Real estate investment trust (“REIT”) First Potomac Realty Trust FPO is undergoing a strategic plan for repositioning, under the guidance of the new CEO Robert Milkovich, who assumed his position in November. The move reflects the company’s efforts to capitalize on the growth opportunities in the Washington, D.C., office market.
In fact, according to a recent interview with REIT.com, Milkovich revealed that the Washington, D.C., office market is rebounding. This market, which had its share of troubles in the recent past, is gaining from the shifting of people from other regions to Washington with the notable portion being millennials who are migrating for jobs. In fact, palpable job growth is the most-preferred catalyst for office space demand.
Against this backdrop, a repositioning plan has been chalked out that is aimed at lowering the risk of the company’s portfolio, balance sheet de-leveraging and maximization of the value of its assets. Milkovich’s plan involves some non-core asset dispositions, addressing expiring leases, managing overhead and such other steps. Notably, the company would be leaner and the divestiture timings would be based on lease rollover, lease expiration, mortgage on property and position within the market.
Discussing the Washington area submarkets, Milkovich pointed out that the company would prefer to be in “submarkets with a higher barrier to entry; good public transportation, or at least a very strong road network; and amenity base.”
The company’s primary focus is the Central Business District in Washington. Moreover, The Capitol Hill submarket and NoMa (the area north of Capitol Hill and Union Station) are on the company’s preferred list. It also plans to “monitor and target” the Arlington, Alexandria and Fairfax Counties.
Finally, going forward, we believe that U.S. office expansion will continue given the solid domestic job market and improved economic fundamentals. Amid this, REITs like First Potomac, Boston Properties Inc. BXP, SL Green Realty Corp. SLG and Mack-Cali Realty Corp. CLI are expected to benefit and enjoy bottom-line growth.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment