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Based upon data provided by tenants who report sales, overall retail sales, including anchor and shop space, totaled $290 per square foot in 2004. On a same store basis, sales increased 3.3% compared to 2003, with average annual increases of 0.7% over the past three years. Based upon current reports for just the 25 grocery stores in our portfolio, sales are averaging $460 per square foot. On a same store basis, grocery sales decreased a modest 0.9% over the prior year but have increased at a compounded average annual rate of 1.8% over the past 5 years. 

Leasing activity within the retail portfolio continues to be strong. Of the approximately 500,000 square feet of retail space scheduled to expire during 2005, over 50% of the leases have already been renewed or extended as of March 23, 2005. 

We maintain that tenant diversity is critical to the stability of our retail portfolio cash flow. Only four retail tenants in 2004 paid annual rent in excess of 1.5% of total revenues. Giant Food and Safeway contributed 4.8% and 2.9% of total revenues, respectively. Lowe’s Home Improvement and Home Depot, each with two locations, contributed 2.0% and 1.6% of revenues, respectively. 

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## Office Highlights 

The office portfolio is comprised of five properties, totaling approximately 1,200,000 square feet, and contributed 29% of our 2004 property operating income. The 225,000 square foot 601 Pennsylvania Avenue office building, located between the White House and the U.S. Capitol, is the Company’s largest asset, as measured by property operating income. This building is 100% leased with long term leases, and none of these leases are due to expire prior to 2008. During 2003 and 2004, we successfully re- leased over 140,000 square feet of office space in the building by replacing an expiring government lease with tenants such as the American Association of Health Plans, the Pharmaceutical Care Association and the National Gallery of Art. The re-leasing of 601 Pennsylvania Avenue contributed substantially to the office portfolio’s 11.2% same property operating income increase in 2004. Excluding the impact of 601 Pennsylvania Avenue, the office portfolio’s 2004 same property operating income growth was 3.2%. 

Only two office tenants, the United States Government at 3.5%, and the American Association of Health Plans at 2.2%, contributed more than 1.5% of 2004 total revenues. Our office buildings were 95.9% leased at year end 2004. Over 90% of the office lease base rents have fixed annual escalations averaging over 2.5% per year. Only 52,000 square feet of leases are scheduled to expire during the balance of 2005. 

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