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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

x                              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

OR

o                                 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-9317

HRPT PROPERTIES TRUST

(Exact Name of Registrant as Specified in Its Charter)

400 Centre Street, Newton, Massachusetts 02458

(Address of Principal Executive Offices)  (Zip Code)

617-332-3990

 (Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

Number of registrant’s common shares of beneficial interest, $0.01 par value per share, outstanding as of May 7, 2009:  223,683,241

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HRPT PROPERTIES TRUST

FORM 10-Q

MARCH 31, 2009

INDEX

References in this Form 10-Q to “we”, “us” and “our” refers to HRPT Properties Trust and its consolidated subsidiaries, unless otherwise noted.

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PART I          Financial Information

Item 1.  Financial Statements

HRPT PROPERTIES TRUST

CONDENSED CONSOLIDATED BALANCE SHEET

(amounts in thousands, except share data)

(unaudited)

See accompanying notes

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HRPT PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(amounts in thousands, except per share data)

(unaudited)

See accompanying notes

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HRPT PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(amounts in thousands)

(unaudited)

See accompanying notes

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HRPT PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Note 1.  Basis of Presentation

The accompanying consolidated financial statements of HRPT Properties Trust and its subsidiaries have been prepared without audit.  Certain information and footnote disclosures required by accounting principles generally accepted in the United States, or GAAP, for complete financial statements have been condensed or omitted.  We believe the disclosures made are adequate to make the information presented not misleading.  However, the accompanying financial statements should be read in conjunction with the financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2008.  In the opinion of management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included.  All intercompany transactions and balances between HRPT Properties Trust and its subsidiaries have been eliminated.  Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.  Reclassifications have been made to the prior years’ financial statements to conform to the current year’s presentation.

In December 2007, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No. 141(R), “Business Combinations”, or SFAS No. 141(R).  SFAS No. 141(R) establishes principles and requirements for how the acquirer shall recognize and measure in its financial statements the identifiable assets acquired, liabilities assumed, any noncontrolling interest in the acquiree and goodwill acquired in a business combination.  SFAS No. 141(R) is effective for fiscal years beginning after December 15, 2008.  We adopted SFAS No. 141(R) on January 1, 2009.

Note 2.  Securities Held to Maturity

In March 2009, we purchased $8,000 of marketable commercial mortgage pass through certificates, or certificates, which are backed by our mortgage notes payable due January 2011, for $6,760.  We classify these certificates as investments held to maturity rather than available for sale or trading because we have the intent and ability to hold these certificates until maturity.  These certificates are included in other assets in our condensed consolidated balance sheet as of March 31, 2009.  These certificates had an estimated fair market value of $6,041 as of March 31, 2009.  We follow the amortized cost method of accounting for these certificates.  Under this method, we will amortize the difference between the face value of the certificates and its purchase price to income using the interest method over the expected remaining term of the certificates.

Note 3.  Real Estate Properties

During the three months ended March 31, 2009, we funded $8,574 of improvements to our owned properties and we acquired four office properties for $57,500, excluding closing costs, using cash on hand and borrowings under our revolving credit facility.

In May 2008, we entered into a series of agreements to sell 48 medical office, clinic and biotech laboratory buildings to Senior Housing Properties Trust, or Senior Housing, for an aggregate purchase price of approximately $565,000.  To date, we have sold 38 of these properties containing 1,595,000 square feet of space for approximately $366,009, excluding closing costs, and recognized gains totaling $145,919.  One of the remaining buildings with an allocated value of $3,000 is no longer subject to the agreement for sale.  We expect the closings of the remaining nine buildings to occur in 2010.  We and Senior Housing may mutually agree to accelerate the closings of these acquisitions.  In addition, Senior Housing acquired rights of first refusal from us to purchase any of 45 additional buildings (containing approximately 4,598,000 square feet of rental space) that are leased to tenants in medical related businesses which we will continue to own after these transactions.  Senior Housing was formerly our subsidiary, and both we and Senior Housing are managed by Reit Management & Research LLC, or RMR.  Because we and Senior Housing are both managed by RMR, the terms of these transactions were negotiated by special committees of our and Senior Housing’s boards of trustees composed solely of independent trustees who were not also independent trustees of both companies.

In June 2008, we also agreed to sell one additional property to a third party for $15,000, excluding closing costs.  We expect the closing of this building to occur in 2010.

Our obligations to complete the uncompleted sales are subject to various conditions typical of commercial real estate transactions.  We can provide no assurance that we will sell any or all of these buildings or that the remaining sales will be completed in 2010 or sooner.

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HRPT PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(dollars in thousands, except per share data)

All properties under contract for sale as of March 31, 2009, are classified as held for sale on our consolidated balance sheet.  Results of operations for properties under contract for sale, or sold as of March 31, 2009, are included in discontinued operations in our consolidated statements of income.  Summarized balance sheet and income statement information for properties under contract for sale, or sold as of March 31, 2009, is as follows:

Note 4.  Indebtedness

In March 2009, we repurchased and retired $31,781 of our floating rate senior notes due 2011, for $24,207 plus accrued interest, and recognized a gain of $7,513, net of unamortized deferred financing fees, on early extinguishment of debt.

We have a $750,000 unsecured revolving credit facility that we use for acquisitions, working capital and general business purposes.  The interest rate on this facility averaged 1.1% and 3.9% per annum for the three months ended March 31, 2009 and 2008, respectively.  As of March 31, 2009, we had $297,000 outstanding and $453,000 available under our revolving credit facility.

Our public debt indentures and credit facility agreement contain a number of financial and other covenants, including a credit facility covenant which limits the amount of aggregate distributions on common shares to 90% of operating cash flow available for shareholder distributions as defined in the credit facility agreement.  We believe that we are in compliance with these financial and other covenants.

Note 5.  Shareholders’ Equity

During the three months ended March 31, 2009, we repurchased 4,050,000 of our common shares for $14,486, including transaction costs, using cash on hand.

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HRPT PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(dollars in thousands, except per share data)

Note 6.  Earnings per Common Share

The effect of our convertible preferred shares on income from continuing operations available for common shareholders per share is anti-dilutive for the periods presented.

Note 7.  Segment Information

As of March 31, 2009, we owned 357 office properties and 184 industrial and other properties, excluding properties classified as held for sale.  We account for all of these properties in geographic operating segments for financial reporting purposes based on our method of internal reporting.  We define these individual geographic segments as those which currently, or during either of the last two quarters, represent or generate 5% or more of our total square feet, revenues or property net operating income.  Property level information by geographic segment and property type, excluding properties held for sale or sold, as of and for the three months ended March 31, 2009 and 2008, is as follows:

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HRPT PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(dollars in thousands, except per share data)

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HRPT PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(dollars in thousands, except per share data)

The table below reconciles our calculation of property net operating income, or NOI, to net income, the most directly comparable financial measure under generally accepted accounting principles, or GAAP, reported in our consolidated financial statements for the three months ended March 31, 2009 and 2008.  We consider NOI to be appropriate supplemental information to net income because it helps both investors and management to understand the operations of our properties.  We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our results of operations because it reflects only those income and expense items that are incurred at the property level.  Our management also uses NOI to evaluate individual, regional and company wide property level performance.  NOI excludes certain components from net income in order to provide results that are more closely related to our properties’ results of operations.  NOI does not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income, net income available for common shareholders or cash flow from operating activities as a measure of financial performance.  A reconciliation of NOI to net income for the three months ended March 31, 2009 and 2008, is as follows:

Note 8.  Related Person Transactions

In February 2009, we invested $25 in an insurance company with RMR and other companies to which RMR provides management services, and in April 2009 we invested an additional $5,049 in this insurance company.  We currently own approximately 16.67% of this insurance company.

As previously disclosed and more fully described under “Item 1. Business” in our Annual Report on Form 10-K for the year ended December 31, 2008, our wholly owned subsidiary, Government Properties Income Trust, or GOV, has filed a registration statement with the Securities and Exchange Commission, or SEC, for the initial public offering of 10,000,000 common shares of beneficial interest, or common shares.  In connection with this initial public offering, we transferred to GOV in April 2009, 29 properties, 25 of which are leased primarily to the U.S. Government and four of which are leased to the States of California, Maryland, Minnesota and South Carolina.  These properties contain approximately 3.3 million rentable square feet and are located in 14 states and the District of Columbia.  As of March 31, 2009, approximately $3,000 of transaction related costs were included in other assets.  If the GOV registration statement becomes effective and the initial public offering is completed, we expect to own 49.9%, or 9,950,000 common shares of GOV after the completion of the offering (46.4% if the underwriters’ over allotment option is exercised in full).  If the initial public offering of GOV is successfully completed, GOV will enter into management agreements with RMR on terms that are substantially similar to our management agreements with RMR; and our management fees to RMR will be reduced by the amount of the fees that we currently pay on the properties that we transferred to GOV.

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HRPT PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(dollars in thousands, except per share data)

GOV’s registration statement for its offering of common shares is subject to review and comment by the SEC and the offering will not occur unless, among other things, the SEC has declared the registration statement to be effective, and underwriters have agreed to purchase and distribute the shares proposed to be offered by GOV.  We may also determine, in our discretion, due to market conditions or otherwise, not to proceed with this offering. Accordingly, there can be no assurance when or if the offering will occur.

For more information about our related party transactions, including our sales of properties to Senior Housing, our management contracts with RMR, the insurance company in which we have invested and the risks which may arise from these related party transactions, please see our Annual Report on Form 10-K for the year ended December 31, 2008.

Note 9.  Subsequent Events

In April 2009, we declared a distribution of $0.12 per common share, or approximately $26,800, to be paid on or about May 26, 2009, to shareholders of record on April 23, 2009.  We also announced a distribution on our series B preferred shares of $0.5469 per share, or $3,828, a distribution on our series C preferred shares of $0.4453 per share, or $2,672, and a distribution on our series D preferred shares of $0.4063, or $6,167, which we expect to pay on or about May 15, 2009, to our preferred shareholders of record as of May 1, 2009.

In April 2009, our wholly owned subsidiary, GOV entered into a new $250,000 secured credit facility with a group of commercial banks.  The maturity date of this facility is April 24, 2012, and we have the option to extend the facility, subject to certain conditions, for one year to April 24, 2013.  Interest under the facility is generally set at LIBOR, subject to a floor, plus a spread which varies depending on the amount of debt leverage at the borrower subsidiary.  The initial interest rate applicable to the loan is 5.25%.  The $250,000 proceeds of this credit facility were distributed to us and used by us to repay amounts outstanding under our existing unsecured revolving credit facility.

As of May 7, 2009, we repurchased and retired $49,320 of our 6.95% senior notes due 2012 for $41,495, $9,020 of our 6.50% senior notes due 2013 for $7,261, $5,345 of our 5.75% senior notes due 2014 for $4,278, and $4,000 of our 6.40% senior notes due 2015 for $2,760, using cash on hand and borrowings under our revolving credit facility.  In connection with these transactions, we expect to recognize gains of approximately $11,500, net of unamortized discounts and deferred financing fees during the second quarter of 2009.

As of May 7, 2009, we have an agreement to acquire an additional property with approximately 125,000 square feet of space for a total purchase price of $32,000, excluding closing costs.  This potential purchase transaction is subject to completion of diligence and other customary conditions; because of these contingencies, we can provide no assurances that we will purchase this property.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and tables should be read in conjunction with our consolidated financial statements and notes thereto included in this quarterly report and our Annual Report on Form 10-K for the year ended December 31, 2008.

OVERVIEW

We primarily own office and industrial buildings located throughout the United States.  We also own approximately 17 million square feet of leased industrial and commercial lands located in Oahu, Hawaii.

Property Operations

As of March 31, 2009, 89.5% of our total square feet was leased, compared to 91.4% leased as of March 31, 2008.  These results reflect a 2.2 percentage point decrease in occupancy at properties we owned continuously since January 1, 2008.  Occupancy data for 2009 and 2008 is as follows (square feet in thousands):

During the three months ended March 31, 2009, we signed new leases for 190,000 square feet and lease renewals for 755,000 square feet, at weighted average rental rates that were 6% above rents previously charged for the same space.  Average lease terms for leases signed during the three months ended March 31, 2009, were 5.0 years.  Commitments for tenant improvement and leasing costs for leases signed during the three months ended March 31, 2009, totaled $6.7 million, or $7.12 per square foot (approximately $1.42/sq. ft. per year of the lease term).

During the past twelve months, leasing market conditions in the majority of our markets have continued to weaken.  The pace of new leasing activity and the leasing of currently vacant space within our portfolio has slowed and completion of newly constructed office properties in certain markets has continued, causing our occupancy to decline.  Required landlord funded tenant build outs and leasing commissions payable to tenant brokers for new leases and lease renewals have generally remained unchanged over the past twelve months but started to increase in certain markets since the second half of 2008.  These build out costs and leasing commissions are generally amortized as a reduction of our income during the terms of the affected leases.  Also, some tenants and prospective tenants have demonstrated reluctance to enter lease renewals or new leases for extended terms.  We believe that some decreases in occupancy and effective rents may further reduce the financial results at some of our currently owned properties.  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.

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Approximately 16.9% of our leased square feet and 18.4% of our rents are included in leases scheduled to expire through December 31, 2010.  Lease renewals and rental rates at which available space may be relet in the future will depend on prevailing market conditions at that time.  Lease expirations by year, as of March 31, 2009, are as follows (square feet and dollars in thousands):

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Our principal source of funds for our operations is rents from tenants at our properties.  Rents are generally received from our non-government tenants monthly in advance, and from our government tenants monthly in arrears.  As of March 31, 2009, tenants responsible for 1% or more of our total rent were as follows (square feet in thousands):

Investment Activities

During the three months ended March 31, 2009, we acquired four office properties with 392,000 square feet of space for $57.5 million, excluding closing costs.  At the time of acquisition, these properties were 100% leased and yielded approximately 11.1% of the aggregate gross 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.

In May 2008, we entered into a series of agreements to sell 48 medical office, clinic and biotech laboratory buildings to Senior Housing for an aggregate purchase price of approximately $565.0 million.  To date, we have sold 38 of these properties containing 1,595,000 square feet of space for approximately $366.0 million, excluding closing costs, and recognized gains totaling $145.9 million.  One of the remaining buildings with an allocated value of $3.0 million is no longer subject to the agreement for sale.  We expect the closings of the remaining nine buildings to occur in 2010.  We and Senior Housing may mutually agree to accelerate the closings of these acquisitions.  In addition, Senior Housing acquired rights of first refusal from us to purchase any of 45 additional buildings (containing approximately 4,598,000 square feet of rental space) that are leased to tenants in medical related businesses which we will continue to own after these transactions.  Senior Housing was formerly our subsidiary, and both we and Senior Housing are managed by RMR.  Because we and Senior Housing are both managed by RMR, the terms of these transactions were negotiated by special committees of our and Senior Housing’s boards of trustees composed solely of independent trustees who were not also independent trustees of both companies.

In June 2008, we also agreed to sell one additional property to a third party for approximately $15 million, excluding closing costs.  We expect the closing of this building to occur in 2010.

Our obligations to complete the uncompleted sales are subject to various conditions typical of commercial real estate transactions.  We can provide no assurance that we will sell any or all of these buildings or that the remaining sales will be completed in 2010 or sooner.

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In February 2009, we invested $25,000 in an insurance company with RMR and other companies to which RMR provides management services, and in April 2009 we invested an additional $5.0 million in this insurance company.  We currently own approximately 16.67% of this insurance company.

In March 2009, we purchased $8.0 million of marketable certificates which are backed by our mortgage notes payable due January 2011, for $6.8 million.  We classify these certificates as investments held to maturity rather than available for sale or trading because we have the intent and ability to hold these certificates until maturity.  These certificates are included in other assets in our condensed consolidated balance sheet as of March 31, 2009.  These certificates had an estimated fair market value of $6.0 million as of March 31, 2009.

Financing Activities

During the three months ended March 31, 2009, we repurchased 4,050,000 of our common shares for $14.5 million, including transaction costs, using cash on hand.

In March 2009, we repurchased and retired $31.8 million of our floating rate senior notes due 2011, for $24.2 million, excluding accrued interest, and recognized a gain on early extinguishment of debt of $7.5 million, net of unamortized deferred financing fees.

As of May 7, 2009, we repurchased and retired $49.3 million of our 6.95% senior notes due 2012 for $41.5 million, $9.0 million of our 6.50% senior notes due 2013 for $7.3 million, $5.3 million of our 5.75% senior notes due 2014 for $4.3 million, and $4.0 million of our 6.40% senior notes due 2015 for $2.8 million, using cash on hand and borrowings under our revolving credit facility.  In connection with these transactions, we expect to recognize gains of approximately $11.5 million, net of unamortized discounts and deferred financing fees during the second quarter of 2009.

In April 2009, our wholly owned subsidiary, GOV, entered into a new $250.0 million secured credit facility with a group of commercial banks.  The maturity date of this facility is April 24, 2012, and we have the option to extend the facility, subject to certain conditions, for one year to April 24, 2013.  Interest under the facility is generally set at LIBOR, subject to a floor, plus a spread which varies depending on the amount of debt leverage at the borrower subsidiary.  The initial interest rate applicable to the loan is 5.25%.  The $250.0 million proceeds of this credit facility were distributed to us and used by us to repay amounts outstanding under our existing unsecured revolving credit facility.

As previously disclosed and more fully described under “Item 1. Business” in our Annual Report on Form 10-K for the year ended December 31, 2008, GOV has filed a registration statement with the SEC for the initial public offering of 10,000,000 common shares of beneficial interest, or common shares.  In connection with this initial public offering, we transferred to GOV in April 2009, 29 properties, 25 of which are leased primarily to the U.S. Government and four of which are leased to the States of California, Maryland, Minnesota and South Carolina.  These properties contain approximately 3.3 million rentable square feet and are located in 14 states and the District of Columbia.  If the GOV registration statement becomes effective and the initial public offering is completed, we expect to own 49.9%, or 9,950,000 common shares of GOV after the completion of the offering (46.4% if the underwriters’ over allotment option is exercised in full).  If the initial public offering of GOV is successfully completed, GOV will enter into management agreements with RMR on terms that are substantially similar to our management agreements with RMR; and our management fees to RMR will be reduced by the amount of the fees that we currently pay on the properties that we transferred to GOV.

GOV’s registration statement for its offering of common shares is subject to review and comment by the SEC and the offering will not occur unless, among other things, the SEC has declared the registration statement to be effective, and underwriters have agreed to purchase and distribute the shares proposed to be offered by GOV.  We may also determine, in our discretion, due to market conditions or otherwise, not to proceed with this offering. Accordingly, there can be no assurance when or if the offering will occur.

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RESULTS OF OPERATIONS

Three Months Ended March 31, 2009, Compared to Three Months Ended March 31, 2008