First Potomac (FPO) Disposes JV Assets for $59.5 Million

First Potomac Realty Trust FPO declared selling of two joint-venture (JV) assets for $59.5 million to an affiliated company of Adler Kawa Real Estate Advisors. The dispositions are in line with the company’s strategic plan of lowering portfolio risk, de-leveraging balance sheet and maximizing value of its assets.

The two JV assets disposed were Rivers Park I and II in Columbia, MD, and Aviation Business Park in Glen Burnie, MD. First Potomac Realty owned a 25% stake in Rivers Park I and II, and 50% interest in Aviation Business Park. The assets comprised 428,268 square feet of space and were owned in unconsolidated joint ventures with an affiliate of AEW Capital Management.  

The company reaped gross proceeds of $18.975 million from the sales. It used the proceeds to pay off existing debt and for general corporate needs.

Notably, the company had completed an extensive underwriting of its business, portfolio and team in the beginning of 2016.  Based on this underwriting, it undertook a strategic plan that included the sale of $350 million of non-core assets. First Potomac Realty has already sold $311 million of assets towards its mentioned target.
 
On the other hand, the company has scope to capitalize on growth opportunities in the Washington, D.C. office market. While the rightsizing efforts on part of the government and public sector, and new supply issues have created concerns; there have been efforts toward diversification of the D.C. economy which are likely to drive growth of the real estate market.  

First Potomac currently has a Zacks Rank #3 (Hold).

Shares of First Potomac slightly outperformed the Zacks categorized REIT and Equity Trust – Other industry over the past one year. Over this time frame, First Potomac logged in a return of 5.5% against 5.1% gain of the industry.

Stocks to Consider

Better-ranked stocks in the REIT space include CoreSite Realty Corporation COR , Piedmont Office Realty Trust, Inc. PDM and W. P. Carey Inc. WPC. All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CoreSite Realty currently has a long-term growth rate of 19.1%.

Piedmont Office Realty’s estimates for 2017 moved north by 0.6% to $1.73, over the past 30 days.

W. P. Carey is a steady performer, having exceeded the Zacks Consensus Estimate in each of the four trailing quarters, with an average beat of 12.38%.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. 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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