First Potomac Realty Trust (NYSE: FPO), a leader in the ownership, management, development and redevelopment of office and business park properties in the greater Washington, D.C. region, reported results for the three and six months ended June 30, 2016.

Second Quarter 2016 and Subsequent Highlights

• Reported net loss attributable to common shareholders of $5.5 million, or $0.10 per diluted share.
• Reported Core Funds From Operations of $16.1 million, or $0.27 per diluted share.
• Increased same property net operating income by 3.6% on an accrual basis and 6.0% on a cash basis compared with the same period in 2015.
• Increased occupied percentage to 93.1% from 89.1% at June 30, 2015.
• Increased leased percentage to 94.4% from 91.0% at June 30, 2015.
• Redeemed an additional 3.6 million our 7.750% Series A Cumulative Redeemable Perpetual Preferred Shares (the "7.750% Series A Preferred Shares") on April 27, 2016 and the remaining 0.6 million outstanding shares on July 6, 2016.
• Completed the sale of Storey Park, a development site located in Washington, D.C, for a contractual sales price of $54.5 million, which generated net proceeds of $52.7 million.

"We had a very strong second quarter from both a financial and operational perspective as we continued to execute on our strategic plan to de-risk, de-lever, and maximize shareholder value," stated Bob Milkovich, Chief Executive Officer of First Potomac Realty Trust. "We signed 293,000 square feet of leases, achieved a tenant retention rate of 90% for the quarter, delivered solid same-property NOI growth of 3.6% and continued to improve our operating metrics. Subsequent to the end of the quarter, we fully redeemed the remaining 7.750% Series A Preferred Shares and closed on the sale of Storey Park, bringing our total dispositions to over $200 million against our stated goal of $350 million. We are pleased with the progress we have made, and we remain focused on optimizing our portfolio and unlocking the value that is inherent in First Potomac."

Second Quarter Results

For the three and six months ended June 30, 2016, net loss attributable to common shareholders was$5.5 million, or $0.10 per diluted share, and $9.6 million, or $0.17 per diluted share, respectively. For the three and six months ended June 30, 2015, net loss attributable to common shareholders was $2.5 million, or $0.04per diluted share, and $5.0 million, or $0.09 per diluted share, respectively. The increase in net loss attributable to common shareholders for the three and six months ended June 30, 2016 compared with the same periods in 2015 was primarily due to the write-off of $3.1 million and $5.0 million, respectively, of original issuance costs associated with the redemption of 3.6 million shares and 5.8 million shares, respectively, of our 7.750% Series A Preferred Shares. The original issuance costs are deducted from net loss attributable to First Potomac Realty Trust to calculate net loss attributable to common shareholders on our consolidated statements of operations.

Core Funds From Operations ("Core FFO") increased for the three months ended June 30, 2016 to$16.1 million, or $0.27 per diluted share, from $15.2 million, or $0.25 per diluted share, for the same period in 2015. Core FFO increased for the six months ended June 30, 2016 to $30.9 million, or $0.51 per diluted share, from $29.7 million, $0.49 per diluted share, for the same period in 2015. These increases were primarily due to increases in Same Property Net Operating Income ("Same Property NOI"), as a result of higher occupancy in our portfolio, as well as decreases in general and administrative expenses and lower accrued dividends on our preferred shares.

The increases in Core FFO for the three and six months ended June 30, 2016, compared with the same periods in 2015, included decreases in net operating income related to property dispositions. In addition, at the beginning of 2016, we ceased capitalizing expenses related to Storey Park when the property was being marketed for sale. The increase in Core FFO for the six months ended June 30, 2016 also included a reduction in interest income due to the repayment of the $29.7 mezzanine loan on America's Square in the first quarter of 2015.

Funds From Operations ("FFO") available to common shareholders decreased to $13.0 million, or $0.22 per diluted share, for the three months ended June 30, 2016, from $15.2 million, or $0.25 per diluted share, for the same period in 2015. The decrease in FFO compared with the increase in Core FFO was primarily due to the write-off of $3.1 million of original issuance costs associated with the redemption of 3.6 million shares of our 7.750% Series A Preferred Shares that were redeemed in the second quarter of 2016.

FFO available to common shareholders decreased to $25.8 million, or $0.43 per diluted share, for the six months ended June 30, 2016, from $30.3 million, or $0.50 per diluted share, for the same period in 2015. FFO for the six months ended June 30, 2016 includes the write-off of $5.0 million of original issuance costs associated with the redemption of 5.8 million shares of our 7.750% Series A Preferred Shares that were redeemed during the first six months of 2016. In addition, FFO for the six months ended June 30, 2015included a $2.4 million yield maintenance payment that we received with the prepayment of the $29.7 million mezzanine loan on America's Square in the first quarter of 2015.

Operating Performance

At June 30, 2016, our consolidated portfolio consisted of 73 buildings totaling 6.5 million square feet. Our consolidated portfolio was 94.4% leased and 93.1% occupied at June 30, 2016 compared with 94.1% leased and 92.3% occupied at March 31, 2016 and 91.0% leased and 89.1% occupied at June 30, 2015. Year-over-year, we achieved a 340 basis-point increase in our leased percentage and a 400 basis-point increase in our occupied percentage across our consolidated portfolio. The increase in occupancy during the second quarter of 2016 compared with the same period in 2015 is primarily a result of tenant move-ins at 440 First Street, NW, Greenbrier Business Park, and Hillside I and II.

During the second quarter of 2016, we executed 293,000 square feet of leases, which consisted of 126,000 square feet of new leases and 167,000 square feet of renewal leases. The 126,000 square feet of new leases included a 45,000 square foot lease at 540 Gaither Road within Redland Corporate Center in Maryland. Currently, 540 Gaither Road is fully occupied by the Department of Health and Human Services, which is vacating the property in March 2017. We anticipate that the new tenant at 540 Gaither Road will take occupancy in early 2018. The 167,000 square feet of renewal leases in the quarter, which included a 107,000 square foot renewal at Crossways Boulevard in Southern Virginia, reflected a tenant retention rate of 90% and we experienced positive net absorption of 21,000 square feet in the second quarter of 2016. Our executed new and renewal leases for the quarter does not include a one-year lease extension with the Bureau of Prisons at 500 First Street, NW, which expires in July 2017, or the 98,000 square feet of combined new and renewal leases at our unconsolidated joint venture properties.

For the six months ended June 30, 2016, we executed 459,000 square feet of leases, including 171,000 square feet of new leases and 288,000 square feet of renewal leases, achieved a tenant retention rate of 81% and had positive net absorption of 14,000 square feet.

Same Property NOI increased 3.6% on an accrual basis for the three months ended June 30, 2016 compared with the same period in 2015. Specifically, Same Property NOI increased 8.4% in Maryland, 6.7% inWashington, D.C. and 6.2% in Southern Virginia for the three months ended June 30, 2016 compared with the same period in 2015. These increases in Same Property NOI were primarily due to increases in occupancy, particularly at the following properties: 440 First Street, NW, which is located in Washington D.C., Hillside I and II, which is located in Maryland, and Greenbrier Business Park, which is located in Southern Virginia. Same Property NOI decreased 7.5% in Northern Virginia, primarily due to an increase in bad debt reserves at several non-core properties.

Same Property NOI increased 5.7% on an accrual basis for the six months ended June 30, 2016 compared with the same period in 2015. More specifically, Same Property NOI increased 9.8% in Maryland, 7.7% in Southern Virginia and 5.5% in Washington, D.C., primarily due to increases in occupancy across the portfolio in these regions. Same Property NOI decreased 0.8% in Northern Virginia for the six months ended June 30, 2016 compared with the same period in 2015 primarily due to an increase in bad debt reserves at several non-core properties in the second quarter of 2016.

A reconciliation of net (loss) income from our consolidated statements of operations to Same Property NOI and a definition and statement of purpose are included below in the financial tables accompanying this press release and under "Non-GAAP Financial Measures," respectively.

A list of our properties, as well as additional information regarding our results of operations, and our definition of "strategic hold," "reposition" and "non-core" as they relate to our portfolio, can be found in our Second Quarter 2016 Supplemental Financial Information Report, which is posted on our website, www.first-potomac.com.

Dispositions

On July 25, 2016, we sold Storey Park, a development site located in the NoMa submarket of Washington, D.C., for net proceeds of $52.7 million. On June 30, 2016, we classified the property as "held-for-sale" on our consolidated balance sheet, and we recorded an impairment charge of $2.8 million for the three months endedJune 30, 2016 based on the anticipated sales price of the property.

Aggregate gross proceeds from dispositions identified as part of our Strategic Plan now total $205.9 millionagainst our stated goal of $350 million. This amount reflects the sales of Storey Park, the combined sale of Enterprise Center, Gateway Centre Manassas, Linden Business Center, Herndon Corporate Center, Prosperity Business Center, Reston Business Campus, Windsor at Battlefield and Van Buren Office Park (collectively, the "NOVA Non-Core Portfolio"), which was sold in the first quarter of 2016, as well as Cedar Hill I and III, and Newington Business Park Center, which were both sold in the fourth quarter of 2015.

950 F Street, NW Mezzanine Loan

On June 2, 2016, the owners of 950 F Street, NW, a ten-story, 287,000 square-foot office/retail building located in Washington, D.C., prepaid a mezzanine loan that had an outstanding balance of $34.0 million. The loan had a fixed interest rate of 9.75%, was scheduled to mature on April 1, 2017 and had been freely prepayable sinceDecember 21, 2015. In addition to the prepayment of the loan's entire principal balance, we received interest through June 24, 2016 and an exit fee upon the loan's prepayment. We recognized $0.2 million of accelerated income in the second quarter of 2016 related to the receipt of the exit fee. We used the proceeds from the prepayment of the mezzanine loan to redeem the remaining 0.6 million outstanding shares of our 7.750% Series A Preferred Shares and to pay down a portion of our unsecured revolving credit facility.

7.750% Series A Preferred Shares Redemption

As previously disclosed, on January 19, 2016 and April 27, 2016, we used proceeds from dispositions to redeem 2.2 million shares and 3.6 million shares, respectively, of our 7.750% Series A Preferred Shares at a redemption price of $25.00 per share, plus accrued dividends up to the applicable date of redemption.

On July 6, 2016, we used a portion of the proceeds from the repayment of the 950 F Street, NW mezzanine loan to redeem the remaining 0.6 million outstanding shares of our 7.750% Series A Preferred Shares at a redemption price of $25.00 per share, plus accrued dividends up to the date of redemption. The 7.750% Series A Preferred Shares (NYSE: FPO-PA) have been delisted from trading on the New York Stock Exchange.

Balance Sheet

We had $782.5 million of gross debt outstanding at June 30, 2016, of which $246.7 million was fixed-rate debt,$300.0 million was hedged variable-rate debt and $235.8 million was unhedged variable-rate debt. The weighted average interest rate of our debt was 3.4% at June 30, 2016. In July 2016, two swap agreements that together fixed LIBOR at a weighted average interest rate of 1.8% on $60.0 million of variable rate debt expired.

In May 2016, we extended the maturity date of our 440 First Street, NW construction loan for one year to May 2017. The interest rate applicable to the loan will remain at LIBOR plus 2.5%.

Dividends

On July 25, 2016, we declared a dividend of $0.10 per common share, equating to an annualized dividend of$0.40 per common share. The dividend will be paid on August 15, 2016 to common shareholders of record as of August 8, 2016.

About First Potomac Realty Trust

First Potomac Realty Trust is a self-administered, self-managed real estate investment trust that focuses on owning, operating, developing and redeveloping office and business park properties in the greater Washington, D.C. region. FPO common shares (NYSE: FPO) are publicly traded on the New York Stock Exchange. As of June 30, 2016, our consolidated portfolio totaled 6.5 million square feet. Based on annualized cash basis rent, our portfolio consists of 64% office properties and 36% business park and industrial properties. A key element of First Potomac's overarching strategy is its dedication to sustainability. Over one million square feet of First Potomac property is LEED Certified and over half of the portfolio's multi-story office square footage is LEED or Energy Star Certified.