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

Overview

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 parks that we believe possess growth opportunities.

During the three months ended March 31, 2012, we:

† had an increase in net income attributable to common shareholders of $24.5 million as compared to the three months ended March 31, 2011, due in large part to a decrease in impairment losses attributable primarily to a $27.7 million loss recognized on our property in Cascade, Maryland that was formerly the Army base known as Fort Ritchie ("Fort Ritchie") in the three months ended March 31, 2011;

† had an increase of $3.1 million as compared to the three months ended March 31, 2011 in our net operating income ("NOI") from real estate operations (defined below) attributable to our Same Office Properties (also defined below);

† finished the period with occupancy of our portfolio of operating office properties at 87.0%;

† sold eight operating properties totaling 314,000 square feet and non-operating properties for aggregate sale prices totaling $62.7 million. The net proceeds from these sales were used primarily to pay down our Revolving Credit Facility; and

† entered into an unsecured term loan agreement, under which we borrowed $250.0 million. The term loan agreement matures on February 14, 2017. The net proceeds from these borrowings were used to pay down our Revolving Credit Facility.

We discuss significant factors contributing to changes in our net income attributable to common shareholders and diluted earnings per share over the prior year period in the section below entitled "Results of Operations." In addition, the section below entitled "Liquidity and Capital Resources" includes discussions of, among other things: