WASHINGTON--(BUSINESS WIRE)--First Potomac Realty Trust (NYSE:FPO), a leading owner of office and industrial properties in the Greater Washington D.C. region, today announced the acquisition of 1750 H Street, NW, in Washington, D.C. for $65 million in a 50/50 joint venture with AEW Capital Management, L.P. This is the firm’s second multi-story Class A office building acquisition in downtown Washington, D.C. In separate transactions, the company also acquired the first mortgage loan on an office park adjacent to BWI Airport and a single-story office building in Chesapeake, Virginia.
“With its attractive pricing and great location, the acquisition of 1750 H Street NW, is a significant investment opportunity. It fits well into our long-term business plan to grow our presence in the downtown D.C. market, increase the number of office buildings we own, and continue our focus on high-quality properties,” said Douglas J. Donatelli, Chairman and CEO of First Potomac Realty Trust. “We are also pleased to be partnering with AEW again, a long-term partner of ours that enjoys a stellar investment track record.”
Chief Investment Officer, Nicholas R. Smith added, “The three transactions we have completed recently are a testament to our overall strength in the Washington, D.C. region, our solid reputation as a property owner and our ability to find creative solutions to sellers’ needs. We were able to identify off-market opportunities and, in the case of 1750 H Street, NW, be selected by the seller as the local real estate company it wanted as its landlord. These acquisitions are tangible examples of how we can create value for our shareholders.”
1750 H Street, NW is a ten-story, 111,000-square-foot office building located approximately three blocks from the White House in Washington, D.C.’s central business district. The building is 100 percent leased to six tenants, including 46,900 square feet on the top four floors that is leased back to the seller, the National Treasury Employee’s Union (NTEU) for a ten-year term. The amenity-rich building has windows on three of the four sides, a roof-top terrace, a fitness center and an underground parking garage with capacity for over 70 vehicles.
The acquisition was financed, in part, through the assumption of a $31.4 million mortgage loan. The loan carries an interest rate of 5.6% and matures in July 2014. The balance of the purchase price was funded 50 percent by the Company using a draw on its line of credit and available cash and 50 percent by AEW Capital Management. The Company projects an initial cash yield of 6.5% and an initial accrual yield of 7.0%.
The Company recently completed two additional transactions, acquiring Battlefield Corporate Center, a 97,000 square foot single-story office property in Chesapeake, Virginia, in an UPREIT transaction, as well as the acquisition of a first mortgage loan collateralized by Aviation Business Park, a three-building, single-story, office park totaling 121,000 square feet in Glen Burnie, Maryland, adjacent to Baltimore-Washington International Airport.
On September 30, 2010, the Company acquired the $10.6 million first mortgage loan collateralized by Aviation Business Park for $8.0 million. The property, which was completed in July 2008, is currently 12.5% leased to one tenant. The acquisition of the loan was financed with the Company’s available cash. The Company expects to take title to the property through a deed-in-lieu of foreclosure in exchange for additional consideration to the owner if certain future leasing hurdles are met.
On October 28, 2010, the Company acquired Battlefield Corporate Center, a 97,000 square foot business park located in Chesapeake, Virginia, for $8.0 million. The property is 100% leased to one tenant. The acquisition was financed with a new 10-year $4.3 million mortgage loan with an interest rate of 4.26%, the issuance of 230,876 Operating Partnership units to the seller and available cash. The Company projects an initial cash yield of 8.5% and an initial accrual yield of 9.5%.
Forward Looking Statements
The forward-looking statements contained in this press release are subject to various risks and uncertainties. Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, there can be no assurance that its expectations will be achieved. Certain factors that could cause actual results to differ materially from the Company’s expectations include changes in general or regional economic conditions; the Company’s ability to timely lease or re-lease space at current or anticipated rents; changes in interest rates; changes in operating costs; the Company’s ability to complete acquisitions on acceptable terms and successfully integrate such acquisitions into the Company’s portfolio; the Company’s ability to manage its current debt levels and repay or refinance its indebtedness upon maturity or other required payment dates; the Company’s ability to obtain debt and/or financing on attractive terms, or at all; changes in the assumptions underlying the Company’s expected rates of return on acquisitions and other risks detailed in the Company’s Annual Report on Form 10-K and described from time to time in the Company’s filings with the SEC. Many of these factors are beyond the Company’s ability to control or predict. Forward-looking statements are not guarantees of performance. For forward-looking statements herein, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.
About First Potomac Realty Trust
First Potomac Realty Trust is a self-administered, self-managed real estate investment trust that focuses on owning, operating, developing and redeveloping office and industrial properties in the greater Washington, D.C. region. The Company's portfolio totals over 12 million square feet. The Company's largest tenant is the U.S. Government, which along with government contractors, accounts for over 20 percent of the Company's revenue.