In order to boost its office portfolio, First Potomac Realty Trust (FPO) bought an iconic and historical property in Northwestern, Washington, D.C. for $58 million. However, on broader market concerns, shares of First Potomac fell by 11 cents to $12.78 during the trading session on Apr 9.
In particular, this real estate investment trust bought the 1401 K Street property that is also known as the Tower Building. The 12-story office building, situated in downtown Washington, D.C, is said to be one of the first art-deco office buildings. Moreover, it is conveniently accessible by key transportation networks of the region. The property, which spans 117,093 square foot, is presently 88% leased to 22 tenants.
First Potomac bought the property, through an assumption of existing secured mortgage debt worth $37.3 million along with the cash draw from its revolving credit facility. The move will expand the company’s reach in the downtown office market of Washington D.C. Additionally, given the Tower Building’s strategic location and popularity, the asset will boost the company’s rental revenue going forward.
As a matter of fact, the office REITs have just started to benefit from the growth in jobs and lower new supply and they are tapping opportunities for owning distinguished properties in top locations around the country to improve the quality of their portfolio. But the pace of improvement is expected to be tepid as a result of the space efficiency strategies adopted by the companies.
First Potomac owns, manages, develops and redevelops office, business parks and industrial properties in the greater Washington D.C. region. As of Dec 31, 2013, the company’s portfolio spanned about 9.1 million square feet. Office property consists 51% of the portfolio while the remaining 49% is industrial property and business parks.
First Potomac is expected to release its first-quarter 2014 results on Apr 24, after the closing bell. The Zacks Consensus Estimate for funds from operations (FFO) for the quarter is currently pegged at 22 cents.
First Potomac currently holds a Zacks Rank #3 (Hold). Investors interested in the REIT industry may also consider Cousins Properties Incorporated (CUZ), Liberty Property Trust (LPT) and Public Storage (PSA). All these stocks carry a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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