or local laws relating to zoning, construction, fire and life safety requirements and other matters. These laws may require significant property modifications in the future and could result in the levy of fines against us. In addition, although we believe that we adequately insure our properties, we are subject to the risk that our insurance may not cover all of the costs to restore a property that is damaged by a fire or other catastrophic events, including acts of war or, as mentioned above, terrorism. The occurrence of any of these events could have an adverse effect on our financial condition, results of operations, cash flows and ability to make expected distributions to our shareholders.

        We may be subject to increased costs of insurance and limitations on coverage, particularly regarding acts of terrorism.    Our portfolio of properties is insured for losses under our property, casualty and umbrella insurance policies through September 30, 2012. These policies include coverage for acts of terrorism. Future changes in the insurance industry's risk assessment approach and pricing structure may increase the cost of insuring our properties and decrease the scope of insurance coverage, either of which could adversely affect our financial position and operating results. Most of our loan agreements contain customary covenants requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs, or at all, in the future. In addition, if lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance and/or refinance our properties and execute our growth strategies, which, in turn, would have an adverse effect on our financial condition, results of operations, cash flows and ability to make expected distributions to our shareholders.

        Our business could be adversely affected by a negative audit by the United States Government.    Agencies of the United States, including the Defense Contract Audit Agency and various agency Inspectors General, routinely audit and investigate government contractors. These agencies review a contractor's performance under its contracts, cost structure and compliance with applicable laws, regulations, and standards. The United States Government also reviews the adequacy of, and a contractor's compliance with, its internal control systems and policies. Any costs found to be misclassified may be subject to repayment. If an audit or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or prohibition from doing business with the United States Government. In addition, we could suffer serious reputational harm if allegations of impropriety were made against us.

        Our ownership limits are important factors.    Our Declaration of Trust limits ownership of our common shares by any single shareholder to 9.8% of the number of the outstanding common shares or 9.8% of the value of the outstanding common shares, whichever is more restrictive. Our Declaration of Trust also limits ownership by any single shareholder of our common and preferred shares in the aggregate to 9.8% of the aggregate value of the outstanding common and preferred shares. We call these restrictions the "Ownership Limit." Our Declaration of Trust allows our Board of Trustees to exempt shareholders from the Ownership Limit. The Ownership Limit and the restrictions on ownership of our common shares may delay or prevent a transaction or a change of control that might involve a premium price for our common shares or otherwise be in the best interest of our shareholders.

        Our Declaration of Trust includes other provisions that may prevent or delay a change of control.    Subject to the requirements of the New York Stock Exchange, our Board of Trustees has the authority, without shareholder approval, to issue additional securities on terms that could delay or prevent a change in control. In addition, our Board of Trustees has the authority to reclassify any of our unissued

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common shares into preferred shares. Our Board of Trustees may issue preferred shares with such preferences, rights, powers and restrictions as our Board of Trustees may determine, which could also delay or prevent a change in control.

        The Maryland business statutes impose potential restrictions that may discourage a change of control of our company.    Various Maryland laws may have the effect of discouraging offers to acquire us, even if the acquisition would be advantageous to shareholders. Resolutions adopted by our Board of Trustees and/or provisions of our bylaws exempt us from such laws, but our Board of Trustees can alter its resolutions or change our bylaws at any time to make these provisions applicable to us.

        Our failure to qualify as a REIT would have adverse tax consequences, which would substantially reduce funds available to make distributions to our shareholders.    We believe that since 1992 we have qualified for taxation as a REIT for Federal income tax purposes. We plan to continue to meet the requirements for taxation as a REIT. Many of these requirements, however, are highly technical and complex. The determination that we are a REIT requires an analysis of various factual matters and circumstances that may not be totally within our control. For example, to qualify as a REIT, at least 95% of our gross income must come from certain sources that are specified in the REIT tax laws. We are also required to distribute to shareholders at least 90% of our REIT taxable income (excluding capital gains). The fact that we hold most of our assets through our Operating Partnership and its subsidiaries further complicates the application of the REIT requirements. Even a technical or inadvertent mistake could jeopardize our REIT status. Furthermore, Congress and the Internal Revenue Service might make changes to the tax laws and regulations and the courts might issue new rulings that make it more difficult or impossible for us to remain qualified as a REIT.

        If we fail to qualify as a REIT, we would be subject to Federal income tax at regular corporate rates. Also, unless the Internal Revenue Service granted us relief under certain statutory provisions, we would remain disqualified as a REIT for four years following the year we first fail to qualify. If we fail to qualify as a REIT, we would have to pay significant income taxes and would therefore have less money available for investments or for distributions to our shareholders. In addition, if we fail to qualify as a REIT, we will no longer be required to pay dividends. As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital and would likely have a significant adverse effect on the value of our securities.

        We could face possible adverse changes in tax laws, which may result in an increase in our tax liability.    From time to time changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax liability. The shortfall in tax revenues for states and municipalities in recent years may lead to an increase in the frequency and size of such changes. If such changes occur, we may be required to pay additional taxes on our assets or income. These increased tax costs could adversely affect our financial condition and results of operations and the amount of cash available for payment of dividends.

        A number of factors could cause our security prices to decline.    As is the case with any publicly-traded securities, certain factors outside of our control could influence the value of our common and preferred shares. These conditions include, but are not limited to:

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        We may experience significant losses and harm to our financial condition if financial institutions holding our cash and cash equivalents file for bankruptcy protection.    We believe that we maintain our cash and cash equivalents with high quality financial institutions. We have not experienced any losses to date on our deposited cash. However, we may incur significant losses and harm to our financial condition in the future if any of these financial institutions files for bankruptcy protection.

        Certain of our Trustees have potential conflicts of interest.    Certain members of our Board of Trustees own partnership units in our Operating Partnership. These individuals may have personal interests that conflict with the interests of our shareholders. For example, if our Operating Partnership sells or refinances certain of the properties that these Trustees contributed to the Operating Partnership, the Trustees could suffer adverse tax consequences. Their personal interests could conflict with our interests if such a sale or refinancing would be advantageous to us. We have certain policies in place that are designed to minimize conflicts of interest. We cannot, however, provide assurance that these policies will be successful in eliminating the influence of such conflicts, and if they are not successful, decisions could be made that might fail to reflect fully the interests of all of our shareholders.

Item 1B.    Unresolved Staff Comments

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Item 2.    Properties

        The following table provides certain information about our office properties as of December 31, 2011:

Property and Location
  Submarket   Year Built/
Renovated
  Rentable
Square
Feet
  Occupancy(1)   Annualized
Rental
Revenue(2)
  Annualized
Rental
Revenue per
Occupied
Square
Foot(2)(3)
 

Baltimore/Washington Corridor:

                                   

2730 Hercules Road

  National Business Park     1990     238,007     100.0 % $ 8,745,038   $ 36.74  

Annapolis Junction, MD

                                   

300 Sentinel Drive

  National Business Park     2009     193,296     98.6 %   6,205,914     32.57  

Annapolis Junction, MD

                                   

304 Sentinel Drive

  National Business Park     2005     162,483     100.0 %   5,149,530     31.69  

Annapolis Junction, MD

                                   

2720 Technology Drive

  National Business Park     2004     158,929     100.0 %   5,289,305     33.28  

Annapolis Junction, MD

                                   

306 Sentinel Drive

  National Business Park     2006     155,367     100.0 %   4,838,585     31.14  

Annapolis Junction, MD

                                   

302 Sentinel Drive

  National Business Park     2007     153,566     99.6 %   5,250,120     34.34  

Annapolis Junction, MD

                                   

2711 Technology Drive

  National Business Park     2002     152,209     100.0 %   5,013,808     32.94  

Annapolis Junction, MD

                                   

308 Sentinel Drive

  National Business Park     2010     151,207     100.0 %   5,002,689     33.09  

Annapolis Junction, MD

                                   

318 Sentinel Drive

  National Business Park     2005     125,635     100.0 %   4,385,786     34.91  

Annapolis Junction, MD

                                   

322 Sentinel Drive

  National Business Park     2006     125,487     100.0 %   5,064,611     40.36  

Annapolis Junction, MD

                                   

320 Sentinel Drive

  National Business Park     2007     125,325     100.0 %   5,058,121     40.36  

Annapolis Junction, MD

                                   

316 Sentinel Way

  National Business Park     2011     125,150     0.0 %        

Annapolis Junction, MD

                                   

324 Sentinel Way

  National Business Park     2010     125,118     100.0 %   3,638,688     29.08  

Annapolis Junction, MD

                                   

140 National Business Parkway

  National Business Park     2003     119,466     100.0 %   4,219,827     35.32  

Annapolis Junction, MD

                                   

132 National Business Parkway

  National Business Park     2000     118,150     100.0 %   3,906,628     33.06  

Annapolis Junction, MD

                                   

2721 Technology Drive

  National Business Park     2000     117,242     100.0 %   3,821,020     32.59  

Annapolis Junction, MD

                                   

2701 Technology Drive

  National Business Park     2001     117,068     100.0 %   3,833,914     32.75  

Annapolis Junction, MD

                                   

2691 Technology Drive

  National Business Park     2005     103,578     100.0 %   3,588,956     34.65  

Annapolis Junction, MD

                                   

134 National Business Parkway

  National Business Park     1999     92,327     100.0 %   2,982,958     32.31  

Annapolis Junction, MD

                                   

133 National Business Parkway

  National Business Park     1997     88,057     100.0 %   2,883,341     32.74  

Annapolis Junction, MD

                                   

141 National Business Parkway

  National Business Park     1990     87,364     100.0 %   2,760,773     31.60  

Annapolis Junction, MD

                                   

135 National Business Parkway

  National Business Park     1998     86,437     100.0 %   3,023,246     34.98  

Annapolis Junction, MD

                                   

131 National Business Parkway

  National Business Park     1990     69,702     100.0 %   2,291,554     32.88  

Annapolis Junction, MD

                                   

430 National Business Pkwy

  National Business Park     2011     61,299     100.0 %   2,094,317     34.17  

Annapolis Junction, MD

                                   

114 National Business Parkway

  National Business Park     2002     10,113     100.0 %   234,857     23.22  

Annapolis Junction, MD

                                   

314 Sentinel Way

  National Business Park     2008     4,462     100.0 %   237,872     53.31  

Annapolis Junction, MD

                                   

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Property and Location
  Submarket   Year Built/
Renovated
  Rentable
Square
Feet
  Occupancy(1)   Annualized
Rental
Revenue(2)
  Annualized
Rental
Revenue per
Occupied
Square
Foot(2)(3)
 

7740 Milestone Parkway(4)

  Arundel Preserve     2009     144,610     6.0 %   283,691     32.77  

Hanover, MD

                                   

1550 West Nursery Road

  Airport Square     2009     161,689     100.0 %   3,457,038     21.38  

Linthicum, MD

                                   

1306 Concourse Drive

  Airport Square     1990     116,259     66.3 %   1,853,742     24.05  

Linthicum, MD

                                   

870 Elkridge Landing Road

  Airport Square     1981     105,456     100.0 %   2,506,436     23.77  

Linthicum, MD

                                   

920 Elkridge Landing Road

  Airport Square     1982     103,415     100.0 %   2,010,637     19.44  

Linthicum, MD

                                   

1304 Concourse Drive

  Airport Square     2002     101,124     79.0 %   2,152,439     26.95  

Linthicum, MD

                                   

900 Elkridge Landing Road

  Airport Square     1982     101,005     100.0 %   2,447,840     24.23  

Linthicum, MD

                                   

1199 Winterson Road

  Airport Square     1988     100,104     100.0 %   2,741,631     27.39  

Linthicum, MD

                                   

1302 Concourse Drive

  Airport Square     1996     83,717     78.5 %   1,748,380     26.61  

Linthicum, MD

                                   

881 Elkridge Landing Road

  Airport Square     1986     75,385     100.0 %   2,005,117     26.60  

Linthicum, MD

                                   

1099 Winterson Road

  Airport Square     1988     71,675     34.8 %   580,362     23.28  

Linthicum, MD

                                   

849 International Drive

  Airport Square     1988     69,018     70.7 %   1,276,037     26.14  

Linthicum, MD

                                   

1190 Winterson Road

  Airport Square     1987     69,016     100.0 %   1,838,589     26.64  

Linthicum, MD

                                   

911 Elkridge Landing Road

  Airport Square     1985     68,373     100.0 %   1,610,324     23.55  

Linthicum, MD

                                   

1201 Winterson Road

  Airport Square     1985     67,903     100.0 %   1,485,615     21.88  

Linthicum, MD

                                   

999 Corporate Boulevard

  Airport Square     2000     67,083     34.8 %   603,933     25.83  

Linthicum, MD

                                   

891 Elkridge Landing Road

  Airport Square     1984     57,987     80.0 %   1,277,213     27.52  

Linthicum, MD

                                   

901 Elkridge Landing Road

  Airport Square     1984     57,872     51.7 %   870,301     29.09  

Linthicum, MD

                                   

900 International Drive

  Airport Square     1986     57,140     100.0 %   920,936     16.12  

Linthicum, MD

                                   

930 International Drive

  Airport Square     1986     56,685     99.8 %   1,090,061     19.27  

Linthicum, MD

                                   

800 International Drive

  Airport Square     1988     56,585     59.9 %   760,515     22.43  

Linthicum, MD

                                   

921 Elkridge Landing Road

  Airport Square     1983     56,452     0.0 %        

Linthicum, MD

                                   

938 Elkridge Landing Road

  Airport Square     1984     56,270     100.0 %   1,269,166     22.55  

Linthicum, MD

                                   

939 Elkridge Landing Road

  Airport Square     1983     54,224     86.9 %   834,431     17.71  

Linthicum, MD

                                   

5520 Research Park Drive

  UMBC     2009     103,333     91.0 %   2,378,463     25.31  

Catonsville, MD

                                   

5522 Research Park Drive

  UMBC     2007     23,925     100.0 %   841,112     35.16  

Catonsville, MD

                                   

7467 Ridge Road

  BWI South     1990     74,545     65.5 %   1,156,254     23.70  

Hanover, MD

                                   

7240 Parkway Drive

  BWI South     1985     74,475     92.8 %   1,447,466     20.94  

Hanover, MD

                                   

7272 Park Circle Drive

  BWI South     1991/1996     60,041     79.8 %   1,011,682     21.11  

Hanover, MD

                                   

23


Table of Contents

Property and Location
  Submarket   Year Built/
Renovated
  Rentable
Square
Feet
  Occupancy(1)   Annualized
Rental
Revenue(2)
  Annualized
Rental
Revenue per
Occupied
Square
Foot(2)(3)
 

7318 Parkway Drive

  BWI South     1984     59,204     100.0 %   1,372,041     23.17  

Hanover, MD

                                   

7320 Parkway Drive

  BWI South     1983     56,964     0.0 %        

Hanover, MD

                                   

1340 Ashton Road

  BWI South     1989     45,867     100.0 %   860,760     18.77  

Hanover, MD

                                   

1362 Mellon Road

  BWI South     2006     43,232     86.5 %   865,221     23.14  

Hanover, MD

                                   

1334 Ashton Road

  BWI South     1989     38,128     100.0 %   868,745     22.78  

Hanover, MD

                                   

1331 Ashton Road

  BWI South     1989     28,906     29.1 %   150,416     17.87  

Hanover, MD

                                   

1341 Ashton Road

  BWI South     1989     15,314     100.0 %   331,569     21.65  

Hanover, MD

                                   

1343 Ashton Road

  BWI South     1989     9,903     100.0 %   140,047     14.14  

Hanover, MD

                                   

2500 Riva Road

  Annapolis     2000     155,000     100.0 %   2,262,067     14.59  

Annapolis, MD

                                   

7125 Columbia Gateway Drive
Columbia, MD

  Howard County Perimeter     1973/1999     479,976     70.1 %   6,522,562     19.40  

9140 Route 108
Columbia, MD

  Howard County Perimeter     1974/1985     171,436     100.0 %   7,389,857     43.11  

7200 Riverwood Road
Columbia, MD

  Howard County Perimeter     1986     160,000     100.0 %   4,756,599     29.73  

7000 Columbia Gateway Drive
Columbia, MD

  Howard County Perimeter     1999     145,386     100.0 %   2,440,493     16.79  

6721 Columbia Gateway Drive
Columbia, MD

  Howard County Perimeter     2009     131,451     100.0 %   3,970,916     30.21  

6711 Columbia Gateway Drive
Columbia, MD

  Howard County Perimeter     2006 - 2007     124,048     100.0 %   3,654,044     29.46  

6731 Columbia Gateway Drive
Columbia, MD

  Howard County Perimeter     2002     123,576     87.5 %   3,152,831     29.17  

6950 Columbia Gateway Drive
Columbia, MD

  Howard County Perimeter     1998     112,861     100.0 %   2,344,172     20.77  

6940 Columbia Gateway Drive
Columbia, MD

  Howard County Perimeter     1999     108,652     81.0 %   2,434,265     27.66  

7067 Columbia Gateway Drive
Columbia, MD

  Howard County Perimeter     2001     85,393     98.3 %   2,042,058     24.33  

8621 Robert Fulton Drive
Columbia, MD

  Howard County Perimeter     2005 - 2006     83,734     100.0 %   1,919,859     22.93  

6700 Alexander Bell Drive
Columbia, MD

  Howard County Perimeter     1988     76,359     75.8 %   1,416,089     24.45  

6750 Alexander Bell Drive
Columbia, MD

  Howard County Perimeter     2001     75,328     86.4 %   1,774,692     27.27  

6740 Alexander Bell Drive
Columbia, MD

  Howard County Perimeter     1992     63,161     100.0 %   1,834,668     29.05  

7015 Albert Einstein Drive
Columbia, MD

  Howard County Perimeter     1999     62,216     100.0 %   1,309,964     21.06  

7160 Riverwood Drive
Columbia, MD

  Howard County Perimeter     2000     62,041     94.6 %   1,709,961     29.14  

8671 Robert Fulton Drive
Columbia, MD

  Howard County Perimeter     2002     55,688     100.0 %   916,624     16.46  

6716 Alexander Bell Drive
Columbia, MD

  Howard County Perimeter     1990     52,114     66.8 %   914,617     26.28  

8661 Robert Fulton Drive
Columbia, MD

  Howard County Perimeter     2002     48,666     100.0 %   970,805     19.95  

7142 Columbia Gateway Drive
Columbia, MD

  Howard County Perimeter     1994     47,668     100.0 %   735,841     15.44  

24


Table of Contents

Property and Location
  Submarket   Year Built/
Renovated
  Rentable
Square
Feet
  Occupancy(1)   Annualized
Rental
Revenue(2)
  Annualized
Rental
Revenue per
Occupied
Square
Foot(2)(3)
 

9020 Mendenhall Court
Columbia, MD

  Howard County Perimeter     1982/2005     47,603     88.2 %   679,199     16.18  

7130 Columbia Gateway Drive
Columbia, MD

  Howard County Perimeter     1989     45,882     100.0 %   900,939     19.64  

9140 Guilford Road
Columbia, MD

  Howard County Perimeter     1983     40,288     55.8 %   343,054     15.25  

7150 Riverwood Drive
Columbia, MD

  Howard County Perimeter     2000     39,496     100.0 %   799,144     20.23  

9720 Patuxent Woods Drive
Columbia, MD

  Howard County Perimeter     1986/2001     39,480     100.0 %   727,532     18.43  

6708 Alexander Bell Drive
Columbia, MD

  Howard County Perimeter     1988     39,128     100.0 %   948,041     24.23  

7065 Columbia Gateway Drive
Columbia, MD

  Howard County Perimeter     2000     38,560     100.0 %   790,810     20.51  

7138 Columbia Gateway Drive
Columbia, MD

  Howard County Perimeter     1990     38,285     100.0 %   906,894     23.69  

9740 Patuxent Woods Drive
Columbia, MD

  Howard County Perimeter     1986/2001     37,520     100.0 %   581,409     15.50  

9160 Guilford Road
Columbia, MD

  Howard County Perimeter     1984     36,919     100.0 %   751,420     20.35  

7063 Columbia Gateway Drive
Columbia, MD

  Howard County Perimeter     2000     36,295     100.0 %   981,167     27.03  

6760 Alexander Bell Drive
Columbia, MD

  Howard County Perimeter     1991     36,227     64.4 %   538,056     23.06  

7150 Columbia Gateway Drive
Columbia, MD

  Howard County Perimeter     1991     34,734     85.0 %   604,614     20.49  

9700 Patuxent Woods Drive
Columbia, MD

  Howard County Perimeter     1986/2001     31,117     100.0 %   678,387     21.80  

7061 Columbia Gateway Drive
Columbia, MD

  Howard County Perimeter     2000     30,730     82.7 %   609,680     24.00  

9730 Patuxent Woods Drive
Columbia, MD

  Howard County Perimeter     1986/2001     30,495     78.1 %   407,350     17.09  

6724 Alexander Bell Drive
Columbia, MD

  Howard County Perimeter     2001     28,107     80.3 %   575,448     25.51  

7170 Riverwood Drive
Columbia, MD

  Howard County Perimeter     2000     27,891     41.4 %   187,906     16.29  

7134 Columbia Gateway Drive
Columbia, MD

  Howard County Perimeter     1990     21,931     0.0 %        

9150 Guilford Road
Columbia, MD

  Howard County Perimeter     1984     18,405     100.0 %   380,283     20.66  

10280 Old Columbia Road
Columbia, MD

  Howard County Perimeter     1988/2001     16,145     90.2 %   252,562     17.33  

10270 Old Columbia Road
Columbia, MD

  Howard County Perimeter     1988/2001     15,914     60.6 %   162,122     16.80  

9710 Patuxent Woods Drive
Columbia, MD

  Howard County Perimeter     1986/2001     14,778     72.2 %   202,964     19.02  

9130 Guilford Road
Columbia, MD

  Howard County Perimeter     1984     13,647     0.0 %        

10290 Old Columbia Road
Columbia, MD

  Howard County Perimeter     1988/2001     10,229     77.2 %   163,482     20.70  

6741 Columbia Gateway Drive
Columbia, MD

  Howard County Perimeter     2008     4,592     100.0 %   144,372     31.44  
                                 

Subtotal/Average

              8,859,080     87.9 % $ 214,359,486   $ 27.53  
                                 

Northern Virginia:

                                   

15000 Conference Center Drive

  Dulles South     1989     444,869     85.3 % $ 9,652,813   $ 25.42  

Chantilly, VA

                                   

15010 Conference Center Drive

  Dulles South     2006     220,906     100.0 %   7,296,046     33.03  

Chantilly, VA

                                   

25


Table of Contents

Property and Location
  Submarket   Year Built/
Renovated
  Rentable
Square
Feet
  Occupancy(1)   Annualized
Rental
Revenue(2)
  Annualized
Rental
Revenue per
Occupied
Square
Foot(2)(3)
 

15049 Conference Center Drive

  Dulles South     1997     152,993     100.0 %   4,708,200     30.77  

Chantilly, VA

                                   

15059 Conference Center Drive

  Dulles South     2000     146,801     98.8 %   4,551,549     31.37  

Chantilly, VA

                                   

14900 Conference Center Drive

  Dulles South     1999     125,357     89.7 %   3,174,811     28.24  

Chantilly, VA

                                   

14280 Park Meadow Drive

  Dulles South     1999     112,916     100.0 %   2,861,504     25.34  

Chantilly, VA

                                   

4851 Stonecroft Blvd. 

  Dulles South     2004     88,099     100.0 %   2,666,224     30.26  

Chantilly, VA

                                   

14850 Conference Center Drive

  Dulles South     2000     72,194     33.4 %   334,537     13.89  

Chantilly, VA

                                   

14840 Conference Center Drive

  Dulles South     2000     71,517     0.0 %        

Chantilly, VA

                                   

13200 Woodland Park Road

  Herndon     2002     396,837     100.0 %   12,531,612     31.58  

Herndon, VA

                                   

13454 Sunrise Valley

  Herndon     1998     112,284     86.1 %   2,421,055     25.05  

Herndon, VA

                                   

13450 Sunrise Valley

  Herndon     1998     53,572     100.0 %   1,443,882     26.95  

Herndon, VA

                                   

2900 Towerview Road

  Route 28 South     1982/2008     151,497     51.1 %   1,491,098     19.25  

Herndon, VA

                                   

1751 Pinnacle Drive

  Tyson's Corner     1989/1995     260,150     91.6 %   8,394,841     35.24  

McLean, VA

                                   

1753 Pinnacle Drive

  Tyson's Corner     1976/2004     184,480     100.0 %   7,171,364     38.87  

McLean, VA

                                   

1550 Westbranch Drive

  Tyson's Corner     2002     160,461     100.0 %   4,719,440     29.41  

McLean, VA

                                   

3120 Fairview Park Drive

  Merrifield     2008     180,853     24.9 %   1,649,957     36.58  

Falls Church, VA

                                   
                                 

Subtotal/Average

              2,935,786     84.8 % $ 75,068,931   $ 30.16  
                                 

San Antonio:

                                   

7700 Potranco Road

  San Antonio     1982/1985     508,412     100.0 % $ 17,636,099   $ 34.69  

San Antonio, TX

                                   

8000 Potranco Road

  San Antonio     2010     125,157     100.0 %   3,298,570     26.36  

San Antonio, TX

                                   

8030 Potranco Road

  San Antonio     2010     125,155     100.0 %   3,298,570     26.36  

San Antonio, TX

                                   

1101 Sentry Gateway

  San Antonio     2011     94,920     1.2 %   19,635     17.00  

San Antonio, TX

                                   

1560B Cable Ranch Road

  San Antonio     1985/2006     77,040     100.0 %   1,833,802     23.80  

San Antonio, TX

                                   

1560A Cable Ranch Road

  San Antonio     1985/2007     45,935     100.0 %   598,969     13.04  

San Antonio, TX

                                   

7700-5 Potranco Road

  San Antonio     2009     25,056     100.0 %   362,110     14.45  

San Antonio, TX

                                   

7700-1 Potranco Road

  San Antonio     2007     8,674     100.0 %   292,755     33.75  

San Antonio, TX

                                   
                                 

Subtotal/Average

              1,010,349     90.7 % $ 27,340,510   $ 29.83  
                                 

Washington DC—Capitol Riverfront:

                                   

1201 M Street
Washington, DC

  Washington DC—Capitol Riverfront     2001     202,273     83.9 % $ 7,312,766   $ 43.09  

1220 12th Street, SE
Washington, DC

  Washington DC—Capitol Riverfront     2003     158,913     96.9 %   6,974,988     45.28  
                                 

Subtotal/Average

              361,186     89.6 % $ 14,287,754   $ 44.13  
                                 

26


Table of Contents

Property and Location
  Submarket   Year Built/
Renovated
  Rentable
Square
Feet
  Occupancy(1)   Annualized
Rental
Revenue(2)
  Annualized
Rental
Revenue per
Occupied
Square
Foot(2)(3)
 

St Mary's & King George Counties:

                                   

16480 Commerce Drive

  King George County     2000     70,875     100.0 % $ 1,347,091   $ 19.01  

Dahlgren, VA

                                   

16541 Commerce Drive

  King George County     1996     37,292     100.0 %   716,644     19.22  

Dahlgren, VA

                                   

16539 Commerce Drive

  King George County     1990     32,257     100.0 %   603,238     18.70  

Dahlgren, VA

                                   

16442 Commerce Drive

  King George County     2002     25,606     73.5 %   359,078     19.08  

Dahlgren, VA

                                   

16501 Commerce Drive

  King George County     2002     22,833     100.0 %   493,127     21.60  

Dahlgren, VA

                                   

16543 Commerce Drive

  King George County     2002     17,286     87.3 %   392,699     26.02  

Dahlgren, VA

                                   

22309 Exploration Drive

  St. Mary's County     1984/1997     98,860     100.0 %   1,517,477     15.35  

Lexington Park, MD

                                   

45310 Abell House Lane

  St. Mary's County     2011     82,842     100.0 %   2,426,201     29.29  

California, MD

                                   

46591 Expedition Drive

  St. Mary's County     2005     59,843     100.0 %   1,468,324     24.54  

Lexington Park, MD

                                   

46579 Expedition Drive

  St. Mary's County     2002     58,989     100.0 %   1,501,990     25.46  

Lexington Park, MD

                                   

44425 Pecan Court

  St. Mary's County     1997     58,694     97.1 %   1,267,067     22.23  

California, MD

                                   

22289 Exploration Drive

  St. Mary's County     2000     58,633     87.5 %   1,230,427     23.97  

Lexington Park, MD

                                   

22299 Exploration Drive

  St. Mary's County     1998     58,132     62.2 %   914,070     25.27  

Lexington Park, MD

                                   

44408 Pecan Court

  St. Mary's County     1986     49,808     0.0 %        

California, MD

                                   

23535 Cottonwood Parkway

  St. Mary's County     1984     46,656     100.0 %   593,488     12.72  

California, MD

                                   

22300 Exploration Drive

  St. Mary's County     1997     45,093     100.0 %   755,412     16.75  

Lexington Park, MD

                                   

44417 Pecan Court

  St. Mary's County     1989     29,053     100.0 %   313,914     10.80  

California, MD

                                   

44414 Pecan Court

  St. Mary's County     1986     25,444     100.0 %   266,144     10.46  

California, MD

                                   

44420 Pecan Court

  St. Mary's County     1989     25,338     0.0 %        

California, MD

                                   
                                 

Subtotal/Average

              903,534     87.3 % $ 16,166,393   $ 20.50  
                                 

Greater Baltimore:

                                   

210 Research Blvd

  Harford County     2010     79,573     34.6 % $ 842,182   $ 30.57  

Aberdeen, MD

                                   

209 Research Blvd

  Harford County     2010     77,192     100.0 %   2,253,075     29.19  

Aberdeen, MD

                                   

11311 McCormick Road
Hunt Valley, MD

  Hunt Valley/RTE 83 Corridor     1984/1994     214,705     97.6 %   4,891,897     23.35  

10150 York Road
Hunt Valley, MD

  Hunt Valley/RTE 83 Corridor     1985     175,207     84.1 %   2,998,959     20.35  

9690 Deereco Road
Timonium, MD

  Hunt Valley/RTE 83 Corridor     1988     134,950     100.0 %   3,359,741     24.90  

200 International Circle
Hunt Valley, MD

  Hunt Valley/RTE 83 Corridor     1987     125,352     93.7 %   2,647,860     22.55  

375 Padonia Road West
Timonium, MD

  Hunt Valley/RTE 83 Corridor     1986     104,885     100.0 %   1,950,274     18.59  

226 Schilling Circle
Hunt Valley, MD

  Hunt Valley/RTE 83 Corridor     1980     97,309     100.0 %   2,128,651     21.88  

27


Table of Contents

Property and Location
  Submarket   Year Built/
Renovated
  Rentable
Square
Feet
  Occupancy(1)   Annualized
Rental
Revenue(2)
  Annualized
Rental
Revenue per
Occupied
Square
Foot(2)(3)
 

201 International Circle
Hunt Valley, MD

  Hunt Valley/RTE 83 Corridor     1982     78,243     73.2 %   1,332,066     23.25  

222 Schilling Circle
Hunt Valley, MD

  Hunt Valley/RTE 83 Corridor     1978/1997     28,617     64.4 %   386,543     20.96  

224 Schilling Circle
Hunt Valley, MD

  Hunt Valley/RTE 83 Corridor     1978/1997     27,575     88.8 %   490,013     20.01  

8110 Corporate Drive

  White Marsh     2001     79,091     100.0 %   1,551,584     19.62  

White Marsh, MD

                                   

8140 Corporate Drive

  White Marsh     2003     76,271     78.5 %   1,667,279     27.85  

White Marsh, MD

                                   

8031 Corporate Drive

  White Marsh     1988/2004     66,000     100.0 %   1,111,740     16.84  

White Marsh, MD

                                   

9910 Franklin Square Drive

  White Marsh     2005     57,812     100.0 %   1,317,180     22.78  

White Marsh, MD

                                   

7941-7949 Corporate Drive

  White Marsh     1996     57,782     0.0 %        

White Marsh, MD

                                   

8020 Corporate Drive

  White Marsh     1997     50,796     100.0 %   1,116,441     21.98  

White Marsh, MD

                                   

4940 Campbell Drive

  White Marsh     1990     50,415     85.5 %   1,016,477     23.59  

White Marsh, MD

                                   

4979 Mercantile Road

  White Marsh     1985     49,590     72.8 %   484,857     13.43  

White Marsh, MD

                                   

8094 Sandpiper Circle

  White Marsh     1998     49,585     88.7 %   843,149     19.17  

White Marsh, MD

                                   

4969 Mercantile Road

  White Marsh     1983     47,132     0.0 %        

White Marsh, MD

                                   

8098 Sandpiper Circle

  White Marsh     1998     46,485     100.0 %   806,540     17.35  

White Marsh, MD

                                   

8114 Sandpiper Circle

  White Marsh     1986     45,803     72.8 %   862,119     25.84  

White Marsh, MD

                                   

5020 Campbell Blvd. 

  White Marsh     1986 - 1988     43,623     76.3 %   488,330     14.68  

White Marsh, MD

                                   

9920 Franklin Square Drive

  White Marsh     2006     42,891     88.2 %   914,414     24.18  

White Marsh, MD

                                   

8007 Corporate Drive

  White Marsh     1995     41,799     78.0 %   606,248     18.60  

White Marsh, MD

                                   

9930 Franklin Square Drive

  White Marsh     2001     39,750     100.0 %   733,020     18.44  

White Marsh, MD

                                   

8010 Corporate Drive

  White Marsh     1998     38,487     100.0 %   732,922     19.04  

White Marsh, MD

                                   

8615 Ridgely's Choice

  White Marsh     2005     37,746     91.7 %   693,998     20.04  

White Marsh, MD

                                   

5355 Nottingham Drive

  White Marsh     2005     35,930     79.6 %   558,846     19.54  

White Marsh, MD

                                   

5325 Nottingham Drive

  White Marsh     2002     35,678     100.0 %   785,058     22.00  

White Marsh, MD

                                   

9900 Franklin Square Drive

  White Marsh     1999     33,800     85.7 %   529,855     18.29  

White Marsh, MD

                                   

5024 Campbell Blvd. 

  White Marsh     1986 - 1988     33,710     73.3 %   387,022     15.66  

White Marsh, MD

                                   

8019 Corporate Drive

  White Marsh     1990     32,424     75.9 %   519,112     21.10  

White Marsh, MD

                                   

9940 Franklin Square Drive

  White Marsh     2000     32,242     49.4 %   298,101     18.72  

White Marsh, MD

                                   

5026 Campbell Blvd. 

  White Marsh     1986 - 1988     30,163     77.8 %   380,216     16.20  

White Marsh, MD

                                   

8013 Corporate Drive

  White Marsh     1990     29,995     27.6 %   135,117     16.31  

White Marsh, MD

                                   

28


Table of Contents

Property and Location
  Submarket   Year Built/
Renovated
  Rentable
Square
Feet
  Occupancy(1)   Annualized
Rental
Revenue(2)
  Annualized
Rental
Revenue per
Occupied
Square
Foot(2)(3)
 

7939 Honeygo Blvd. 

  White Marsh     1984     28,208     80.7 %   503,596     22.13  

White Marsh, MD

                                   

8133 Perry Hall Blvd. 

  White Marsh     1988     27,995     81.1 %   457,830     20.16  

White Marsh, MD

                                   

5022 Campbell Blvd. 

  White Marsh     1986 - 1988     26,748     92.6 %   401,005     16.19  

White Marsh, MD

                                   

8029 Corporate Drive

  White Marsh     1988/2004     25,000     100.0 %   449,990     18.00  

White Marsh, MD

                                   

7923 Honeygo Blvd. 

  White Marsh     1985     23,481     89.1 %   370,936     17.72  

White Marsh, MD

                                   

8003 Corporate Drive

  White Marsh     1999     17,599     0.0 %        

White Marsh, MD

                                   

8015 Corporate Drive

  White Marsh     1990     15,669     68.9 %   210,349     19.49  

White Marsh, MD

                                   

8023 Corporate Drive

  White Marsh     1990     9,486     100.0 %   182,267     19.21  

White Marsh, MD

                                   

1501 South Clinton Street

  Baltimore City     2006     481,277     92.6 %   14,757,194     33.11  

Baltimore, MD

                                   
                                 

Subtotal/Average

              2,984,071     84.5 % $ 59,154,055   $ 23.46  
                                 

Suburban Maryland:

                                   

110 Thomas Johnson Drive

  Frederick     1987/1999     120,318     91.0 % $ 2,710,260   $ 24.76  

Frederick, MD

                                   

400 Professional Drive

  Gaithersburg     2000     129,853     66.7 %   2,114,604     24.41  

Gaithersburg, MD

                                   

4230 Forbes Boulevard

  Lanham     2003     55,866     43.0 %   375,808     15.65  

Lanham, MD(4)

                                   

11800 Tech Road

  North Silver Spring     1989     239,776     82.5 %   3,309,988     16.74  

Silver Spring, MD

                                   

45 West Gude Drive

  Rockville     1987     122,555     54.3 %   1,497,285     22.50  

Rockville, MD

                                   

15 West Gude Drive

  Rockville     1986     108,485     100.0 %   2,739,649     25.25  

Rockville, MD

                                   

5850 University Research Court

  College Park     2008     123,449     100.0 %   3,757,009     30.43  

College Park, MD(4)

                                   

5825 University Research Court

  College Park     2008     118,620     79.5 %   2,784,416     29.53  

College Park, MD(4)

                                   
                                 

Subtotal/Average

              1,018,922     79.6 % $ 19,289,019   $ 23.80  
                                 

Colorado Springs:

                                   

3535 Northrop Grumman Point

  Colorado Springs East     2008     124,305     100.0 % $ 2,451,462   $ 19.72  

Colorado Springs, CO

                                   

985 Space Center Drive

  Colorado Springs East     1989     104,028     94.6 %   2,128,568     21.63  

Colorado Springs, CO

                                   

655 Space Center Drive

  Colorado Springs East     2008     103,970     100.0 %   2,185,622     21.02  

Colorado Springs, CO

                                   

565 Space Center Drive

  Colorado Springs East     2009     89,899     8.6 %   36,980     4.78  

Colorado Springs, CO

                                   

1670 North Newport Road

  Colorado Springs East     1986/1987     67,500     56.2 %   805,032     21.22  

Colorado Springs, CO

                                   

1055 North Newport Road

  Colorado Springs East     2007 - 2008     59,763     100.0 %   1,235,529     20.67  

Colorado Springs, CO

                                   

745 Space Center Drive

  Colorado Springs East     2006     51,500     100.0 %   1,405,270     27.29  

Colorado Springs, CO

                                   

1915 Aerotech Drive

  Colorado Springs East     1985     37,946     15.8 %   83,937     14.02  

Colorado Springs, CO

                                   

1925 Aerotech Drive

  Colorado Springs East     1985     37,946     60.1 %   527,177     23.11  

Colorado Springs, CO

                                   

29


Table of Contents

Property and Location
  Submarket   Year Built/
Renovated
  Rentable
Square
Feet
  Occupancy(1)   Annualized
Rental
Revenue(2)
  Annualized
Rental
Revenue per
Occupied
Square
Foot(2)(3)
 

980 Technology Court

  Colorado Springs East     1995     33,207     100.0 %   682,857     20.56  

Colorado Springs, CO

                                   

525 Babcock Road

  Colorado Springs East     1967     14,000     100.0 %   198,430     14.17  

Colorado Springs, CO

                                   

5725 Mark Dabling Blvd.
Colorado Springs, CO

  Colorado Springs Northwest     1984     108,976     100.0 %   2,046,254     18.78  

5775 Mark Dabling Blvd.
Colorado Springs, CO

  Colorado Springs Northwest     1984     108,640     61.6 %   1,152,156     17.22  

5755 Mark Dabling Blvd.
Colorado Springs, CO

  Colorado Springs Northwest     1989     104,848     88.4 %   1,991,314     21.48  

10807 New Allegiance Drive

  I-25 North Corridor     2009     145,723     41.2 %   1,296,364     21.61  

Colorado Springs, CO

                                   

9965 Federal Drive

  I-25 North Corridor     1983/2007     74,749     100.0 %   1,372,347     18.36  

Colorado Springs, CO

                                   

9945 Federal Drive

  I-25 North Corridor     2009     74,005     0.0 %        

Colorado Springs, CO

                                   

9950 Federal Drive

  I-25 North Corridor     2001     66,223     100.0 %   1,046,628     15.80  

Colorado Springs, CO

                                   

12515 Academy Ridge View

  I-25 North Corridor     2006     61,372     100.0 %   1,585,824     25.84  

Colorado Springs, CO

                                   

9925 Federal Drive

  I-25 North Corridor     2008     53,788     90.8 %   768,341     15.74  

Colorado Springs, CO

                                   

9960 Federal Drive

  I-25 North Corridor     2001     46,948     78.3 %   781,262     21.24  

Colorado Springs, CO

                                   
                                 

Subtotal/Average

              1,569,336     74.9 % $ 23,781,354   $ 20.22  
                                 

Greater Philadelphia:

                                   

785 Jolly Road

  Greater Philadelphia     1991 - 1996     219,065     100.0 % $ 2,884,072   $ 13.17  

Blue Bell, PA

                                   

801 Lakeview Drive

  Greater Philadelphia     1991 - 1996     218,653     99.4 %   5,341,961     24.58  

Blue Bell, PA

                                   
                                 

Subtotal/Average

              437,718     99.7 % $ 8,226,033   $ 18.85  
                                   

Other Region:

                                   

11751 Meadowville Lane

  Richmond Southwest     2007     193,000     100.0 %   5,366,053     27.80  

Richmond, VA

                                   

201 Technology Drive

  Southwest Virginia     2007     102,842     100.0 %   3,559,958     34.62  

Lebanon, VA

                                   

310 The Bridge Street

  Huntsville     2009     138,466     100.0 %   3,558,174     25.70  

Huntsville, AL

                                   
                                 

Subtotal/Average

              434,308     100.0 % $ 12,484,186   $ 28.75  
                                 

Total/Average

              20,514,290     86.2 % $ 470,157,772   $ 26.59  
                                 

(1)
This percentage is based upon all rentable square feet under lease terms that were in effect as of December 31, 2011.

(2)
Annualized rental revenue is the monthly contractual base rent as of December 31, 2011 multiplied by 12, plus the estimated annualized expense reimbursements under existing leases. Our computation of annualized rental revenue excludes the effect of lease incentives, although the effect of this exclusion is generally not material. We consider annualized rental revenue to be a useful measure for analyzing revenue sources because, since it is point-in-time based, it does not contain increases and decreases in revenue associated with periods in which lease terms were not in effect; historical revenue under generally accepted accounting principles does contain such fluctuations. We find the measure particularly useful for leasing, tenant, segment and industry analysis.

(3)
Annualized rental revenue per occupied square foot is a property's annualized rental revenue divided by that property's occupied square feet as of December 31, 2011.

(4)
This property was owned by a joint venture in which we held a 50% interest as of December 31, 2011.

30


Table of Contents

        The following table provides certain information about our office properties that were under construction or redevelopment as of December 31, 2011:

Property and Location
  Submarket   Estimated
Rentable
Square Feet
Upon Completion
  Percentage
Leased at
December 31,
2011
 

Under Construction

                 

Baltimore/Washington Corridor:

                 

7205 Riverwood Road

  Howard County Perimeter     89,295     0 %

Columbia, MD

                 

410 National Business Parkway

  BWI Airport     110,362     0 %

Annapolis Junction, MD

                 

430 National Business Parkway

  BWI Airport     109,559     73 %

Annapolis Junction, MD

                 
                 

Subtotal/Average

        309,216     26 %
                 

Northern Virginia:

                 

7770 Backlick Road (Patriot Ridge)

  Springfield     237,000     44 %

Springfield, VA

                 
                 

Greater Baltimore:

                 

206 Research Boulevard

  Harford County     128,119     0 %

Aberdeen, MD

                 
                 

Huntsville:

                 

1000 Redstone Gateway

  Huntsville     114,891     0 %

Huntsville, AL

                 
                 

Total Under Construction

        789,226     23 %
                 

Under Redevelopment

                 

Greater Philadelphia:

                 

751 Arbor Way (Hillcrest I)

  Greater Philadelphia     113,291     39 %

Blue Bell, PA

                 
                 

Total Under Redevelopment

        113,291     39 %
                 

31


Table of Contents

        The following table provides certain information about our land held or under pre-construction as of December 31, 2011:

Land Location
  Submarket   Acres   Estimated
Developable
Square Feet
 

Baltimore/Washington Corridor:

                 

National Business Park North

  BWI Airport     183     1,674,000  

Annapolis Junction, MD

                 

National Business Park

  BWI Airport     12     385,000  

Annapolis Junction, MD

                 

1243 Winterson Road (AS 22)

  BWI Airport     2     30,000  

Linthicum, MD

                 

940 Elkridge Landing Road (AS 7)

  BWI Airport     2     54,000  

Linthicum, MD

                 

West Nursery Road

  BWI Airport     1     5,000  

Linthicum, MD

                 

Arundel Preserve

  BWI Airport     84     1,382,000  

Hanover, MD

                 

1460 Dorsey Road

  BWI Airport     6     60,000  

Hanover, MD

                 

Columbia Gateway Parcel T-11

  Howard Co. Perimeter     14     220,000  

Columbia, MD

                 

7125 Columbia Gateway Drive

  Howard Co. Perimeter     8     300,000  

Columbia, MD

                 

Riverwood

  Howard Co. Perimeter     5     27,000  

Columbia, MD

                 
               

Subtotal

        318     4,137,000  
               

Northern Virginia:

                 

Westfields Corporate Center

  Dulles South     23     400,000  

Chantilly, VA

                 

Westfields—Park Center

  Dulles South     33     400,000  

Chantilly, VA

                 

Woodland Park

  Herndon     5     225,000  

Herndon, VA

                 

Patriot Ridge

  Springfield     11     739,000  

Springfield, VA

                 
               

Subtotal

        72     1,764,000  
               

San Antonio:

                 

8100 Potranco Road

  San Antonio Northwest     9     125,000  

San Antonio, TX

                 

Northwest Crossroads

  San Antonio Northwest     31     375,000  

San Antonio, TX

                 

Military Drive

  San Antonio Northwest     41     752,000  

San Antonio, TX

                 
               

Subtotal

        81     1,252,000  
               

32


Table of Contents

Land Location
  Submarket   Acres   Estimated
Developable
Square Feet
 

St. Mary's & King George Counties

                 

Dahlgren Technology Center

  King George County     38     64,000  

Dahlgren, MD

                 

Expedition VII

  St. Mary's County     6     45,000  

Lexington Park, MD

                 
               

Subtotal

        44     109,000  
               

Greater Baltimore:

                 

Canton Crossing

  Baltimore     10     773,000  

Baltimore, MD

                 

White Marsh

  White Marsh     138     1,352,000  

White Marsh, MD

                 

North Gate Business Park

  Harford County     39     567,000  

Aberdeen, MD

                 
               

Subtotal

        187     2,692,000  
               

Suburban Maryland

                 

Thomas Johnson Drive

  Frederick     6     170,000  

Frederick, MD

                 

Route 15 / Biggs Ford Road

  Frederick     107     1,000,000  

Frederick, MD

                 

Rockville Corporate Center

  Rockville     10     220,000  

Rockville, MD

                 

M Square Research Park

  College Park     49     510,000  

College Park, MD

                 
               

Subtotal

        172     1,900,000  
               

Colorado Springs:

                 

InterQuest

  I-25 North Corridor     94     1,450,000  

Colorado Springs, CO

                 

9965 Federal Drive

  I-25 North Corridor     4     30,000  

Colorado Springs, CO

                 

Patriot Park

  Colorado Springs East     71     1,000,000  

Colorado Springs, CO

                 

Aerotech Commerce

  Colorado Springs East     6     90,000  

Colorado Springs, CO

                 
               

Subtotal

        175     2,570,000  
               

Greater Philadelphia:

                 

Arborcrest

  Blue Bell     8     722,000  
               

Blue Bell, PA

                 

Other:

                 

Redstone Gateway

  Huntsville, AL     465     4,485,000  

Huntsville, AL

                 

Indian Head

  Charles County, MD     217     967,000  

Charles County, MD

                 

Fort Ritchie

  Fort Ritchie     591      

Cascade, MD

                 
               

Subtotal

        1,273     5,452,000  
               

Total Land Held and Under Preconstruction

        2,330     20,598,000  
               

33


Table of Contents

        The following table provides certain information about our wholesale data center property as of December 31, 2011:

Property and Location
  Year
Built
  Gross
Building
Area
  Raised
Floor
Square
Footage(1)
  Initial
Stabilization
Critical Load
(in MWs)(2)
  Critical Load
Upon Completion
Leased at
December 31,
2011
  MW
Operational
 

9651 Hornbaker Road

    2010     233,000     100,000     18     17 %   17 %

Manassas, Virginia

                                     

(1)
Raised floor square footage is that portion of the gross building area in which tenants locate their computer servers. Raised floor area is considered to be the net rentable square footage.

(2)
Critical load is the power available for exclusive use of tenants in the property (expressed in terms of megawatts ("MWs")).

Lease Expirations

        The following table provides a summary schedule of the lease expirations for leases in place at our office properties as of December 31, 2011, assuming that none of the tenants exercise renewal options. This analysis includes the effect of early renewals completed on existing leases but excludes the effect of new tenant leases on 399,802 square feet executed but yet to commence as of December 31, 2011.

Year of Lease Expiration(1)
  Number of
Leases
Expiring
  Square
Footage of
Leases
Expiring
  Percentage of
Total
Occupied
Square Feet
  Annualized
Rental
Revenue of
Expiring
Leases(2)
  Percentage of
Total
Annualized
Rental Revenue
Expiring(2)
  Total
Annualized
Rental Revenue of
Expiring Leases
Per Occupied
Square Foot
 
 
   
   
   
  (in thousands)
   
   
 

2012

    171     2,349,450     13.3 % $ 58,048     12.3 % $ 24.71  

2013

    118     2,021,184     11.4 %   59,678     12.7 %   29.53  

2014

    131     2,147,570     12.1 %   57,535     12.2 %   26.79  

2015

    116     2,688,720     15.2 %   68,954     14.7 %   25.65  

2016

    99     1,843,069     10.4 %   46,445     9.9 %   25.20  

2017

    60     1,338,885     7.6 %   36,769     7.8 %   27.46  

2018

    46     1,115,484     6.3 %   29,522     6.3 %   26.46  

2019

    27     886,856     5.0 %   22,395     4.8 %   25.25  

2020

    26     1,285,972     7.3 %   32,410     6.9 %   25.20  

2021

    22     662,096     3.7 %   17,765     3.8 %   26.83  

2022

    11     737,163     4.2 %   20,911     4.4 %   28.37  

2023

    2     52,899     0.3 %   1,176     0.3 %   22.24  

2024

            0.0 %       0.0 %    

2025

    4     555,370     3.1 %   18,550     3.9 %   33.40  
                             

Total/Weighted Average

    833     17,684,718     100.0 % $ 470,158     100.0 % $ 26.59  
                             

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Table of Contents

        The following table provides a summary schedule of the lease expirations for leases in place at our wholesale data center property as of December 31, 2011:

Year of Lease Expiration
  Number of
Leases
Expiring
  Raised Floor
Square Footage
Expiring
  Critical Load
Leased
(in megawatts)
  Critical Load
Used
(in megawatts)
  Annualized
Rental
Revenue of
Expiring
Leases(2)
 
 
   
   
   
   
  (in thousands)
 

2019

    1     7,172     1     1.00   $ 2,057  

2020

    1     19,023     2     1.25     2,570  
                       

Total/Weighted Average

    2     26,195     3     2.25   $ 4,627  
                       

(1)
Most of our leases with the United States Government provide for consecutive one-year terms or provide for early termination rights. All of the leasing statistics set forth above assumed that the United States Government will remain in the space that it leases through the end of the respective arrangements, without ending consecutive one-year leases prematurely or exercising early termination rights. We reported the statistics in this manner because we manage our leasing activities using these same assumptions and believe these assumptions to be probable.

(2)
Annualized rental revenue is the monthly contractual base rent as of December 31, 2011 multiplied by 12, plus the estimated annualized expense reimbursements under existing office leases. Our computation of annualized rental revenue excludes the effect of lease incentives, although the effect of this exclusion is generally not material.

Item 3.    Legal Proceedings

        We are not currently involved in any other material litigation nor, to our knowledge, is any material litigation currently threatened against the Company (other than routine litigation arising in the ordinary course of business, substantially all of which is expected to be covered by liability insurance).

Item 4.    Mine Safety Disclosures

        Not applicable.

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Table of Contents


PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

        Our common shares trade on the New York Stock Exchange ("NYSE") under the symbol "OFC." The table below shows the range of the high and low sale prices for our common shares as reported on the NYSE, as well as the quarterly common share dividends per share declared:

 
  Price Range    
 
 
  Dividends
Per Share
 
2010
  Low   High  

First Quarter

  $ 32.69   $ 42.44   $ 0.3925  

Second Quarter

  $ 34.82   $ 43.61   $ 0.3925  

Third Quarter

  $ 35.04   $ 39.85   $ 0.4125  

Fourth Quarter

  $ 33.33   $ 38.96   $ 0.4125  

 

 
  Price Range    
 
 
  Dividends
Per Share
 
2011
  Low   High  

First Quarter

  $ 33.83   $ 36.90   $ 0.4125  

Second Quarter

  $ 30.63   $ 36.79 &nb