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Analyst Blog

First Potomac Realty Trust (FPO - Snapshot Report) recently accomplished the sale of a significant part of its industrial portfolio to an affiliate of Blackstone Real Estate Partners VII and Corporate Office Properties Trust. The sell-offs have helped the company reap $259 million in total.

First Potomac can now enjoy greater financial flexibility, a streamlined portfolio and have sufficient funds to acquire high-quality office properties in the Washington, D.C. region.

In particular, the divested portfolio to the Blackstone affiliate for $241.5 million included 23 institutional-quality properties spanning over 4.0 million square feet. Of them, 16 are positioned in Southern Virginia while the rest are located in the Baltimore, MD and Washington, D.C. submarkets.

In addition, First Potomac vended a property -- I-66 Commerce Center in Haymarket, VA to Corporate Office Properties Trust in early May for $17.5 million.

The sell-offs have resulted in First Potomac retaining in its portfolio, mainly office and business park properties in the greater Washington, D.C. market. Also, two industrial properties in the Northern Virginia market are present in its current portfolio.

Moreover, recently, the company generated net proceeds of approximately $104.9 million from an equity offering of nearly 7.5 million shares. The move came as part of its efforts to infuse capital and repay debt.

Presently, we await the company’s second-quarter 2013 earnings that are scheduled to release in late July for an update on the full-year 2013 core FFO guidance, following the sale of these assets and the recently completed public offering.

Finally, we believe that the increase in financial flexibility through asset sale and the stock offering would poise the company well for investment and acquisition prospects in the greater Washington D.C. office sector and hence we remain encouraged. This is expected to go a long way in strengthening the company’s top line.

Currently, First Potomac carries a Zacks Rank #3 (Hold). A number of other REITs that are performing well and deserve a look include CubeSmart (CUBE - Snapshot Report), DCT Industrial Trust Inc. (DCT - Snapshot Report) and Extra Space Storage Inc. (EXR - Snapshot Report), all carrying a Zacks Rank #2.

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