The following discussion and tables should be read in conjunction with the financial statements and notes thereto included in this Quarterly Report on Form 10-Q and in our Annual Report.

OVERVIEW

As of September 30, 2012, we owned 82 properties located in 31 states and the District of Columbia containing approximately 10.0 million rentable square feet, of which 66.7% was leased to the U.S. Government, 17.4% was leased to 10 state governments, and 1.9% was leased to the United Nations, an international intergovernmental organization. The U.S. Government, 10 state governments and the United Nations combined were responsible for 93.9% and 93.1% of our annualized rental income, as defined below, as of September 30, 2012 and 2011, respectively.

Property Operations

As of September 30, 2012, 92.4% of our rentable square feet were leased, compared to 96.1% of our rentable square feet as of September 30, 2011. Occupancy data for our properties as of September 30, 2012 and 2011 is as follows (square feet in thousands):

                                                        Comparable
                                    All Properties     Properties(1)
                                    September 30,      September 30,
                                    2012      2011     2012     2011
Total properties (end of period)        82       67       55       55
Total square feet                    9,969    8,286    6,805    6,805
Percent leased(2)                     92.4 %   96.1 %   91.0 %   96.2 %

(2) Percent leased includes (i) space being fitted out for tenant occupancy pursuant to our lease agreements, if any, and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants, if any, as of the measurement date.

The average effective rental rates per square foot for our properties for the periods ended September 30, 2012 and 2011 were as follows:

                                            Three Months Ended          Nine Months Ended
                                              September 30,               September 30,
                                            2012          2011          2012         2011
Average effective rental rate per
square foot:(1)
All properties                           $    24.59    $    24.91    $    24.47    $   24.20
Comparable properties(2)                 $    25.35    $    24.92    $    24.03    $   23.79

(2) Comparable properties for the three months ended September 30, 2012 consist of 64 properties we owned on September 30, 2012 and which we owned continuously since July 1, 2011. Comparable properties for the nine months ended September 30, 2012 consist of 55 properties we owned on September 30, 2012 and which we owned continuously since January 1, 2011.

We currently believe that U.S. property leasing market conditions are slowly improving, but remain weak in many U.S. markets. Our historical experience, including that of our predecessor, CWH, with respect to properties of the type we own that are

majority leased to government tenants has been that government tenants frequently renew leases to avoid the costs and disruptions that may result from relocating their operations. We believe that current budgetary pressures may cause increased demand for leased space by government tenants, as opposed to new buildings built on behalf of government tenants. However, these same increased budgetary pressures upon the U.S. Government and state governments could also result in a decrease in government employment and consolidation of operations into government owned properties, thereby reducing the need for government leased space. Accordingly, we are unable to reasonably project what the financial impact of market conditions will be on our financial results for future periods.

As of September 30, 2012, leases totaling 633,635 rentable square feet are scheduled to expire through December 31, 2012. Based upon current market conditions and tenant negotiations for leases scheduled to expire through December 31, 2012, we expect that rental rates we are likely to achieve on new or renewed leases will, in the aggregate and on a weighted average basis, be higher than the rates currently being paid, thereby generally resulting in higher revenue from the same space absent an increase in vacancies. However, we can provide no assurance that the rental rates we expect will occur or that we will not experience material declines in our rental income due to vacancies upon lease expirations. Prevailing market conditions at the time our leases expire will generally determine lease renewals and rental rates for space in our properties; and market conditions are generally beyond our control. As of September 30, 2012, lease expirations at our properties by year are as follows (square feet and dollars in thousands):

                                                                               Annualized
                        Number of   Expirations of               Cumulative      Rental                 Cumulative
                         Tenants    Occupied Square   Percent     Percent        Income      Percent     Percent
Year(1)                 Expiring        Feet(2)       of Total    of Total    Expiring(3)    of Total    of Total
2012                           17               634        6.9 %        6.9 % $     17,725        8.3 %        8.3 %
2013                           34               958       10.4 %       17.3 %       14,407        6.7 %       15.0 %
2014                           33               459        5.0 %       22.3 %        8,366        3.9 %       18.9 %
2015                           39             1,298       14.1 %       36.4 %       29,416       13.7 %       32.6 %
2016                           35               603        6.5 %       42.9 %       14,482        6.8 %       39.4 %
2017                           29               618        6.7 %       49.6 %       12,560        5.9 %       45.3 %
2018                           12               670        7.3 %       56.9 %       24,681       11.5 %       56.8 %
2019                           15             1,365       14.8 %       71.7 %       31,594       14.8 %       71.6 %
2020                           13               668        7.3 %       79.0 %       19,260        9.0 %       80.6 %
2021 and thereafter            21             1,939       21.0 %      100.0 %       41,587       19.4 %      100.0 %
Total                         248             9,212      100.0 %              $    214,078      100.0 %

Weighted average
remaining lease term
(in years)                                      5.3                                    5.4

(2) Occupied square feet is pursuant to leases existing as of September 30, 2012, and includes (i) space being fitted out for tenant occupancy pursuant to our lease agreements, if any, and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants, if any.

(3) Annualized rental income is the annualized contractual base rents from our tenants pursuant to our lease agreements as of September 30, 2012, including straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization.

Acquisition Activities (dollar amounts in thousands)

During the nine months ended September 30, 2012, we acquired 11 properties for an aggregate purchase price of $181,051, excluding acquisition related costs. We acquired these properties at a range of capitalization rates from 7.4% to 9.3%, with a weighted average (by purchase price) capitalization rate of 8.1%. We calculate the capitalization rate for property acquisitions as the ratio of
(x) annual straight line rental income, excluding the impact of above and below market lease amortization, based on leases then in

effect at the acquisition date, less estimated annual property operating expenses, excluding depreciation and amortization expense, to (y) the acquisition purchase price, including assumed debt and excluding acquisition costs. For more information about these acquisitions, please see Note 3 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

In October 2012, we entered an agreement to acquire an office property located in Windsor Hill, MD with 78,131 rentable square feet. This property is 100% leased to two tenants, of which 97% is leased to the U.S. Government and occupied by the Centers for Medicare and Medicaid. The contract purchase price is $14,450, excluding acquisition costs. This pending acquisition is subject to our satisfactory completion of diligence and other customary closing conditions; accordingly, we can provide no assurance that we will acquire this property.

Our strategy related to property acquisitions and dispositions is materially unchanged from that disclosed in our Annual Report. We continue to explore and evaluate for possible acquisition additional properties that are majority leased to government tenants; however, we can provide no assurance that we will reach agreements to acquire, or that if we do reach such agreements that we will complete the acquisitions of, such properties.

Although we may sell properties on occasion, we do not currently plan to dispose of any of our properties. Future changes in market conditions, property performance or our plans with regard to particular properties may change our disposition strategy.