The following discussion and tables should be read in conjunction with the financial statements and notes thereto included in this quarterly report and in our Prospectus, which is accessible on the SEC's website at www.sec.gov.

OVERVIEW

We own 29 Properties, located in 14 states and the District of Columbia, containing approximately 3.3 million rentable square feet, of which approximately 95% is leased to the U.S. Government and four state governments.

Property Operations

Leasing market conditions in most U.S. markets are weak. However, the historical experience of our manager, RMR, has been that tenants that are governmental agencies frequently renew leases to avoid the costs and disruptions that may result from relocating their operations. We believe that the expected increase in government regulation resulting from the current economic recession will increase the U.S. Government's demand for leased office space. Similarly, we believe that budgetary pressures may cause an increased demand for leased space, as opposed to government owned space, among government tenants generally. For these and other reasons we believe that occupancy at our government leased office Properties may outperform national market averages. However, there are too many variables for us to reasonably project what the financial impact of market conditions will be on our results for future periods.

As of June 30, 2009, 99.3% of the total rentable square feet of our Properties were leased, compared to 99.5% leased as of June 30, 2008.

Lease renewals and rental rates at which available space in our Properties may be relet in the future will depend, in part, on prevailing market conditions at that time. Lease expirations at our Properties by year, as of June 30, 2009, are as follows (dollars in thousands):

                        Expirations
                        of Occupied                               Rental       Percent
                          Square      Percent    Cumulative       Income          of      Cumulative
Year (1)                  Feet(2)     of Total   % of Total     Expiring(3)     Total     % of Total
2009                              -        0.0 %        0.0 %  $           -        0.0 %        0.0 %
2010                         69,246        2.1 %        2.1 %          1,350        1.8 %        1.8 %
2011                        597,817       18.2 %       20.3 %         11,153       14.9 %       16.7 %
2012                        728,643       22.2 %       42.5 %         23,776       31.7 %       48.4 %
2013                        647,351       19.8 %       62.3 %         13,458       18.0 %       66.4 %
2014                        260,659        7.9 %       70.2 %          5,496        7.3 %       73.7 %
2015                        447,202       13.7 %       83.9 %          8,146       10.9 %       84.6 %
2016                        196,202        6.0 %       89.9 %          4,308        5.7 %       90.3 %
2017                        137,782        4.2 %       94.1 %          2,117        2.8 %       93.1 %
2018 and thereafter         194,484        5.9 %      100.0 %          5,193        6.9 %      100.0 %
Total                     3,279,386      100.0 %               $      74,997      100.0 %
Weighted average
remaining lease term
(in years)                      4.5                                      4.5

(2) Square feet occupied is pursuant to signed leases as of June 30, 2009, and includes (i) space being fitted out for occupancy and (ii) space, if any, which is leased but is not occupied.

(3) Rental income is the annualized rents from our tenants pursuant to signed leases as of June 30, 2009, plus estimated expense reimbursements; and excludes lease value amortization.

The U.S. Government is responsible for approximately 90.2% and 90.1% of our rental income as of June 30, 2009 and 2008, respectively.

Investment Activities

We did not acquire, dispose of, or undertake any material improvements to, any Properties during the three and six month period ended June 30, 2009.

Financing Activities

In April 2009, we entered a $250 million senior secured credit facility with Bank of America, N.A. and a syndicate of other lenders. This facility is secured by our 29 Properties. Amounts outstanding under this facility bear interest at a floating rate based upon LIBOR, subject to a floor, or another specified index plus a spread or margin which will vary depending upon our leverage. This facility matures on April 24, 2012, and we have the right to extend the facility for an additional year to April 24, 2013, upon payment of a fee and satisfaction of certain other conditions required under the agreement.

Our secured revolving credit facility agreement contains a number of covenants which restrict our ability to incur debts in excess of calculated amounts, restrict our ability to make distributions under certain circumstances and generally require us to maintain certain financial ratios. Our secured revolving credit facility provides for acceleration upon the occurrence and continuation of certain events of default, including upon a change of control. We believe we were in compliance with all of our covenants under this secured revolving credit facility agreement as of June 30, 2009.

The full amount of our $250 million secured credit facility was borrowed when this facility was entered in April 2009 and that amount was distributed to HRP; HRP is not obligated to repay these amounts.

In June 2009, we completed our IPO, including the full exercise of the underwriters' over allotment, raising net proceeds of $215.6 million. We used the IPO net proceeds of $215.6 million to repay amounts outstanding under our secured revolving credit facility. We subsequently borrowed approximately $9.5 million to pay certain operating expenses, loan origination and IPO costs and for working capital purposes. As of June 30, 2009, the aggregate principal amount outstanding under our secured revolving credit facility was $43.9 million and $206.1 million was available to us for future borrowings.

RESULTS OF OPERATIONS



Three Months Ended June 30, 2009, Compared to Three Months Ended June 30, 2008



                                                     Three Months Ended June 30,
                                                                           $          %
                                             2009           2008        Change      Change
                                                (in thousands, except per share data)

Rental income                             $    19,405    $    18,862   $     543        2.9 %

Expenses:
Real estate taxes                               2,113          1,982         131        6.6 %
Utility expenses                                1,523          1,398         125        8.9 %
Other operating expenses                        2,912          2,842          70        2.5 %
Depreciation and amortization                   3,797          3,520         277        7.9 %
General and administrative                        873            746         127       17.0 %
Total expenses                                 11,218         10,488         730        7.0 %

Operating income                                8,187          8,374        (187 )     (2.2 )%

Interest income                                    42             12          30      250.0 %
Interest expense (including
amortization of deferred financing fees
of $427 and $ -, respectively)                 (2,360 )          (46 )    (2,314 )   (5,030 )%
Net income                                $     5,869    $     8,340   $  (2,471 )    (29.6 )%

Weighted average common shares
outstanding                                    12,834              -      12,834          -

Earnings per common share:
Net income                                $      0.47             na          na         na

Rental income. The increase in rental income reflects rent increases from new leases and leases renewed during 2008 at our Properties, net of one lease renewed at a rate lower than its historical rate. The increase also includes contractual rent adjustments based upon changes in the consumer price index and increases in real estate taxes.

Real estate taxes. The increase in real estate taxes reflects increases in both assessed values for some of our Properties and increased tax rates.

Utility expenses. The increase in utility expenses reflects utility rate increases.

Other operating expenses. The increase in other operating expenses primarily reflects the increase in repairs and maintenance expense in 2009 as compared to 2008.

Depreciation and amortization. The increase in depreciation and amortization reflects improvements made to some of our Properties during 2008 and the amortization of leasing costs incurred during 2008.

General and administrative. The increase in general and administrative expense primarily reflects the increased costs for legal, accounting, trustees fees and internal audit expenses as a result of our separation from HRP.

Interest income. The increase in interest income is the result of our having a larger amount of investable cash during the 2009 period.

Interest expense. The increase in interest expense reflects our borrowing of $250 million under our secured revolving credit facility from April 24, 2009 until June 8, 2009, and lesser borrowings thereafter. Interest expense for 2009 also includes the amortization of deferred financing fees we incurred in connection with entering our secured revolving credit facility in 2009.

Net income. Our net income for the three months ended June 30, 2009 decreased as compared to the three months ended June 30, 2008 as a result of the changes noted above.

Six Months Ended June 30, 2009, Compared to Six Month Months Ended June 30, 2008



                                                        Six Months Ended June 30,
                                                                              $          %
                                               2009           2008         Change      Change
                                                  (in thousands, except per share data)

Rental income                               $    38,648    $    37,519    $   1,129        3.0 %

Expenses:
Real estate taxes                                 4,219          3,940          279        7.1 %
Utility expenses                                  3,044          2,909          135        4.6 %
Other operating expenses                          5,711          5,672           39        0.6 %
Depreciation and amortization                     7,361          7,018          343        4.9 %
General and administrative                        1,613          1,492          121        8.1 %
Total expenses                                   21,948         21,031          917        4.4 %

Operating income                                 16,700         16,488          212        1.3 %

Interest income                                      44             25           19       76.0 %
Interest expense (including amortization
of deferred financing fees of $427 and
$ -, respectively)                               (2,360 )         (102 )     (2,258 )   (2,213 )%
Net income                                  $    14,384    $    16,411       (2,027 )    (12.4 )%

Weighted average common shares
outstanding                                       8,590              -        8,590          -

Earnings per common share:
Net income                                  $      1.67             na           na         na

Rental income. The increase in rental income reflects rent increases from new leases and leases renewed during 2008 at our Properties, net of a reduction in rental income from the renewal of one lease at a rate lower than the historical rate. The increase also includes contractual rent adjustments based upon changes in the consumer price index and increases in real estate taxes.

Real estate taxes. The increase in real estate taxes reflects increases in both assessed values for some of our Properties and increased tax rates.

Utility expenses. The increase in utility expenses reflects utility rate increases.

Other operating expenses. The increase in other operating expenses primarily reflects the increase in repairs and maintenance expense in 2009 as compared to 2008.

Depreciation and amortization. The increase in depreciation and amortization reflects improvements made to some of our Properties during 2008.

General and administrative. The increase in general and administrative expense primarily reflects the increased costs for legal, accounting and internal audit expenses as a result of our separation from HRP.

Interest income. The increase in interest income is the result of our having a larger amount of investable cash during the 2009 period than in the 2008 period.

Interest expense. The increase in interest expense reflects our borrowing $250 million under our secured revolving credit facility from April 24, 2009 until June 8, 2009, and lesser borrowings thereafter. Interest expense for 2009 also includes the amortization of deferred financing fees we incurred in connection with entering our secured revolving credit facility in 2009.

Net income. Our net income for the six months ended June 30, 2009 decreased as compared to the six months ended June 30, 2008 as a result of the changes noted above.

LIQUIDITY AND CAPITAL RESOURCES

Our Operating Liquidity and Resources.

Rental income from our Properties is our principal source of funds to meet operating expenses and pay planned distributions on our common shares. This flow of funds has historically been sufficient to pay operating expenses, debt service relating to our Properties and distributions to HRP. Now that we are a separate public company, our operating expenses are higher than our operating expenses were when our Properties were owned by HRP. These additional costs are estimated to be approximately $450,000 per year for legal and audit fees and $300,000 per year in other costs. Despite this increase in our expenses, we believe that our operating cash flow will be sufficient to meet our operating expenses, debt service and planned distributions on our common shares.

Our future cash flows from operating activities will depend primarily upon our ability to:

† maintain or increase the occupancy of and the current rent rates at our Properties;

†          control operating cost increases at our Properties; and



†          purchase additional Properties which produce positive cash flows from
operations.

We believe that leasing market conditions in many U.S. markets will continue to be weak for the next two to three years. However, the historical experience of RMR has been that government tenants frequently renew leases to avoid the costs and disruptions that may result from relocating their operations. We believe that the expected increase in government regulation resulting from the current economic recession will increase the U.S. Government's demand for leased office space. Similarly, we believe that budgetary pressures may cause an increased demand for leased space, as opposed to government owned space, among government tenants generally. For these and other reasons we believe that occupancy at our portfolio of government leased Properties may outperform national market averages. However, there are too many variables for us to reasonably project what the impact of market conditions will be on our results for future periods.

We generally do not intend to purchase "turn around" properties or properties which do not generate positive cash flows. Our future purchases of properties which generate positive cash flow cannot be accurately projected, because such purchases depend upon available opportunities which come to our attention.

We intend to pay regular quarterly distributions to holders of our common shares. Our expected initial quarterly distribution is $0.40 per common share. On an annualized basis, we expect to distribute $1.60 per common share. We intend to maintain this distribution rate until at least the second quarter of 2010. However, the timing and amount of our distributions will be at the discretion of our board of trustees and will depend on various factors that our board of trustees deems relevant, including our results of operations, our financial condition, our capital requirements, our funds from operations, our cash available for distribution, restrictive covenants in our financial or other contractual arrangements, economic conditions and restrictions under Maryland law. The quarterly distribution that we expect to pay for the period beginning on the Closing Date through June 30, 2009 will be prorated for the number of days in such period, and we intend to declare a third quarter distribution that will include this pro rata second quarter distribution amount.

Cash flows provided by (used for) our Properties for operating, investing and financing activities were $20.4 million, ($1.2) million and ($18.9) million, respectively, for the six month period ended June 30, 2009, and $24.4 million, ($1.1) million and ($23) million, respectively, for the six month period ended June 30, 2008. Changes in all three categories between 2009 and 2008 are primarily related to Property operations, net borrowings, distributions to HRP prior to the Closing Date, our IPO and our use of net proceeds from our IPO.

Our Investment and Financing Liquidity and Resources.

In order to fund acquisitions and to accommodate cash needs that may result from timing differences between our receipt of rents and our desire or need to make distributions or pay operating or capital expenses, we have obtained a $250 million secured revolving credit facility from a syndicate of financial institutions. At June 30, 2009, there was $43.9 million outstanding and $206.1 million available for borrowings by us under our secured revolving credit facility, and we had cash and cash equivalents of $451,000. We expect to use cash balances, borrowings under our secured revolving credit facility and net proceeds from offerings of equity or debt securities to fund our future operations, distributions to our shareholders and any future property acquisitions.

When significant amounts are outstanding under our secured revolving credit facility or the maturity date of our secured revolving credit facility approaches, we intend to explore alternatives for repaying or refinancing such amounts. Such alternatives may include incurring term debt, issuing new equity securities and extending the maturity date of our secured revolving credit facility. Although there has been a significant recent reduction in the amount of capital available for real estate business on a global basis and we can provide no assurance that we will be successful in consummating any particular type of financing, we believe that we will have access to financing, such as debt and equity offerings, to fund any future acquisitions, capital expenditures and to pay our obligations.

The completion and the costs of our future financings will depend primarily upon market conditions. In particular, the feasibility and cost of any future debt financings will depend primarily on credit markets and our then current creditworthiness. We have no control over market conditions. Potential lenders in future debt transactions will evaluate our ability to fund required debt service and repay balances when they become due by reviewing our business practices and plans and our ability to maintain our earnings, to ladder our debt maturities and to balance our use of debt and equity capital so that our financial performance and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes. We intend to conduct our business activities in a manner which will afford us reasonable access to capital for investment and financing activities.

During the three and six months ended June 30, 2009 and 2008, cash expenditures made and capitalized at our Properties for tenant improvements, leasing costs,

building improvements and development and redevelopment activities were as follows (amounts in thousands):

                                                        Three Months       Six Months
                                                           Ended             Ended
                                                          June 30,          June 30,
                                                        2009     2008     2009    2008

Tenant improvements                                   $    233   $ 173   $  788   $ 343
Leasing costs                                         $      -   $ 163   $    -   $ 294
Building improvements (1)                             $    133   $  24   $  156   $  30
Development, redevelopment and other activities (2)   $      -   $  16   $    -   $ 623

(2) Development, redevelopment and other activities generally include non-recurring expenditures that we believe increase the value of our existing properties.

We have committed to fund expenditures in connection with leasing space during the three months ended June 30, 2009 as follows:

                                                       New       Renewals     Total
Square feet leased during the period                        -        3,988      3,988
Total commitments for tenant improvements and
leasing costs                                               -   $    7,750   $  7,750
Leasing costs per square foot                               -   $     1.94   $   1.94
Average lease term (years)                                  -          3.7        3.7
Leasing costs per square foot per year                      -   $     0.53   $   0.53

A $134,000 mortgage secured by one of our Properties was repaid by HRP in January 2009.

We have no commercial paper, swaps, hedges, joint ventures or off balance sheet arrangements as of June 30, 2009.

Debt Covenants

Our principal debt obligation at June 30, 2009, is our secured revolving credit facility. Our secured revolving credit facility agreement contains a number of covenants which restrict our ability to incur debts in excess of calculated amounts, restrict our ability to make distributions under certain circumstances and generally require us to maintain certain financial ratios. Our secured revolving credit facility provides for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default or upon a change of control. We believe we were in compliance with all of our covenants under our secured revolving credit facility agreement at June 30, 2009.

Related Person Transactions

Until the Closing Date, we were 100% owned by HRP and HRP allocated general and administrative expense, presented under the "Results of Operations" above, to our Properties based on the historical cost of our Properties as a percentage of HRP's historical cost of its real estate investments. RMR is beneficially owned by Barry

M. Portnoy, one of our and HRP's Managing Trustees, and Adam D. Portnoy, our President and the other Managing Trustee of us and of HRP. We do not have any employees nor do we have administrative office separate from RMR. Employees of RMR provide services for us that might otherwise be provided by our employees. Similarly, RMR provides office space to us and each of our executive officers is an executive officer of RMR.

For more information about our related party transactions, including our management contracts with RMR and the risks which may arise from these related party transactions, please see Footnote 6 "Transactions with Affiliates" to our Condensed Consolidated Financial Statements in this report and our Prospectus, particularly "Risk Factors" and "Certain Relationships and Related Person Transactions", which is accessible on the SEC's website at www.sec.gov.