GOVERNMENT PROPERTIES INCOME TRUST (NASDAQ:GOV) Files An 8-K Entry into a Material Definitive Agreement

and other distributions are necessary for each of FPO and its
REIT subsidiary to maintain its status as a REIT. to the Merger
Agreement, FPO has agreed, upon written request by us, to
cooperate and work in good faith (i)to effect the Transaction
by means of a tender offer for all of the outstanding FPO
Common Shares for the REIT Per Share Merger Consideration,
and/or (ii)in certain circumstances, to restructure the REIT
Merger as a reverse merger subject to certain requirements,
including that such restructurings do not delay the closing of
the Transaction. We have not made a decision on whether to
commence, and have not commenced, a tender offer for FPO Common
Shares to the Merger Agreement or otherwise.

We expect to finance this transaction on a long term basis with
the sale of our common shares of beneficial interest, par value
$.01 per share, or our common shares, including the Equity
Offering (as defined and described below), with additional
debt, including senior unsecured notes, mortgage financing
and/or bank debt, and/or with the proceeds of the sales of
certain properties. Pending the completion of our long term
financing plan, we may use borrowings under our existing
revolving credit facility and under the Bridge Loan Facility
(as defined and described below) to finance the Transaction.
The closing of the Transaction is not subject to a financing
condition and the parties to the Merger Agreement have the
right to specific performance to enforce the terms thereof,
including the obligation of us to consummate the Transaction in
accordance with the terms and conditions of the Merger
Agreement.

The Merger Agreement contains certain customary
representations, warranties and covenants, including, among
others, covenants with respect to the conduct of FPOs business
prior to closing, subject to certain consent rights by us, and
covenants prohibiting FPO from soliciting, providing
information or entering into discussions concerning proposals
relating to an alternative acquisition transaction (for 20% or
more of the equity or assets of FPO), subject to certain
limited exceptions.

The Merger Agreement contains certain termination rights for
both us and FPO. Under specified circumstances, FPO is entitled
to terminate the Merger Agreement to accept a superior proposal
(for 67% or more of the equity or assets of FPO, which proposal
the FPO board of trustees determines in its good faith
judgment, if consummated, would be more favorable to the
shareholders of FPO from a financial point of view, and if
accepted, is reasonably likely to be completed on the terms
proposed on a timely basis). Upon such a termination by FPO, or
under certain other specified circumstances, FPO will be
required to pay us a termination fee of $25 million. If the
Merger Agreement is terminated by us for a material breach of
the Merger Agreement by FPO or terminated by either party as a
result of the failure to obtain the approval of the Transaction
by the holders of at least a majority of the outstanding FPO
Common Shares, FPO will be required to reimburse us up to $5
million for expenses incurred by us in connection with the
Merger Agreement (although if the termination fee later becomes
payable, amounts reimbursed to us by FPO will be credited
against the termination fee payable).

The foregoing description of the Merger Agreement is not
complete and is subject to and qualified in its entirety by
reference to the copy of the Merger Agreement attached as
Exhibit2.1 hereto, which is incorporated herein by reference.
Certain of the representations and warranties contained in the
Merger Agreement were made as of a specified date, may be
subject to a contractual standard of materiality different from
what might be viewed as material to FPOs or our shareholders or
may have been used for the purpose of allocating risk between
the parties to the Merger Agreement. Accordingly, the
representations and warranties contained in the Merger
Agreement are not necessarily characterizations of the actual
state of facts with respect to us or our subsidiaries or FPO or
its subsidiaries, including FPO LP, at the time they were made
or otherwise, and investors should not rely on them as
statements of fact.

Commitment Letter

Concurrently with the execution of the Merger Agreement, we
entered into a commitment letter, or the Commitment Letter,
with Citigroup Global Markets Inc., or Citigroup, to which, on
the terms and subject to the conditions set forth therein,
Citigroup (or certain of its affiliates) and Bank of America,
N.A., Morgan Stanley Bank, N.A. and UBS AG, Stamford Branch
have committed to provide us a 364-day senior unsecured bridge
loan facility in an aggregate principal amount of up to $750.0
million, or the

Bridge Loan Facility. We will be required to pay interest at a
rate of LIBOR plus a premium of 1.40% per annum, subject to
adjustment based upon changes to our credit ratings, on
borrowings under the Bridge Loan Facility. Pending the
completion of our long term financing plan, we may use
borrowings under the Bridge Loan Facility to finance the
Transaction. The commitment to provide the Bridge Loan Facility
is subject to consummation of the Transaction and certain other
customary conditions as set forth in the Commitment Letter. The
funding of the Bridge Loan Facility is not a condition to our
obligations under the Merger Agreement. We will pay certain
customary fees and expenses to Citigroup and the other parties
to the Commitment Letter in connection with obtaining the
Bridge Loan Facility. The foregoing description of the
Commitment Letter is not complete and is subject to and
qualified in its entirety by reference to the copy of the
Commitment Letter attached as Exhibit10.1 hereto, which is
incorporated herein by reference.

Citigroup and the other parties to the Commitment Letter, as
well as their affiliates, have engaged in, and may in the
future engage in, investment banking, commercial banking,
advisory and other dealings in the ordinary course of business
with us. They have received, and may in the future receive,
customary fees and commissions for these engagements. In
addition, Citigroup is acting as our exclusive financial
advisor for the Transaction, and Citigroup and affiliates of
other parties to the Commitment Letter are acting as
underwriters for the Equity Offering and will receive customary
fees and commissions in connection therewith.

Item 7.01. Regulation FD Disclosure.

On June28, 2017, we issued a press release announcing the
Transaction, and we also released an investor presentation
containing additional detail on the Transaction. Copies of that
press release and presentation are furnished as Exhibits 99.1
and 99.3, respectively, to this Current Report on Form8-K.

Also on June28, 2017, we issued a press release announcing the
launch of an underwritten public offering, or the Equity
Offering, for 25,000,000 of our common shares. It is
contemplated that the underwriters will also be granted a
30-day option to purchase up to an additional 3,750,000 of our
common shares from us, at the public offering price, less the
underwriting discount. A copy of that press release is
furnished as Exhibit99.2 to this Current Report on Form8-K.

The Equity Offering will be made to our effective shelf
registration statement filed with the Securities and Exchange
Commission, or SEC. The Equity Offering will be made only by
means of a prospectus and a related preliminary prospectus
supplement. This Current Report on Form8-K shall not constitute
an offer to sell or a solicitation of an offer to buy, nor
shall there be any sale of any securities in any state or
jurisdiction in which such an offer, solicitation or sale would
be unlawful prior to registration or qualification under the
securities laws of any such state or jurisdiction.

Item 8.01. Other Events.

Material United States Federal Income Tax Consequences of
the Transaction

The following summary supplements and updates the more detailed
description of the material United States federal income tax
considerations contained in Item 1 of our Annual Report on
Form10-K for the year ended December31, 2016, or our Annual
Report, captioned Material United States Federal Income Tax
Considerations, which summary is incorporated herein by
reference. Subject to the qualifications and assumptions
contained in its opinion, Sullivan Worcester LLP, Boston,
Massachusetts, has rendered a legal opinion that the discussion
in our Annual Report captioned Material United States Federal
Income Tax Considerations, as supplemented by this section, is
accurate in all material respects and fairly summarizes the
U.S. federal income tax considerations discussed therein and in
this section, and the opinions of counsel referred to therein
and in this section represent Sullivan Worcester LLPs opinions
on those subjects.

General U.S. Federal Income Tax Consequences of the
Transaction

As discussed above, we intend to complete the Transaction,
which will include a cash payment by us to the holders of the
FPO Common Shares. As a result of the Transaction, we will be
treated for federal income tax purposes as acquiring the assets
of FPO for the cash we pay plus the assumption of FPOs
liabilities, after which FPO will be treated as liquidating and
distributing the cash to its shareholders. FPO will recognize
gain or loss on the disposition of its assets based on the sum
of the cash paid by us and the value of the liabilities assumed
by us, but this gain or loss plus FPOs operating income is
expected to be offset fully by the dividends paid deduction
available to liquidating REITs in their final taxable year. Our
holding period in the assets we acquire from FPO will begin on
the day following the completion of the Transaction and our
initial tax basis in the assets of FPO will be equal to the sum
of the cash we pay to the holders of FPO Common Shares in
conjunction with the Transaction, the value of FPOs liabilities
that we assume, and the acquisition costs that we capitalize
for income tax purposes.

The assets that we acquire in the Transaction are generally
expected to (a)qualify as real estate assets that satisfy the
REIT asset tests that are described in the section of our
Annual Report captioned Material United States Federal Income
Tax ConsiderationsREIT Qualification RequirementsAsset Tests,
and (b)generate gross income that satisfies the REIT gross
income tests that are described in the section of our Annual
Report captioned Material United States Federal Income Tax
ConsiderationsREIT Qualification RequirementsIncome Tests. As a
result, we believe that our acquisition of FPOs assets will not
materially impact our qualification for taxation as a REIT.

If the Transaction is not completed, then under specified
circumstances we may be entitled to receive a termination fee
from FPO over time. The timing for the payment of the
termination fee has been structured so that we can manage
successfully the REIT gross income tests that we must satisfy.
In addition, if we become entitled to termination fee payments
then we may seek a U.S. Internal Revenue Service, or IRS,
private letter ruling or opinion of counsel that enables us to
receive the termination fee on an accelerated basis while still
complying with the REIT gross income tests. In sum, we believe
that our receipt of termination fee payments would not
materially impact our qualification for taxation as a REIT.

Tax Liabilities and Attributes Inherited from FPO

As a condition of the closing of the Transaction, FPOs counsel
will provide us with an opinion that FPO has been organized and
has operated in conformity with the requirements for
qualification and taxation as a REIT under the U.S. Internal
Revenue Code of 1986, as amended, or the IRC. If, contrary to
that opinion and our expectation, FPO has failed or fails to
qualify for taxation as a REIT for U.S. federal income tax
purposes, then we may inherit significant tax liabilities in
the Transaction because, as the successor by merger to FPO, we
would generally inherit any corporate income tax liabilities of
FPO, including penalties and interest.

It is unclear whether the IRC provisions that are generally
available to remediate REIT compliance failures will be
available to us as a successor in respect of any determination
that FPO failed to qualify for taxation as a REIT. If and to
the extent the remedial provisions are available to us to
address FPOs REIT qualification and taxation for the applicable
period prior to or including the Transaction, we may incur
significant cash outlays in connection with the remediation,
possibly including (a)required distribution payments to
shareholders and associated interest payments to the IRS and
(b)tax and interest payments to the IRS and state and local tax
authorities.

FPOs failure before the Transaction to qualify for taxation as
a REIT and our efforts to remedy any such failure could have an
adverse effect on our results of operations and financial
condition.

Risk Factors

Our business faces many risks, a number of which are described
under the caption Risk Factors in our Annual Report, the Equity
Offering may subject us to certain risk associated with the
offering of our common shares and the Transaction may subject
us to certain risks that are described below. The risks so
described may not be the only risks we face. Additional risks
of which we are not yet aware, or that we currently believe are
immaterial, may also materially and adversely impact our
business operations or financial results. If any of the events
or circumstances described in the risk factors contained in our
Annual Report or described below occurs, our business,
financial condition or results of operations could be adversely
impacted and the trading price of our securities could decline.
Investors and prospective investors should consider the risks
described in our Annual Report and below and the information
contained under the heading Warning Concerning Forward Looking
Statements below, in our Annual Report and in our Quarterly
Report on Form10-Q for the quarter ended March31, 2017 before
deciding whether to invest in our securities.

Risks Related to the Transaction

The Transaction is subject to a number of customary
conditions that if not satisfied or waived could delay or
prevent the Transactions consummation.

The completion of the Transaction is subject to a number of
customary conditions, including, among others, the approval of
the Transaction by the holders of at least a majority of the
FPO Common Shares and the absence of a material adverse effect
with respect to FPO. These conditions make the timing of the
completion of the Transaction, and completion of the
Transaction itself, uncertain. Also, either we or FPO may
terminate the Merger Agreement if the Transaction is not
completed by December31, 2017, except that this right to
terminate the Merger Agreement will not be available to a party
if that party failed to fulfill its obligations under the
Merger Agreement and that failure was the cause of, or resulted
in, the failure of the Transaction to be completed on or before
such date.

If the Transaction is not completed in the timeframe that we
currently expect, or at all, we may be adversely affected by a
number of risks, including the following:

we will be required to pay our costs relating to the
Transaction, such as legal, accounting and financial advisory
fees, whether or not the Transaction is completed;

the time and attention committed by our management to matters
relating to the Transaction could otherwise have been devoted
to pursuing other opportunities;

our shareholders could suffer substantial dilution if we issue
common shares in anticipation of funding a portion of the
Transactions purchase price and the Transactions consummation
is delayed or ultimately not completed, with the result that we
will not have the opportunity to capture the expected benefits
from the Transaction within the anticipated timeframe, or at
all, and be required to find an alternative use for the net
proceeds of any such equity issuance which could take a
substantial amount of time; and

the market price of our common shares could decline to the
extent that the then current market price is positively
affected by a market assumption that the Transaction will be
completed.

The actual cap rate achieved in connection with the
Transaction may be lower than our current preliminary
estimate.

We believe our estimated cap rate for the Transaction is
approximately 7.0%, based on our preliminary estimate of 2018
net operating income attributable to the FPO properties. For
these purposes, we define cap rate as the GAAP earnings from
the acquired properties (for both consolidated properties and a
pro rata share of unconsolidated joint venture properties)
before depreciation, amortization, interest and an allocable

share of corporate office general and administrative expense,
divided by the aggregate transaction value (including a pro
rata share of non-recourse unconsolidated joint venture
indebtedness and adjusted for other tangible properties and
liabilities, but excluding transaction costs). Our calculation
of our preliminary estimated acquisition cap rate for the
Transaction relies upon our preliminary estimate of the 2018
net operating income attributable to the FPO properties, which
is inherently uncertain and based upon our current assumptions
regarding the 2018 operations of the FPO properties and
information available in FPOs public filings and additional
information made available to us by FPO during the process
leading to signing of the Merger Agreement. We have not
completed our own detailed accounting analysis of FPOs property
level earnings, which could result in revisions that lower our
preliminary estimate of 2018 net operating income attributable
to the FPO properties. The 2018 net operating income
attributable to the FPO properties could be materially lower
than our current preliminary estimate due to numerous factors,
including, without limitation, unexpected increases in property
level operating expenses or decreases in property level
revenue, decreases in occupancy, failure to achieve expected
cost savings, tenant defaults, financing arrangements and
potential dispositions of certain assets. Additionally,
property level earnings from FPOs properties may decrease
before or after the Transaction closes. Moreover, alternative
methods of calculating cap rates, such as methods that utilize
cash based accounts, would result in a different cap rate.
Accordingly, the acquisition cap rate ultimately realized by us
on the Transaction may be lower than the cap rate that we
currently estimate.

While we expect that the Transaction will be
accretive to our normalized funds from operations per share
after 2018 and approximately leverage neutral on a debt to
gross assets basis after completion of our long term financing
plan, there can be no assurance that this will be the case;
additionally, it is expected that the Transaction will be
dilutive to our normalized funds from operations per share for
the years ending December31, 2017 and 2018, though the amount
of any such dilution cannot be determined at this
time.

While we currently believe that the Transaction will be
accretive to our normalized funds from operations per share
after 2018 and approximately leverage neutral on a debt to
gross assets basis after completion of our long term financing
plan, there can be no assurance that this will be the case;
additionally, while we currently believe that the Transaction
will be dilutive to our normalized funds from operations per
share for the years ending December31, 2017 and 2018, the
actual amount of any such dilution cannot be determined at this
time and will be based on numerous factors. Normalized funds
from operations is a non-GAAP financial measure that has been
historically reported by us in our periodic filings with the
SEC and is calculated by adjusting funds from operations (which
is also a non-GAAP financial measure), as defined by the
National Association of Real Estate Investment Trusts, as
described in such filings. The accretion to normalized funds
from operations per share that we currently expect to realize
after 2018 and our expectation that the Transaction will be
approximately leverage neutral on a debt to gross assets basis
after completion of our long term financing plan depend upon
many factors, such as the types and costs of long term
financing that we ultimately use to fund the Transaction, the
rents that we will receive from our existing properties and
from the properties now owned by FPO, occupancy, and other
factors. Similarly, any dilution to normalized funds from
operations per share for the years ending December31, 2017 and
2018 depends upon many factors, such as the timing of any
equity issuances and the closing of the Transaction, and other
factors. Most of these factors will be materially impacted by
market conditions beyond our control. Accordingly we can
provide no assurance that the Transaction will be accretive to
our normalized funds from operations per share after 2018, and,
in fact, we may experience dilution to our normalized funds
from operations per share as a result of the Transaction.

Our current expectation that the Transaction will be
approximately leverage neutral on a debt to gross assets basis
after completion of our long term financing plan and dilutive
for the years ending December31, 2017 and 2018 is based upon
our current beliefs regarding the types and costs of our long
term financing for the Transaction. The types and costs of the
long term financing which we use for the Transaction will
depend in large part on market conditions which are beyond our
control. To the extent our estimates regarding our future
normalized funds from operations or the underlying assumptions
are inaccurate, the Transaction may not be accretive to our
normalized funds from operations per share after 2018 or
approximately leverage neutral and the dilutive effect to our
normalized funds from operations per share for the years ending
December31, 2017 and 2018 may be greater than currently
expected.

No assurance can be given that we will be
successful in achieving the currently expected general and
administrative expense cost savings in managing the FPO
properties as compared to FPO on a stand alone
basis.

We currently expect to realize approximately $11.0 million of
annual general and administrative expense saving compared to
FPO on a stand alone basis. Our management agreement with The
RMR Group LLC, or RMR LLC, sets the fees that we pay in lieu of
certain general and administrative expenses to a complex
formula based upon the lower of our market capitalization or
the historical cost of certain of our assets. Also, we may pay
incentive fees to RMR LLC in certain circumstances based upon
total returns realized by our shareholders compared to an index
of total returns of certain other REITs. Some of these
calculations will depend upon future market prices of our
securities and other REITs securities which are beyond our
control. Accordingly, the amount of annual general and
administrative expense savings which we may realize, if any,

cannot be precisely calculated; and, in fact we may realize
more or less savings or no savings and our annual general and
administrative expenses incurred as a result of the Transaction
may be higher than FPO incurred or would incur on a stand alone
basis.

The unaudited pro forma condensed consolidated
financial statements relating to the Transaction and the other
transactions referred to therein are presented for illustrative
purposes only and are not necessarily indicative of what our
financial position or results of operations would have been if
the Transaction and such other transactions had actually been
completed on the dates indicated and are not intended to
project such information for any future date or for any future
period.

The unaudited pro forma condensed consolidated financial
statements relating to the Transaction and the other
transactions referred to therein are based on numerous
assumptions, and the adjustments described therein are based on
available information that our management considers reasonable.
In addition, other than as specified therein, such unaudited
pro forma condensed consolidated financial statements do not
reflect adjustments for other developments with our business or
FPOs business after March31, 2017. As a result, the unaudited
pro forma condensed consolidated financial statements do not
purport to represent what our financial condition actually
would have been had the relevant transactions occurred on
March31, 2017 or represent what the results of our operations
actually would have been had the relevant transactions occurred
on January1, 2016 or project our financial position or results
of operations as of any future date or for any future period.
The unaudited pro forma condensed consolidated financial
statements are not necessarily indicative of our expected
financial position or results of operations for any future
period. Differences could result from numerous factors,
including future changes in our portfolio of investments,
capital structure, property level operating expenses and
revenues, including rents expected to be received on our
existing leases or leases we may enter into during and after
2017, changes in interest rates and other reasons. Actual
future results are likely to be different from amounts
presented in the unaudited pro forma condensed consolidated
financial statements and such differences could be significant.

The transition of business and property management
functions for the FPO properties to RMR LLC may create
unexpected costs, and any delay in the transition may reduce
the benefits expected to be received by us in the
Transaction.

The Transaction involves the combination of two publicly traded
companies that currently operate independently. We and RMR LLC
will be required to devote significant management time and
attention to integrating our properties and operations with
those of FPO. Unexpected difficulties or delays may arise
during this integration process, including, for example,
difficulties or delays in transitioning the management or
financial and tax reporting functions with respect to all, or
some portion of, the FPO properties. While we have assumed
transition and integration expense will be incurred, unexpected
transition and integration difficulties may create additional
expenses and reduce or delay the benefits expected to be
received by us from the Transaction.

Additionally, the Transaction and the integration of the FPO
properties into our existing business may result in material
unanticipated problems, expenses and liabilities as a result of
a number of factors. For example, the FPO properties may be
subject to tax reassessment, which may result in higher than
expected tax payments. Similarly, we may have underestimated
the costs we expect to incur in connection with leasing,
operating and improving the FPO properties. Many of these risks
will be outside of our control and any one of them could result
in increases in costs, decreases in the amount of expected
revenue and diversion of our managements time and attention.

We may be subject to unknown or contingent
liabilities related to the FPO properties for which we may have
no recourse against FPO.

The FPO properties may be subject to unknown or contingent
liabilities for which we may have no recourse against FPO. In
addition, the total amount of costs and expenses that we may
incur with respect to liabilities associated with the FPO
properties may exceed our expectations.

Our future results of operations may be adversely
affected if we are unable to effectively manage our expanded
portfolio and operations following the
Transaction.

Following the Transaction, we will have an expanded portfolio
and operations, and we may continue to expand our operations
through additional acquisitions and other strategic
transactions. Our future success will depend, in part, upon our
ability to manage our expansion opportunities, integrate new
operations into our existing business in an efficient and
timely manner, successfully monitor our operations and costs,
and maintain necessary internal controls. We cannot be sure
that we will be able to maintain or improve current rents and
occupancy at the properties we acquire, that renovation,
expansion or acquisition opportunities will be successful, or
that we will realize any expected revenue enhancements or other
benefits from such transactions.

If our committed debt financing is not available we
may be required to obtain alternative financing for the
Transaction on terms which are materially less favorable to
us.

Pending the long term financing of the Transaction, we intend
to finance a portion of the purchase price and Transaction fees
and expenses with borrowings under our existing $750.0 million
revolving credit facility and under the Bridge Loan Facility.
The obligations of lenders under our revolving credit facility
and the Bridge Loan Facility to fund borrowings are subject to
certain conditions, which may or may not be satisfied as of the
completion of the Transaction. The availability of these funds
to us is not a condition precedent to our obligation to
complete the Transaction. In the event any of these funds are
not available or are available in less than the full amount
anticipated, we will be required to seek alternative financing,
which may not be available on as favorable terms, in a timely
manner or at all.

If we are unable to implement our long term
financing plan for the Transaction on currently expected terms,
our anticipated costs of financing the Transaction could
materially increase.

We expect to finance the Transaction on a long term basis with
the net proceeds from the sale of common shares, additional
debt, including senior unsecured notes, mortgage financings
and/or bank debt, and/or the sale of certain properties. If we
are unable to finance the Transaction as currently expected and
to repay the amounts outstanding under the Bridge Loan Facility
prior to its expiration, our available cash flow to fund
working capital, capital expenditures, acquisitions and other
business activities may be reduced. In such event, the
alternative financing may be more expensive and the expected
benefits of the Transaction could be reduced or eliminated.

In connection with the Transaction, we will incur
significant additional indebtedness, which will increase the
related risks we now face.

In connection with the Transaction, we will incur significant
additional indebtedness and expect to acquire certain
properties of FPO subject to mortgage indebtedness. As a
result, we will be subject to increased risks associated with
debt financing, including an increased risk that our cash flow
could be insufficient to meet required payments on our debt.

As of March31, 2017, we had indebtedness of approximately $1.4
billion. Taking into account our existing indebtedness, the
incurrence of additional indebtedness in connection with the
Transaction and the assumption of certain existing FPO debt in
connection with the Transaction, our pro forma consolidated
indebtedness as of March31, 2017 would have been approximately
$2.2 billion. Our increased indebtedness could adversely affect
us for numerous reasons, including by:

increasing our vulnerability to general adverse economic and
business conditions;

limiting our ability to obtain additional financing to fund
future acquisitions, working capital, capital expenditures and
other general business requirements;

requiring the use of a substantial portion of our cash flow
from operations for the payment of principal and interest on
our indebtedness, thereby reducing our ability to use our cash
flow to fund working capital, acquisitions, capital
expenditures and general operating requirements; and

limiting our flexibility in planning for, or reacting to,
changes in our business.

If we default under a loan, including defaults resulting from
violations of covenants contained in our revolving credit
facility, Bridge Loan Facility and our term loans, we may also
default under other debt instruments that have cross-default
provisions, and the maturity of outstanding indebtedness may be
accelerated and future borrowings under our revolving credit
facility will be prohibited.

Our variable rate indebtedness (including amounts outstanding
under our revolving credit facility and the Bridge Loan
Facility) subjects us to interest rate risk. When interest
rates increase, so will our interest costs, which could
adversely affect our cash flow, our ability to pay principal
and interest on our debt and our cost of refinancing our debt
when it becomes due. Additionally, if we choose to hedge our
interest rate risk, we cannot be sure that the hedge will be
effective or that any hedging counterparty will meet its
obligations to us.

The Bridge Loan Facility has a 364-day term and the principal
balance of such loan will not be reduced during the term of the
loan, except in the case of voluntary or mandatory prepayments.
At maturity we will be required to make a lump sum payment of
the principal (less any amount of prepayments). Our ability to
make this lump sum payment is uncertain and may depend upon our
ability to obtain additional financing.

The pendency of the Transaction could adversely
affect our and FPOs business and operations.

In connection with the pending Transaction, some tenants or
vendors may delay or defer decisions related to their business
dealings with us or FPO, which could negatively impact our and
FPOs revenues, earnings, cash flows or expenses, regardless of
whether the Transaction is completed.

We may incur adverse tax consequences if FPO has
failed or fails to qualify for taxation as a REIT for U.S.
federal income tax purposes.

As a condition of the closing of the Transaction, FPOs counsel
will provide us with an opinion that FPO has been organized and
has operated in conformity with the requirements for
qualification and taxation as a REIT under the IRC. If,
contrary to that opinion and our expectation, FPO has failed or
fails to qualify for taxation as a REIT for U.S. federal income
tax purposes, then we may inherit significant tax liabilities
in the Transaction because, as the successor by merger to FPO,
we would generally inherit any corporate income tax liabilities
of FPO, including penalties and interest.

It is unclear whether the IRC provisions that are generally
available to remediate REIT compliance failures will be
available to us as a successor in respect of any determination
that FPO failed to qualify for taxation as a REIT. If and to
the extent the remedial provisions are available to us to
address FPOs REIT qualification and taxation for the applicable
period prior to or including the Transaction, we may incur
significant cash outlays in connection with the remediation,
possibly including (a)required distribution payments to
shareholders and associated interest payments to the IRS, and
(b)tax and interest payments to the IRS and state and local tax
authorities.

FPOs failure before the Transaction to qualify for taxation as
a REIT and our efforts to remedy any such failure could have an
adverse effect on our results of operations and financial
condition.

The market price of our common shares may decline
in the future as a result of the Transaction or for other
reasons.

In addition to the information set forth in our Annual Report
under the caption Risk FactorsRisks Related to our
SecuritiesChanges in market conditions could adversely affect
the market price of our common shares, the market price of our
common shares may decline in the future as a result of the
Transaction, our financing thereof or a number of other
reasons, such as our failure to achieve the benefits of the
Transaction expected by us, investors or analysts in the
timeframe expected or to the extent anticipated. Our
shareholders could suffer substantial dilution if we issue
common shares in anticipation of funding a portion of the
Transactions purchase price and the Transactions consummation
is delayed or ultimately not completed, with the result that we
will not have the opportunity to capture the expected benefits
from the Transaction within the anticipated timeframe, or at
all, and be required to find an alternative use for the net
proceeds of any such equity issuance which could take a
substantial amount of time. Additionally, the market price of
our common shares may be affected by perceived additional risks
or uncertainties to us following the Transaction to which we
are not currently exposed.

We cannot assure you that we will continue paying
distributions at or above our current annualized distribution
rate.

Our current annualized distribution rate is $1.72 per common
share. We may not be able to continue paying distributions at
or above our current annualized distribution rate for various
reasons, including: the occurrence of any of the risks
described herein or in our Annual Report; restrictions
contained in our revolving credit facility, the Bridge Loan
Facility and the terms of certain other debt instruments; or
any future determination by our Board of Trustees to retain
cash to maintain or improve our credit ratings.

We have no obligation to pay distributions to our shareholders,
and future distributions, if any, will be made at the
discretion of our Board of Trustees. The declaration of any
future distribution will depend on various factors that our
Board of Trustees at the time deems relevant, including our
results of operations, our financial condition, debt and equity
capital available to us, our expectation of our future capital
requirements and operating performance, our funds from
operations, our normalized funds from operations, our receipt
of distributions from Select Income REIT, restrictive covenants
in our financial or other contractual arrangements (including
those in our revolving credit facility, the Bridge Loan
Facility and our term loan agreement), tax law requirements to
maintain our qualification for taxation as a REIT, restrictions
under Maryland law and our expected needs and availability of
cash to pay our obligations. For these reasons, among others,
we may not maintain our annualized distribution rate, and we
may reduce or eliminate future distributions.

Upon completion of the Transaction our
concentration of properties located in the metropolitan
Washington, D.C. market area will increase.

As of March 31, 2017, approximately 27.4% of our annualized
rental income was received from properties located in the
metropolitan Washington, D.C. market area. Similarly, the FPO
properties are concentrated in the metropolitan Washington,
D.C. market area and, pro forma for the Transaction
approximately 54.3% of our annualized rental income would have
been received from properties located in the metropolitan
Washington, D.C. market area. Accordingly, upon completion of
the Transaction our exposure to changes in economic, regulatory
and other conditions in that area will increase. A downturn in
economic conditions in this area could result in reduced demand
from tenants for our properties or lower the rents that our
tenants in this area are willing to pay when our leases expire
or terminate and when renewal or new terms are negotiated.
Additionally, in recent years there has been a decrease in
demand for new leased space by the U.S. government in the
metropolitan Washington, D.C. market area, and that could
increase competition for government tenants and adversely
affect our ability to retain government tenants when our leases
expire.

The metropolitan Washington, D.C. market area office market may
be subject to higher volatility than the office market in other
areas due to uncertainty in government spending and
regulations. In particular, the office market in the
metropolitan Washington, D.C. market area was negatively
impacted by uncertainty regarding the potential for significant
reductions in spending by the U.S. government and may be
impacted by the uncertainty regarding policy changes under the
Trump administration. In addition to actual economic
conditions, investor perception of risks associated with real
estate in the metropolitan Washington, D.C. market area, as a
result of its perceived dependence on the U.S. government, the
impact of sequestration or anticipated policy changes, may make
investors less likely to invest in our common shares and
adversely affect their market price.

Upon completion of the Transaction, government and
other investment grade rated tenants will represent a smaller
portion of our annualized rental income and, therefore, we may
experience higher rates of tenant defaults than before the
Transaction.

During the three months ended March31, 2017, government tenants
and other investment grade rated tenants represented
approximately 88.1% and 43.9% of our and FPOs annualized rental
income, respectively. Pro forma for the Transaction,
approximately 71.7% of our total annualized rental income would
have come from government and other investment grade rated
tenants. Any investments in properties with tenants that are
not governments or investment grade rated may have a greater
risk of default and bankruptcy than investments in properties
leased to governments and investment grade rated tenants. As a
result, we may experience higher rates of tenant defaults than
before the Transaction.

As a result of the Transaction, we will acquire two
properties that are subject to joint venture agreements with
unrelated third parties and our flexibility with respect to
these jointly owned properties may be limited.

As a result of the Transaction, we will acquire properties
which are subject to joint venture agreements with unrelated
third parties. Our participation in these joint ventures will
subject us to risks, including the following:

we may share approval rights over major decisions affecting the
ownership or operation of the joint ventures and any property
owned by the joint ventures;

we may be required to contribute additional capital if our
joint venture partners fail to fund their share of any required
capital contributions;

our joint venture partners may have economic or other business
interests or goals that are inconsistent with our business
interests or goals and that could affect our ability to lease
or release the property, operate the property or maintain our
qualification for taxation as a REIT;

our joint venture partners may be subject to different laws or
regulations than us, or may be structured differently than us
for tax purposes, which could create conflicts of interest
and/or affect our ability to maintain our qualification for
taxation as a REIT;

our ability to sell our joint venture interests on advantageous
terms when we so desire may be limited or restricted under the
terms of the applicable joint venture agreements; and

disagreements with our joint venture partners could result in
litigation or arbitration that could be expensive and
distracting to management and could delay important decisions.

Any of the foregoing risks could have a material adverse effect
on our business, financial condition and results of operations.

IMPORTANT NOTICE REGARDING POSSIBLE TENDER
OFFER

This Current Report on Form8-K is for informational purposes
only and is neither an offer to purchase nor a solicitation of
an offer to sell FPO Common Shares. We have not commenced a
tender offer for FPO Common Shares to terms of the Merger
Agreement described herein or otherwise. If we commence a
tender offer for FPO Common Shares, we will file with the SEC a
tender offer statement on Schedule TO, and FPO will file with
the SEC a solicitation/recommendation statement on Schedule
14D-9 with respect to such tender offer. ANY SUCH TENDER OFFER
MATERIALS (INCLUDING AN OFFER TO PURCHASE, A RELATED LETTER OF
TRANSMITTAL AND CERTAIN OTHER OFFER DOCUMENTS) AND THE
SOLICITATION/RECOMMENDATION STATEMENT OF FPO ON SCHEDULE 14D-9
WILL CONTAIN IMPORTANT INFORMATION. HOLDERS OF FPO COMMON
SHARES SHOULD READ THESE

DOCUMENTS CAREFULLY IF AND WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION THAT HOLDERS OF FPO
COMMON SHARES SHOULD CONSIDER BEFORE MAKING ANY DECISION
REGARDING TENDERING THEIR SECURITIES. Copies of these
documents, if and when filed with the SEC, will be available
free of charge at the SECs website at www.sec.gov. In addition
to these documents, FPO files annual, quarterly and current
reports and other information with the SEC. You may read and
copy any reports or other information filed by FPO at the SEC
public reference room at 100 F Street, N.E., Washington, D.C.
20549. FPOs filings with the SEC are also available for free at
the SECs website at www.sec.gov.

WARNING CONCERNING FORWARD LOOKING STATEMENTS

THIS CURRENT REPORT ON FORM8-K CONTAINS STATEMENTS THAT
CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORMACT OF 1995 AND OTHER
SECURITIES LAWS. ALSO, WHENEVER WE USE WORDS SUCH AS BELIEVE,
EXPECT, ANTICIPATE, INTEND, PLAN, ESTIMATE, WILL, MAY AND
NEGATIVES OR DERIVATIVES OF THESE OR SIMILAR EXPRESSIONS, WE
ARE MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING
STATEMENTS ARE BASED UPON OUR PRESENT INTENT, BELIEFS OR
EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED
TO OCCUR AND MAYNOT OCCUR. ACTUAL RESULTS MAYDIFFER MATERIALLY
FROM THOSE CONTAINED IN OR IMPLIED BY OUR FORWARD LOOKING
STATEMENTS AS A RESULT OF VARIOUS FACTORS. FOR
EXAMPLE:

THIS CURRENT REPORT ON FORM8-K STATES THAT WE ENTERED
INTO A DEFINITIVE MERGER AGREEMENT TO ACQUIRE FPO AND THAT THE
TRANSACTION IS EXPECTED TO CLOSE BEFORE DECEMBER 31, 2017. THE
CLOSING OF THE TRANSACTION IS SUBJECT TO CUSTOMARY CONDITIONS
AND CONTINGENCIES,INCLUDING APPROVAL BY THE HOLDERS OF AT LEAST
A MAJORITY OF THE OUTSTANDING FPO COMMON SHARES. WE CANNOT BE
SURE THAT SUCH CONDITIONS AND CONTINGENCIES WILL BE
SATISFIED. ACCORDINGLY, THE TRANSACTION MAYNOT
CLOSE BEFORE DECEMBER 31, 2017 OR AT ALL, OR THE TERMS OF THE
TRANSACTION MAYCHANGE.

THE APPROVAL OF THE TRANSACTION BY THE HOLDERS OF AT
LEAST A MAJORITY OF THE OUTSTANDING FPO COMMON SHARES MAYBE
SOLICITED BY A PROXY STATEMENT WHICH MUST BE FILED WITH THE
SEC. THE PROCESS OF PREPARING THE PROXY STATEMENT IS TIME
CONSUMING. ACCORDINGLY, WE CANNOT BE SURE THAT THE TRANSACTION
WILL BE CONSUMMATED WITHIN A SPECIFIED TIME PERIOD OR AT
ALL.

OUR DECISION AS TO WHETHER TO MAKE A TENDER OFFER FOR
ALL OF THE OUTSTANDING FPO COMMON SHARES WILL DEPEND ON CERTAIN
FACTORS WE DETERMINE TO BE RELEVANT TO THAT DECISION,INCLUDING
THE AVAILABILITY OF PERMANENT FINANCING, THE AGREEMENT OF
CERTAIN FPO DEBT HOLDERS TO ACCEPT EXPEDITED DEBT ASSUMPTION OR
REPAYMENT AND OTHER FACTORS. FURTHER, FACTORS BEYOND OUR
CONTROL COULD DELAY THE CLOSING OF ANY TENDER OFFER. THERE CAN
BE NO ASSURANCE THAT WE WILL DECIDE TO MAKE A TENDER OFFER FOR
FPO SHARES OR THAT IF WE DO, SUCH TENDER OFFER WILL DECREASE
THE TIME REQUIRED FOR US TO COMPLETE ITS ACQUISITION OF
FPO.

THE COMMITMENT LETTER IS SUBJECT TO VARIOUS
CONDITIONS,INCLUDING MUTUALLY SATISFACTORY DOCUMENTATION AND
CONSUMMATION OF THE TRANSACTION. WE CANNOT BE SURE THAT THESE
CONDITIONS WILL BE SATISFIED, THAT THE TERMS OF THE BRIDGE LOAN
FACILITY WILL NOT CHANGE OR THAT THE BRIDGE LOAN FACILITY WILL
BE AVAILABLE TO US ON A TIMELY BASIS OR AT ALL.

WE ARE NOT COMMITTED TO BORROW THE ENTIRE BRIDGE LOAN
FACILITY OR ANY PORTION THEREOF, AND WE MAYUTILIZE OTHER DEBT
OR EQUITY FINANCING FOR ALL OR A PORTION OF THE TRANSACTION
COSTS WHICH MAYBE ON TERMS AND CONDITIONS THAT ARE LESS
FAVORABLE TO US THAN THE COMMITMENT LETTERS TERMS AND
CONDITIONS.

CONTINUED AVAILABILITY OF BORROWINGS UNDER OUR
REVOLVING CREDIT FACILITY IS SUBJECT TO OUR SATISFYING CERTAIN
FINANCIAL COVENANTS AND OTHER CUSTOMARY CREDIT FACILITY
CONDITIONS THAT WE MAYBE UNABLE TO SATISFY.

ACTUAL COSTS UNDER OUR REVOLVING CREDIT FACILITY AND
THE BRIDGE LOAN FACILITY WILL BE HIGHER THAN LIBOR PLUS A
PREMIUM BECAUSE OF OTHER FEES AND EXPENSES ASSOCIATED WITH SUCH
FACILITIES.

THE PREMIUMS USED TO DETERMINE THE INTEREST RATE
PAYABLE ON OUR REVOLVING CREDIT FACILITY, THE BRIDGE LOAN
FACILITY AND OUR TERM LOANS AND THE FACILITY FEE PAYABLE ON OUR
REVOLVING CREDIT FACILITY ARE BASED ON OUR CREDIT RATINGS.
FUTURE CHANGES IN OUR CREDIT RATINGS MAY CAUSE THE INTEREST AND
FEES WE PAY TO INCREASE.

THE PRO FORMA FINANCIAL INFORMATION FILED AS AN
EXHIBITTO THIS CURRENT REPORT ON FORM8-K INCLUDES CERTAIN
ASSUMPTIONS REGARDING THE POTENTIAL EQUITY OFFERING,INCLUDING
WITH RESPECT TO THE NET PROCEEDS TO US FROM THE EQUITY
OFFERING. WE CANNOT BE SURE THAT THESE ASSUMPTIONS WILL REFLECT
THE ACTUAL NET PROCEEDS TO US FROM THE EQUITY OFFERING,IF ANY.
IN ADDITION TO THE EQUITY OFFERING, WE MAYEXPLORE OTHER LONGER
TERM DEBT OR EQUITY FINANCING ALTERNATIVES. OUR ACTUAL MIX OF
DEBT AND EQUITY FINANCING WILL DEPEND ON THE AVAILABILITY AND
COST OF SUCH FINANCING AND THE FINAL MIX OF FINANCING MAYBE
DIFFERENT FROM CURRENT EXPECTATIONS.

THE SETTLEMENT OF THE EQUITY OFFERING,IF ANY, WILL BE
SUBJECT TO VARIOUS CONDITIONS AND CONTINGENCIES AS ARE
CUSTOMARY IN UNDERWRITING AGREEMENTS IN THE UNITED STATES. IF
THESE CONDITIONS ARE NOT SATISFIED OR THE SPECIFIED
CONTINGENCIES DO NOT OCCUR, THE EQUITY OFFERING MAYBE DELAYED
OR MAYNOT BE COMPLETED.

AN IMPLICATION OF THE STATEMENT THAT IT IS CONTEMPLATED
THAT THE UNDERWRITERS WILL BE GRANTED AN OPTION TO PURCHASE UP
TO AN ADDITIONAL 3,750,000 OF OUR COMMON SHARES FROM US MAYBE
THAT THIS OPTION MAYBE EXERCISED IN WHOLE OR IN PART. IN FACT,
WE DO NOT KNOW WHETHER THE UNDERWRITERS WOULD EXERCISE THIS
OPTION, OR ANY PARTOF IT.

THE INFORMATION CONTAINED IN OUR FILINGS WITH THE
SEC,INCLUDING UNDER THE CAPTION RISK FACTORS ABOVE AND IN OUR
ANNUAL REPORT,IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD
CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE STATED
IN OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS. OUR FILINGS
WITH THE SEC ARE AVAILABLE ON THE SECS WEBSITE AT
WWW.SEC.GOV.

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD
LOOKING STATEMENTS.

EXCEPT AS REQUIRED BY LAW, WE DO NOT INTEND TO UPDATE
OR CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Businesses
Acquired.

The audited consolidated financial statements of FPO and its
subsidiaries comprising the consolidated balance sheets as of
December31, 2016 and 2015 and the consolidated statements of
operations, consolidated statements of comprehensive income
(loss), consolidated statements of equity and consolidated
statements of cash flows for the years ended December31, 2016,
2015 and 2014 and the notes related thereto, and the related
financial statement schedule, are filed as Exhibit99.4 to this
Current Report on Form8-K. The unaudited condensed consolidated
financial statements of FPO and its subsidiaries comprising the
consolidated balance sheet as of March31, 2017 and the
consolidated statements of operations, consolidated statements
of comprehensive income (loss) and consolidated statements of
cash flows for the three months ended March31, 2017 and 2016
and the notes related thereto are filed as Exhibit99.5 to this
Current Report on Form 8-K.

(b) Pro Forma Financial Information

Our unaudited pro forma condensed consolidated balance sheet as
of March31, 2017 and our unaudited pro forma condensed
consolidated statements of income for the year ended
December31, 2016 and the three months ended March31, 2017 and
the notes related thereto are filed as Exhibit99.6 to this
Current Report on Form8-K. The unaudited pro forma condensed
consolidated financial statements are not necessarily
indicative of our expected financial position or results of
operations for any future period. Differences could result from
numerous factors, including future changes in our portfolio of
investments, capital structure, property level operating
expenses and revenues, including rents expected to be received
on our existing leases or leases we may enter into during and
after 2017, changes in interest rates and other reasons. Actual
future results are likely to be different from amounts
presented in the unaudited pro forma condensed consolidated
financial statements and such differences could be significant.

(d) Exhibits

* Schedules and exhibits have been omitted to Item 601(b)(2)of
Regulation S-K. The registrant will furnish copies of any such
schedules and exhibits to the SEC upon request.