In order to raise capital, Bethesda-based real estate investment trust (REIT) First Potomac Realty Trust (FPO - Snapshot Report) recently sold its full 95% ownership stake in the development project 1200 17th Street, NW, located in Washington D.C. The property was sold to Mitsui Fudosan America, Inc. (MFA) for $43.7 million.
First Potomac intends to utilize the proceeds from the transaction on its other development holdings. The company has been interested in exploring opportunities to sell the planned development sites for other core projects such as redevelopment of 440 First Street, NW, also in DC. The property is slated for completion in mid-2013.
1200 17th Street is strategically located in close proximity to the Red, Blue and Orange Metro Lines. The building is currently under demolition and will be redeveloped as a 170,000 square-foot free-standing structure. The construction is slated to be completed by the fourth quarter of 2014.
The new owner of the property, MFA, is the U.S. subsidiary of Japanese real estate company Mitsui Fudosan Co. Ltd. . The company engages in investment and development of real estate properties and has invested in prestigious U.S. markets in Los Angeles, San Francisco, Washington, DC and New York.
In 2011, First Potomac acquired 95% interest in the property in collaboration with its joint venture partner Akridge. The property was previously owned by the National Restaurant Association.
Akridge is a full service real estate firm also based in Washington DC. It provides leasing, acquisition, development, construction management, property management and other services. Akridge will continue the development of the 1200 17th Street, NW property with the new owner.
First Potomac owns, develops, redevelops and operates business parks and industrial properties in the metropolitan area of Washington, DC and other submarkets of Maryland and Virginia. As of June 30, 2012, the company's portfolio comprises more than 14 million square feet of space and consists of 42% office, 22% industrial properties and 36% business parks.
The company recently reported second-quarter 2012 core FFO (funds from Operations) of 32 cents, beating the Zacks Consensus Estimate by 7 cents. We presently have a long-term Neutral recommendation on the stock. Also, it carries a Zacks #3 Rank (short-term Hold rating).
Note: FFO, a widely accepted and reported measure of the performance of REITs, is derived by adding depreciation, amortization and other non-cash expenses to net income.