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2001

2002

2003
Projected

NAREIT Average Office(1)

7.6

%

1.0

%

-4.7

%

OFC(2)

10.3

%

12.5

%

7.6

%

2001 Acquisitions - Actual Closed

$

143 Million

2002 Acquisitions - Actual Closed

$

107 Million

2003 Acquisitions - YTD Closed

$

89 Million

(1)

2003 Offers Out

$

180 Million

(1)

1997

1998

1999

2000

2001

2002

2003 E*

FFO Per Share

$

0.29

$

0.79

$

1.04

$

1.16

$

1.28

$

1.44

$

1.55

1997

1998

1999

2000

2001

2002

2003 E*

EPS Per Share

$

(0.60

)

$

0.47

$

0.66

$

0.59

$

0.63

$

0.56

$

0.70

Funds from Operations

Funds from operations means net income (loss) computed using GAAP, excluding gains (or losses) from debt restructuring and sales of real estate, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures, although FFO includes gains (or losses) from sales of real estate to the extent such gains relate to sales of non-operating properties and development services provided on operating properties. Accounting for real estate assets using historical cost accounting under GAAP assumes that the value of real estate assets diminishes predictably over time. The National Association of Real Estate Trusts (“NAREIT”) stated in its April 2002 White Paper on Funds from Operations that “since real estate asset values have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.” As a result, the concept of FFO was created by NAREIT for the REIT industry to “address this problem.”

Since the Company agrees with the concept of FFO and appreciates the reason surrounding its creation, it believes that FFO is an important supplemental measure of operating performance. In addition, since most equity REITs provide FFO information to the investment community, the Company believes FFO is a useful supplemental measure for comparing the Company’s results to those of other equity REITs. The Company believes that net income is the GAAP measure most directly comparable to FFO.

Adjusted Funds from Operations
(AFFO)

FFO adjusted for the following: straight-line rents, SFAS 141 revenues, and recurring capital expenditures.

GAAP

Generally accepted accounting principles.

Industry Classification

We classify the revenue from our leases into industry groupings based solely on Management’s knowledge of the tenants’ operations in leased space. Occasionally, classifications require subjective and complex judgments. For example, we have a tenant that is considered by many to be in the computer industry; however, since the nature of that tenant’s operations in the space leased from us is focused on providing service to the United State Government’s defense department, we classify the revenue we earn from the lease as Government defense/defense contractor industry revenue. We do not use independent sources such as Standard Industrial Classification codes for classifying our revenue into industry groupings and if we did, the resulting groupings would be materially different.

NAREIT

National Association of Real Estate Investment Trusts

Total Annualized Revenue

Annualized rental revenue is a measure that we use to evaluate the source of our rental revenue as of a point-in-time. It is computed by multiplying the sum of monthly contractual base rent and estimated monthly expense reimbursements under active leases as of a point in time by 12. We consider annualized rental revenue to be a useful measure for analyzing revenue sources because, since it is point-in-time based, it would not contain increases and decreases in revenue associated with periods where leases where not in effect; historical GAAP revenue would contain such fluctuations. We find the measure particularly useful for tenant and segment analysis. We consider annualized rental revenue to be a statistical measure rather than a performance measure. Annualized rental revenue cannot be reconciled to GAAP measures since its computation is not derived from historical GAAP measures.

FFO Payout Ratios

Total dividends/distributions, exclusive of dividends for perpetual preferred equity which are deducted to calculate FFO and inclusive of dividends on restricted shares for certain periods, divided by FFO.

AFFO Payout Ratios

Total dividends/distributions, exclusive of dividends for perpetual preferred equity which are deducted to calculate AFFO and inclusive of dividends on restricted shares for certain periods, divided by AFFO.

(Dollars and shares in thousands, except per share data)

Years ended December 31,(1)

Quarter
ended
March 31,

2003

2002

2001

2000

1999

1998

1997

2003

Low

High

Estimated(2)

Net income available to common shareholders

$

17,250

$

17,750

$

13,167

$

13,065

$

11,332

$

12,229

$

4,369

$

(967

)

$

5,454

Convertible preferred share dividends

544

544

544

508

—

—

—

—

136

Minority interests-preferred units

—

—

—

—

—

2,559

3,412

—

—

Minority interests-common units

—

—

—

—

—

—

1,171

—

—

Numerator for earnings per share-diluted

17,794

18,294

13,711

13,573

11,332

14,788

8,952

(967

)

5,590

Real estate related depreciation and amortization

32,800

32,800

30,997

20,702

16,887

11,987

6,238

1,267

7,980

Restricted common share dividends

332

332

283

—

—

—

—

—

83

Minority interests-preferred units

2,288

2,288

2,287

2,287

2,240

61

—

720

572

Minority interests-common units

7,046

7,250

5,800

6,592

6,322

3,449

—

65

2,233

Convertible preferred share dividends

—

—

—

—

677

1,353

327

—

—

Gain on sales of real estate, excluding development portion

(2,843

)

(2,843

)

(268

)

(416

)

(107

)

(1,140

)

—

—

(2,843

)

Expense on dilutive options

—

—

44

—

—

—

—

—

6

Cumulative effect of accounting change

—

—

—

263

—

—

—

—

—

Numerator for funds from operations per share-diluted

$

57,417

$

58,121

$

52,854

$

43,001

$

37,351

$

30,498

$

15,517

$

1,085

$

13,621

Denominator for earnings per share-diluted

25,600

25,600

24,547

21,623

19,213

22,574

19,237

1,601

25,492

Common units

8,990

8,990

9,282

9,437

9,652

4,883

—

552

8,990

Restricted shares

340

340

326

—

—

—

330

Convertible preferred units

2,421

2,421

2,421

2,421

2,371

70

—

1,602

2,421

Convertible preferred shares

—

—

—

—

918

1,845

449

—

—

Additional dilutive share options

—

—

58

—

—

—

—

—

43

Denominator for funds from operations per share-diluted

37,351

37,351

36,634

33,481

32,154

29,372

19,686

3,755

37,276

Earnings per share-diluted

$

0.70

$

0.71

$

0.56

$

0.63

$

0.59

$

0.66

$

0.47

$

(0.60

)

$

0.22

Funds from operations per share-diluted

$

1.54

$

1.56

$

1.44

$

1.28

$

1.16

$

1.04

$

0.79

$

0.29

$

0.37

Numerator for funds from operations per share-diluted

$

52,854

$

43,001

$

37,351

$

30,498

$

15,517

$

1,085

$

13,621

Straight-line rent adjustments

(2,389

)

(3,175

)

(4,107

)

(2,766

)

(1,785

)

(295

)

(1,177

)

Amort. of origination value of leases on acquired properties

(2,342

)

—

—

—

—

—

(549

)

Recurring capital expenditures

(6,640

)

(5,430

)

(2,843

)

(2,579

)

(538

)

—

(2,756

)

Adjusted funds from operations derived starting from the numerator for funds from operations per share-diluted

$

41,483

$

34,396

$

30,401

$

25,153

$

13,194

$

790

$

9,139