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 30 properties, located in 15 states and the District of Columbia, containing approximately 3.6 million rentable square feet, of which approximately 97.1% is leased to the U.S. Government and four state governments. As of September 30, 2009 and 2008, 99.6% of the total rentable square feet of our properties was leased.

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 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.

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 September 30, 2009, are as follows (square feet and 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        1.9 %        1.9 %         1,395        1.8 %        1.8 %
2011                            598       16.6 %       18.5 %        11,160       14.5 %       16.3 %
2012                            729       20.2 %       38.7 %        23,513       30.5 %       46.8 %
2013                            969       26.8 %       65.5 %        15,760       20.4 %       67.2 %
2014                            261        7.1 %       72.6 %         5,468        7.1 %       74.3 %
2015                            457       12.8 %       85.4 %         8,352       10.8 %       85.1 %
2016                            196        5.4 %       90.8 %         4,312        5.6 %       90.7 %
2017                            138        3.8 %       94.6 %         2,101        2.7 %       93.4 %
2018 and thereafter             194        5.4 %      100.0 %         5,096        6.6 %      100.0 %
Total                         3,611      100.0 %              $      77,157      100.0 %
Weighted average
remaining lease term
(in years)                      4.2                                     4.2

(2) Square feet occupied is pursuant to signed leases as of September 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 September 30, 2009, plus estimated expense reimbursements; and excludes lease value amortization.

The U. S. Government was responsible for approximately 90.4% and 90.1% of our rental income as of September 30, 2009 and 2008, respectively.

Investment Activities

During August of 2009, we purchased one industrial property for $18.2 million, excluding closing costs. We funded this transaction with cash on hand and by borrowing under our secured revolving credit facility. At the time of acquisition, this property was 100% leased and yielded approximately 11.1% of the aggregate purchase price, based on estimated annual net operating income, or NOI, which we define as property GAAP rental income less property operating expenses, on the date of closing.

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 29 of our 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 September 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 option, 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 $31.0 million to pay for acquisitions, certain operating expenses, loan origination costs, IPO costs and for working capital purposes. As of September 30, 2009, the aggregate principal amount outstanding under our secured revolving credit facility was $65.4 million and $184.6 million was available to us for future borrowings.

RESULTS OF OPERATIONS



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



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

Rental income                            $      19,656    $  18,438    $   1,218         6.6 %

Expenses:
Real estate taxes                                2,031        2,011           20         1.0 %
Utility expenses                                 1,799        1,787           12         0.7 %
Other operating expenses                         2,889        3,096         (207 )      (6.7 )%
Depreciation and amortization                    3,828        3,552          276         7.8 %
Acquisition costs                                  207            -          207       100.0 %
General and administrative                       1,246          746          500        67.0 %
Total expenses                                  12,000       11,192          808         7.2 %

Operating income                                 7,656        7,246          410         5.7 %

Interest income                                      1            6           (5 )     (83.3 )%
Interest expense (including
amortization of deferred financing
fees of $562 and $ -, respectively)             (1,472 )        (25 )     (1,447 )    5788.0 %
Net income                               $       6,185    $   7,227    $  (1,042 )     (14.4 )%

Weighted average common shares
outstanding                                     21,455            -       21,455           -

Earnings per common share:
Net income                               $        0.29           na           na          na

Rental income. The increase in rental income primarily reflects the effects of a property acquisition in the current quarter as well as 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 expense reimbursements based upon changes in the consumer price index and changes in real estate tax expense.

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 at some of our properties.

Other operating expenses. The decrease in other operating expenses primarily reflects the decrease in repairs and maintenance expense in the three months ended September 30, 2009 as compared to the same period in 2008.

Depreciation and amortization. The increase in depreciation and amortization reflects improvements made to some of our properties during 2008, depreciation related to the current quarter acquisition and the amortization of leasing costs incurred during 2008.

Acquisition costs. The increase in acquisition costs reflects the costs associated with our acquisition during the three months ended September 30, 2009 as compared to no acquisitions during the same period in 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 becoming a public company, separate from HRP, including share grant awards.

Interest income. The decrease in interest income is the result of our having a lower average amount of investable cash during the three months ended September 30, 2009.

Interest expense. The increase in interest expense reflects our borrowing under our secured revolving credit facility. 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 September 30, 2009 decreased as compared to the three months ended September 30, 2008 as a result of the changes noted above.

Nine Months Ended September 30, 2009, Compared to Nine Months Ended
September 30, 2008



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

Rental income                            $     58,304    $    55,957    $   2,347         4.2 %

Expenses:
Real estate taxes                               6,250          5,951          299         5.0 %
Utility expenses                                4,843          4,696          147         3.1 %
Other operating expenses                        8,600          8,768         (168 )      (1.9 )%
Depreciation and amortization                  11,189         10,570          619         5.9 %
Acquisition costs                                 207              -          207       100.0 %
General and administrative                      2,859          2,238          621        27.8 %
Total expenses                                 33,948         32,223        1,725         5.4 %

Operating income                               24,356         23,734          622         2.6 %

Interest income                                    45             31           14        45.2 %
Interest expense (including
amortization of deferred financing
fees of $989 and $ -, respectively)            (3,832 )         (127 )     (3,705 )    (2,917 )%
Net income                               $     20,569    $    23,638    $  (3,069 )     (13.0 )%

Weighted average common shares
outstanding                                    12,852              -       12,852           -

Earnings per common share:
Net income                               $       1.60             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 expense reimbursements based upon changes in the consumer price index and increases in real estate tax expense.

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 at some of our properties.

Other operating expenses. The decrease in other operating expenses primarily reflects the decrease in repairs and maintenance expense in the nine months ended September 30, 2009 as compared to the same period in 2008.

Depreciation and amortization. The increase in depreciation and amortization reflects improvements made to some of our properties during 2008 and depreciation related to the current quarter acquisition.

Acquisition costs. The increase in acquisition costs reflects the costs associated with our acquisition during 2009 as compared to no acquisitions during the period in 2008.

General and administrative. The increase in general and administrative expense primarily reflects the increased costs for legal, accounting and trustees fees, internal audit expenses as a result of our becoming a public company separate from HRP, including share grant awards.

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 nine months ended September 30, 2009 decreased as compared to the nine 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 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. We believe that our operating cash flow will be sufficient to meet our operating expenses, debt service and 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 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 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. In October 2009, we declared a common share distribution of $0.50 per common share, or approximately $10,741,000. This distribution includes a regular quarterly distribution of $0.40 per common share ($1.60 per share per year) with respect to the quarter ended September 30, 2009, plus an additional $0.10 per common share with respect to our first 22 days as a public company during the prior quarter. This dividend will be paid on or about November 25, 2009 to shareholders of record on October 23, 2009.

Cash flows provided by (used for) our operating, investing and financing activities were $27.3 million, ($23.3) million and ($1.8) million, respectively, for the nine month period ended September 30, 2009, and $34.8 million, ($1.7) million and ($32.9) million, respectively, for the nine month period ended September 30, 2008. Changes in our operating and financing cash flows between 2009 and 2008 are primarily related to our properties operations, our net borrowings, our distributions to HRP prior to the Closing Date, our IPO and our use of net proceeds from our IPO. The 2009 change in investing cash flow was primarily the result of our one acquisition. The remainder of the cash flow changes in 2009 and the changes in 2008 were related to building and tenant improvements.

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 maintain a $250 million secured revolving credit facility from a syndicate of financial institutions. At September 30, 2009, there was $65.4 million outstanding and $184.6 million available for borrowings under our secured revolving credit facility, and we had cash and cash equivalents of $2.3 million. 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 that 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 and 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 nine months ended September 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         Nine Months
                                                            Ended               Ended
                                                        September 30,       September 30,
                                                        2009      2008      2009      2008

Tenant improvements                                   $    224    $ 425   $   1,012   $ 768
Leasing costs                                         $      1    $  22   $       1   $ 316
Building improvements (1)                             $    154    $   -   $     310   $  30
Development, redevelopment and other activities (2)   $      -    $   -   $       -   $ 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 September 30, 2009 as follows:

                                                       New      Renewals    Total
Square feet leased during the period                   10,080          -     10,080
Total commitments for tenant improvements and
leasing costs                                        $  1,512          -   $  1,512
Leasing costs per square foot                        $   0.15          -   $   0.15
Average lease term (years)                                6.3          -        6.3
Leasing costs per square foot per year               $   0.02          -   $   0.02

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 September 30, 2009.

Debt Covenants

Our principal debt obligation at September 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 September 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. . . .