BETHESDA, Md., July 25, 2013 /PRNewswire/ -- First Potomac
Realty Trust (NYSE: FPO), a leader in the ownership, management,
development and redevelopment of office and business park
properties in the greater Washington,
D.C. region, reported results for the three and six months
ended June 30, 2013.
(Logo:
http://photos.prnewswire.com/prnh/20130604/MM26388LOGO)
Second Quarter 2013 Highlights
- Executed on the industrial portfolio sale, a key component
of the updated strategic and capital plan, which generated total
gross proceeds of $259.0
million.
- Successfully completed the public offering of 7,475,000
common shares, the proceeds of which were largely utilized to pay
down debt.
- Reported Core Funds From Operations of $15.9 million, or $0.28 per diluted share.
- Executed 540,000 square feet of leases, including 234,000
square feet of new leases.
- Brought Redland Corporate Center, a 349,000 square foot
office property in Rockville,
Maryland, from 40% leased at acquisition to 100%
leased.
- Signed first office lease at 440 First Street, NW on Capitol
Hill with Associated Builders and Contractors, Inc. for
approximately 20,000 square feet.
Douglas J. Donatelli, Chairman
and CEO of First Potomac Realty Trust, stated, "The second quarter
marked significant progress with respect to our previously
announced updated strategic and capital plan, as we concentrated
our operating focus through the sale of the industrial portfolio,
and decreased leverage through the use of proceeds from both that
sale and our common equity offering. We signed more than
540,000 square feet of leases, including 234,000 square feet of new
leases, reduced the remaining lease expirations for the year, and
increased both the leased and occupied percentages in our
portfolio. We also expanded our Board of Trustees and
appointed a new trustee. We believe these results mark
significant steps towards our goal of positioning First Potomac to
be the leading owner of high-quality office properties in the
region in the coming years."
Funds From Operations ("FFO") increased for the three and six
months ended June 30, 2013 compared
with the same periods in 2012 primarily due to a reduction in loss
on debt extinguishment and reduced legal and accounting fees.
During the second quarter of 2013, the Company sold the majority of
its industrial portfolio (including I-66 Commerce Center), which is
explained in greater detail below, for aggregate gross proceeds of
$259.0 million. In connection with
the sale, the Company prepaid $42.7
million of debt associated with the sold properties and used
a portion of the proceeds from the sale to prepay a $16.4 million mortgage loan that encumbered
Cloverleaf Center, which resulted in an aggregate $4.6 million loss on debt extinguishment for the
three months ended June 30, 2013.
During the second quarter of 2012, the Company recorded
$13.2 million of debt extinguishment
charges from the prepayment of its senior notes, and $2.5 million of legal and accounting fees
associated with the Company's completed internal investigation.
Core FFO decreased for the three months ended June 30, 2013 compared with the same period in
2012, primarily due to a decline in net operating income as a
result of selling the industrial portfolio, which is reflected in
discontinued operations. Core FFO increased slightly for the
six months ended June 30, 2013
compared with the same period in 2012, due to a reduction in
interest expense as the Company refinanced approximately
$180 million of debt at lower
interest rates from June 2012 though
the end of 2012, which was partially offset by a reduction in net
operating income.
A reconciliation between Core FFO and FFO available to common
shareholders for the three and six months ended June 30, 2013 and 2012 is presented below (in
thousands, except per share amounts):
|
Three Months Ended
June 30,
|
|
Six Months Ended June
30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Amount
|
|
Per
diluted
share(1)
|
|
Amount
|
|
Per
diluted
share(1)
|
|
Amount
|
|
Per
diluted
share(1)
|
|
Amount
|
|
Per
diluted
share(1)
|
Core FFO
|
$
15,886
|
|
$
0.28
|
|
$
16,929
|
|
$
0.32
|
|
$
31,733
|
|
$
0.58
|
|
$
31,484
|
|
$
0.60
|
Loss on
debt extinguishment
|
(4,615)
|
|
(0.08)
|
|
(13,221)
|
|
(0.25)
|
|
(4,615)
|
|
(0.08)
|
|
(13,325)
|
|
(0.26)
|
Internal
investigation costs
|
-
|
|
-
|
|
(2,533)
|
|
(0.05)
|
|
-
|
|
-
|
|
(2,533)
|
|
(0.05)
|
Deferred
abatement and
straight-line
amortization(2)
|
-
|
|
-
|
|
-
|
|
-
|
|
1,567
|
|
0.03
|
|
-
|
|
-
|
Acquisition costs
|
-
|
|
-
|
|
(23)
|
|
-
|
|
-
|
|
-
|
|
(41)
|
|
-
|
Contingent consideration
related to acquisition of
property(3)
|
(75)
|
|
-
|
|
-
|
|
-
|
|
(75)
|
|
-
|
|
-
|
|
-
|
Legal
costs associated with
informal SEC inquiry
|
(55)
|
|
-
|
|
-
|
|
-
|
|
(391)
|
|
(0.01)
|
|
-
|
|
-
|
FFO available to
common
shareholders
|
$
11,141
|
|
$
0.20
|
|
$
1,152
|
|
$
0.02
|
|
$
28,219
|
|
$
0.52
|
|
$ 15,585
|
|
$
0.29
|
Net income
(loss)
|
$
14,476
|
|
|
|
$(13,219)
|
|
|
|
$
16,439
|
|
|
|
$(16,694)
|
|
|
Net income (loss)
attributable to
common shareholders per
diluted common
share(4)
|
$
0.20
|
|
|
|
$
(0.31)
|
|
|
|
$
0.19
|
|
|
|
$
(0.43)
|
|
|
|
(1) Numbers may not foot due
to rounding.
(2) Represents the accelerated
amortization of the straight-line balance and the deferred
abatement for Engineering Solutions at I-66
Commerce Center, which
terminated its lease prior to completion. The tenant vacated the
property at the end of March 2013. The property
was sold in May
2013.
(3) Reflects an increase in
the Company's contingent consideration liability related to its
acquisition of Ashburn Center in 2009. The Company
expects to pay $1.7 million to
the seller of the property in the third quarter of 2013 to fulfill
the obligation.
(4) Reflects amounts
attributable to noncontrolling interests and the impact of
dividends on the Company's preferred shares to arrive at net
income (loss) attributable to
common shareholders.
|
A reconciliation of net income (loss) to FFO available to common
shareholders and Core FFO, as well as definitions and statements of
purpose, are included below in the financial tables accompanying
this press release and under "Non-GAAP Financial Measures,"
respectively.
Operating Performance
At June 30, 2013, the Company's
consolidated portfolio consisted of 151 buildings totaling
approximately 9 million square feet. The Company's consolidated
portfolio was 86.5% leased and 84.0% occupied at June 30, 2013, compared with 86.3% leased and
83.9% occupied at March 31, 2013 and
85.4% leased and 84.0% occupied at June 30,
2012. Excluding the properties sold during the second
quarter of 2013, the Company's portfolio would have been 85.6%
leased and 82.3% occupied at March 31,
2013 and 85.5% leased and 83.5% occupied at June 30, 2012. On a period- over-period basis,
the increase in both the leased and occupied percentages reflect
the lease up of previously vacant space in the Company's
portfolio.
During the second quarter of 2013, the Company executed 540,000
square feet of leases, which consisted of 234,000 square feet of
new leases and 306,000 square feet of renewal leases, of which
51,000 square feet of renewal leases were associated with
industrial properties sold during the second quarter.
Excluding the properties sold during the second quarter, the
Company achieved a tenant retention rate of 79% and achieved
positive net absorption of approximately 69,000 square feet during
the second quarter.
Same-property net operating income ("Same-Property NOI") was
flat for the three months ended June 30,
2013 and increased 0.4% for the six months ended
June 30, 2013 compared with the same
periods in 2012. For the three months ended June 30, 2013, an increase in occupancy was
offset by an increase in operating expenses, partially attributable
to a higher recovery of bad debt expense in the second quarter of
2012.
A reconciliation of net income (loss) to Same-Property NOI and a
definition and statement of purpose are included below in the
financial tables accompanying this press release and under
"Non-GAAP Financial Measures," respectively.
A list of the Company's properties, as well as additional
information regarding the Company's results of operations can be
found in the Company's Second Quarter 2013 Supplemental Financial
Report, which is posted on the Company's website,
www.first-potomac.com.
Dispositions
Industrial Portfolio Sale
Consistent with the updated strategic and capital plan announced
in January, during the second quarter, the Company sold 24
industrial properties, which comprised the majority of the
Company's industrial portfolio and consisted of approximately 4.3
million square feet, 2.6 million square feet of which are located
in Southern Virginia. The
aggregate sales price of the disposition, which consisted of two
separate transactions, was $259.0
million. Specifically, on May 7,
2013, the Company sold I-66 Commerce Center, a 236,000
square foot industrial property in Haymarket, Virginia, for $17.5 million. On June 18,
2013, the Company completed the sale of the remaining 23
industrial properties to an affiliate of Blackstone Real Estate
Partners VII for $241.5 million.
The Company received gross proceeds of $259.0 million from the sale of the 24 industrial
properties. Proceeds from the sale were partially utilized to
repay $42.7 million of mortgage and
other indebtedness secured by the properties, and to pay associated
prepayment penalties and closing costs. In addition, the
Company used a portion of the net proceeds from the sale to prepay
a $16.4 million mortgage loan that
encumbered Cloverleaf Center and to repay $121.0 million of the outstanding balance under
its unsecured revolving credit facility. For tax planning purposes,
the Company also placed $28.2 million
of the net proceeds with a qualified intermediary in order to
facilitate a potential tax-free exchange in the event the Company
identifies an acquisition opportunity, which is reflected in
escrows and reserves on the Company's balance sheet. The
Company reported a gain on the sale of the portfolio of
$18.7 million in its second quarter
results, and recorded an aggregate loss on debt extinguishment of
$4.6 million that was associated with
the repayment of debt related to the industrial properties sold in
the second quarter and the prepayment of the mortgage loan
encumbered by Cloverleaf Center.
Other Dispositions
On June 5, 2013, the Company sold
a 32,000 square foot building at Lafayette Business Center, a
six-building, 254,000 square foot office park located in
Chantilly, Virginia for net
proceeds of approximately $2.5
million. The Company reported a gain on the sale of
the property of $0.2 million in its
second quarter results. The Company used the net proceeds from the
sale to repay a portion of the outstanding balance under its
unsecured revolving credit facility.
On June 14, 2013, the Company
entered into a contract to sell an additional 34,000 square foot
building at Lafayette Business Center. The sale is expected to be
completed in the third quarter of 2013. At June 30, 2013, the Company classified the
building as "held-for-sale" on its consolidated balance sheet for
each of the periods presented in this press release.
On July 15, 2013, the Company
entered into a contract to sell Triangle Business Center, a 74,000
square foot business park property located in Baltimore, Maryland. Based on the anticipated
sales price, the Company recorded an impairment charge of
$1.4 million in the second quarter of
2013. The sale is expected to be completed in the third
quarter of 2013.
The operating results of the 24 industrial properties and both
buildings at Lafayette Business Center, and the gains realized on
completed sales transactions mentioned above are reflected as
discontinued operations in the Company's consolidated statements of
operations for each of the periods presented in this press release.
Financing Activity
On May 24, 2013, the Company
completed the public offering of 7,475,000 common shares at a
public offering price of $14.70 per
share, which generated net proceeds of $105.1 million, after deducting the underwriting
discount and offering costs. The Company used a portion of the net
proceeds to repay its $10.0 million
secured term loan, its $37.5 million
secured bridge loan, and to pay down $53.0
million of the outstanding balance under its unsecured
revolving credit facility. The remaining net proceeds were utilized
for general corporate purposes.
On June 5, 2013, the Company
entered into a construction loan (the "Construction Loan") with
U.S. Bank, National Association that is collateralized by the
Company's 440 First Street, NW property, which has undergone a
major redevelopment since its acquisition. The Construction Loan
has a borrowing capacity of up to $43.5
million, of which the Company borrowed $21.7 million in the second quarter. The
Construction Loan has a variable interest rate of LIBOR plus a
spread of 2.50% and matures in May
2016, with two one-year extension options at the Company's
discretion. The Company can repay all or a portion of the
Construction Loan, without penalty, at any time during the term of
the loan.
Balance Sheet
The Company had $688.0 million of
debt outstanding at June 30, 2013
compared with $954.9 million of debt
outstanding at March 31, 2013. Of the
Company's outstanding debt at June 30,
2013, $294.4 million was
fixed-rate debt and $350.0 million
was variable-rate debt that had been swapped to a fixed interest
rate. The remainder of the Company's debt, $43.7 million, was variable-rate debt that
consisted of a $22.0 million mortgage
loan and the $21.7 million
outstanding balance under the Construction Loan.
Dividends
On July 23, 2013, the Company
declared a dividend of $0.15 per
common share, equating to an annualized dividend of $0.60 per common share. The dividend will be paid
on August 15, 2013 to common
shareholders of record as of August 6,
2013. The Company also declared a dividend of $0.484375 per share on its Series A Preferred
Shares. The dividend will be paid on August
15, 2013 to preferred shareholders of record as of
August 6, 2013.
Core FFO Guidance
The Company is updating its full-year 2013 Core FFO guidance to
$1.00 to $1.04 per diluted share. The
Company's revised guidance reflects all prior dispositions and
financing activities completed during the first and second quarter,
including the completion of the industrial portfolio sale and the
public offering of 7,475,000 common shares. Among other
things, guidance does not include the impact of any potential
acquisition opportunities. The following is a summary of the
assumptions that the Company used in arriving at its guidance,
which were updated based on the Company's first and second quarter
activity (unaudited, amounts in thousands except percentages and
per share amounts):
|
|
Expected
Ranges(1)
|
|
|
|
|
|
Portfolio
NOI(2)
|
|
$
114,000
|
-
|
$
116,000
|
Interest and Other
Income
|
|
|
6,000
|
|
FFO from
Unconsolidated Joint Ventures
|
|
5,000
|
-
|
5,500
|
|
|
|
|
|
Interest
Expense
|
|
$
33,000
|
-
|
$
36,000
|
G&A
|
|
20,000
|
-
|
21,000
|
Preferred
Dividends
|
|
|
12,400
|
|
|
|
|
|
|
Weighted Average
Shares
|
|
57,500
|
-
|
58,000
|
Average
Occupancy
|
|
84.0%
|
-
|
84.5%
|
Year-End
Occupancy
|
|
84.0%
|
-
|
85.0%
|
Same-Property NOI –
Accrual Basis
|
|
1.0%
|
-
|
2.5%
|
|
(1) The Company's guidance
reflects the disposition of the 24 industrial properties, both
buildings at Lafayette Business Center, and
Triangle Business Center, as
well as the issuance of 7,475,000 common shares as described above,
but does not take into
consideration any additional
dispositions, acquisitions or capital raising activities in
2013. The Company's guidance also excludes any
potential gains or asset
impairments associated with potential future property
dispositions.
|
(2) Does not include the
$1.5 million straight-line amortization rent impact associated with
Engineering Solutions at I-66 Commerce Center.
The tenant terminated its lease
at the end of March 2013 and the property was sold in May
2013.
|
The Company's guidance is also based on a number of other
assumptions, many of which are outside the Company's control and
all of which are subject to change. The Company may change its
guidance as actual and anticipated results vary from these
assumptions.
Guidance Range for
2013
|
|
Low Range
|
|
High Range
|
Net income
attributable to common shareholders per diluted share
|
|
$
0.08
|
|
$
0.12
|
Real estate
depreciation(1)
|
|
1.17
|
|
1.17
|
I-66 Commerce Center
accelerated amortization
|
|
(0.03)
|
|
(0.03)
|
Net loss attributable
to noncontrolling interests and items excluded
from Core FFO per diluted
share(2)
|
|
(0.22)
|
|
(0.22)
|
Core FFO per diluted
share
|
|
$
1.00
|
|
$
1.04
|
|
|
|
|
|
|
(1) Includes the Company's
pro-rata share of depreciation from its unconsolidated joint
ventures and depreciation related to the
Company's disposed
properties.
|
(2) Items excluded from Core
FFO consist of the gains associated with disposed properties and
the costs associated with the informal
SEC inquiry, contingent
consideration, impairment charges and debt
extinguishments.
|
Investor Conference Call and Webcast
First Potomac will host a
conference call on July 26, 2013 at
9:00 AM ET to discuss second quarter
results. The conference call can be accessed by dialing (877)
705-6003 or (201) 493-6725 for international participants. A
replay of the call will be available from 12:00 Noon ET on July 26,
2013, until midnight ET on
August 2, 2013. The replay can
be accessed by dialing (877) 870-5176 or (858) 384-5517 for
international callers, and entering pin number 417107.
A live broadcast of the conference call will also be available
online at the Company's website, www.first-potomac.com, on
July 26, 2013, beginning at
9:00 AM ET. An online replay will
follow shortly after the call and will continue for 90 days.
About First Potomac Realty Trust
First Potomac Realty Trust is a self-administered, self-managed
real estate investment trust that focuses on owning, operating,
developing and redeveloping office and business park properties in
the greater Washington, D.C.
region. As of June 30, 2013, the
Company's consolidated portfolio totaled approximately 9 million
square feet. Based on annualized cash basis rent, the Company's
portfolio consists of 52% office properties and 48% business park
and industrial properties. A key element of First Potomac's
overarching strategy is its dedication to sustainability. Nearly
one million square feet of First Potomac property is LEED
Certified, with the potential for another one million square feet
in future development projects. Approximately half of
the portfolio's multi-story office square footage is LEED or
Energy Star Certified and 81% of First Potomac's Washington, DC portfolio is Energy Star
Certified. FPO common shares (NYSE: FPO) and preferred shares
(NYSE: FPO-PA) are publicly traded on the New York Stock
Exchange.
Non-GAAP Financial Measures
Funds from Operations – Funds from operations ("FFO")
represents net income (computed in accordance with U.S. generally
accepted accounting principles ("GAAP")), excluding gains (losses)
on sales of real estate and impairments of real estate assets, plus
real estate-related depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures. The
Company also excludes, from its FFO calculation, any depreciation
and amortization related to third parties from its consolidated
joint ventures. The Company considers FFO a useful measure of
performance for an equity REIT because it facilitates an
understanding of the operating performance of its properties
without giving effect to real estate depreciation and amortization,
which assume that the value of real estate assets diminishes
predictably over time. Since real estate values have historically
risen or fallen with market conditions, the Company believes that
FFO provides a meaningful indication of its performance. The
Company also considers FFO an appropriate performance measure given
its wide use by investors and analysts. The Company computes FFO in
accordance with standards established by the Board of Governors of
NAREIT in its March 1995 White Paper
(as amended in November 1999,
April 2002 and January 2012), which may differ from the
methodology for calculating FFO utilized by other equity real
estate investment trusts ("REITs") and, accordingly, may not be
comparable to such other REITs. Further, FFO does not represent
amounts available for management's discretionary use because of
needed capital replacement or expansion, debt service obligations
or other commitments and uncertainties, nor is it indicative of
funds available to fund the Company's cash needs, including its
ability to make distributions. The Company presents FFO per diluted
share calculations that are based on the outstanding dilutive
common shares plus the outstanding Operating Partnership units for
the periods presented.
Core FFO – Management believes that the computation of
FFO in accordance with NAREIT's definition includes certain items
that are not indicative of the results provided by the Company's
operating portfolio and affect the comparability of the Company's
period-over-period performance. These items include, but are not
limited to, gains and losses on the retirement of debt, legal and
accounting costs related to the Company's prior internal
investigation and the informal SEC inquiry, personnel separations
costs, contingent consideration charges and acquisition costs.
The Company's presentation of FFO in accordance with the NAREIT
white paper, or presentation of Core FFO, should not be considered
as an alternative to net income (computed in accordance with GAAP)
as an indicator of the Company's financial performance or to cash
flow from operating activities (computed in accordance with GAAP)
as an indicator of its liquidity. The Company's FFO and Core FFO
calculations are reconciled to net income in the Company's
Consolidated Statements of Operations included in this release.
NOI – The Company defines net operating income ("NOI") as
operating revenues (rental income, tenant reimbursements and other
income) less property and related expenses (property expenses, real
estate taxes and insurance). Management believes that NOI is a
useful measure of the Company's property operating performance as
it provides a performance measure of the revenues and expenses
directly associated with owning, operating, developing and
redeveloping office and business park properties, and provides a
perspective not immediately apparent from net income or FFO. Other
REITs may use different methodologies for calculating NOI, and
accordingly, the Company's NOI may not be comparable to other
REITs. The Company's NOI calculations are reconciled to total
revenues and total operating expenses at the end of this
release.
Same-Property NOI – Same-Property Net Operating Income
("Same-Property NOI"), defined as operating revenues (rental,
tenant reimbursements and other revenues) less operating expenses
(property operating expenses, real estate taxes and insurance) from
the properties owned by the Company for the entirety of the periods
compared, is a primary performance measure the Company uses to
assess the results of operations at its properties. As an
indication of the Company's operating performance, Same-Property
NOI should not be considered an alternative to net income
calculated in accordance with GAAP. A reconciliation of the
Company's Same-Property NOI to net income from its consolidated
statements of operations is presented below. The Same-Property NOI
results exclude corporate-level expenses, as well as certain
transactions, such as the collection of termination fees, as these
items vary significantly period-over-period thus impacting trends
and comparability. Also, the Company eliminates depreciation and
amortization expense, which are property level expenses, in
computing Same-Property NOI as these are non-cash expenses that are
based on historical cost accounting assumptions and do not offer
the investor significant insight into the operations of the
property. This presentation allows management and investors to
distinguish whether growth or declines in net operating income are
a result of increases or decreases in property operations or the
acquisition of additional properties. While this presentation
provides useful information to management and investors, the
results below should be read in conjunction with the results from
the consolidated statements of operations to provide a complete
depiction of total Company performance.
Forward Looking Statements
The forward-looking statements contained in this press release,
including statements regarding the Company's 2013 Core FFO guidance
and related assumptions, the benefits of the sale of the Company's
industrial properties, the potential sale of Triangle Business
Center and a building at Lafayette Business Center and the
timing of such sales, and future acquisition and growth
opportunities, are subject to various risks and uncertainties.
Although the Company believes the expectations reflected in such
forward-looking statements are based on reasonable assumptions,
there can be no assurance that its expectations will be achieved.
Certain factors that could cause actual results to differ
materially from the Company's expectations include changes in
general or regional economic conditions; the Company's ability to
timely lease or re-lease space at current or anticipated rents;
changes in interest rates; changes in operating costs; the
Company's ability to complete acquisitions on acceptable terms; the
Company's ability to manage its current debt levels and repay or
refinance its indebtedness upon maturity or other required payment
dates; the Company's ability to maintain financial covenant
compliance under its debt agreements; the Company's ability to
maintain effective internal controls over financial reporting and
disclosure controls and procedures; any impact of the informal
inquiry initiated by the U.S. Securities and Exchange Commission
(the "SEC"); the Company's ability to obtain debt and/or financing
on attractive terms, or at all; changes in the assumptions
underlying the Company's earnings and Core FFO guidance and other
risks detailed in the Company's Annual Report on Form 10-K and
described from time to time in the Company's filings with the SEC.
Many of these factors are beyond the Company's ability to control
or predict. Forward-looking statements are not guarantees of
performance. For forward-looking statements herein, the Company
claims the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform
Act of 1995. The Company assumes no obligation to update or
supplement forward-looking statements that become untrue because of
subsequent events.
FIRST POTOMAC
REALTY TRUST Consolidated Statements of Operations
(unaudited, amounts in thousands, except per share
amounts)
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended June
30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Revenues:
|
|
|
|
|
|
|
|
Rental
|
$
32,551
|
|
$
31,370
|
|
$
64,697
|
|
$
62,604
|
Tenant reimbursements
and other
|
8,106
|
|
8,891
|
|
16,994
|
|
16,473
|
|
|
|
|
|
|
|
|
Total
revenues
|
40,657
|
|
40,261
|
|
81,691
|
|
79,077
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Property
operating
|
9,947
|
|
8,623
|
|
20,916
|
|
18,474
|
Real estate taxes and
insurance
|
4,204
|
|
4,027
|
|
8,935
|
|
7,955
|
General and
administrative
|
4,985
|
|
7,245
|
|
10,252
|
|
12,142
|
Acquisition
costs
|
-
|
|
23
|
|
-
|
|
41
|
Depreciation and
amortization
|
14,739
|
|
13,738
|
|
29,244
|
|
27,289
|
Impairment of real
estate assets
|
1,446
|
|
-
|
|
1,446
|
|
1,949
|
Contingent
consideration related to acquisition of
property
|
75
|
|
-
|
|
75
|
|
-
|
|
|
|
|
|
|
|
|
Total operating
expenses
|
35,396
|
|
33,656
|
|
70,868
|
|
67,850
|
|
|
|
|
|
|
|
|
Operating
income
|
5,261
|
|
6,605
|
|
10,823
|
|
11,227
|
|
|
|
|
|
|
|
|
Other expenses,
net:
|
|
|
|
|
|
|
|
Interest
expense
|
9,353
|
|
10,358
|
|
19,310
|
|
21,022
|
Interest and other
income
|
(1,574)
|
|
(1,499)
|
|
(3,105)
|
|
(3,007)
|
Equity in (earnings)
losses of affiliates
|
(7)
|
|
(24)
|
|
(35)
|
|
22
|
Loss on debt
extinguishment
|
201
|
|
13,221
|
|
201
|
|
13,221
|
|
|
|
|
|
|
|
|
Total other expenses,
net
|
7,973
|
|
22,056
|
|
16,371
|
|
31,258
|
|
|
|
|
|
|
|
|
Loss from continuing
operations before income taxes
|
(2,712)
|
|
(15,451)
|
|
(5,548)
|
|
(20,031)
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
-
|
|
(101)
|
|
-
|
|
(162)
|
|
|
|
|
|
|
|
|
Loss from continuing
operations
|
(2,712)
|
|
(15,552)
|
|
(5,548)
|
|
(20,193)
|
|
|
|
|
|
|
|
|
Discontinued
operations:
|
|
|
|
|
|
|
|
Income from
operations
|
2,655
|
|
2,172
|
|
7,454
|
|
3,338
|
Loss on debt
extinguishment
|
(4,414)
|
|
-
|
|
(4,414)
|
|
-
|
Gain on sale of real estate
property
|
18,947
|
|
161
|
|
18,947
|
|
161
|
|
|
|
|
|
|
|
|
Income from
discontinued operations
|
17,188
|
|
2,333
|
|
21,987
|
|
3,499
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
14,476
|
|
(13,219)
|
|
16,439
|
|
(16,694)
|
|
|
|
|
|
|
|
|
Less: Net (income) loss attributable to
noncontrolling
interests
|
(466)
|
|
789
|
|
(406)
|
|
1,108
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to First Potomac Realty
Trust
|
14,010
|
|
(12,430)
|
|
16,033
|
|
(15,586)
|
|
|
|
|
|
|
|
|
Less: Dividends on
preferred shares
|
(3,100)
|
|
(3,100)
|
|
(6,200)
|
|
(5,764)
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to common shareholders
|
$
10,910
|
|
$
(15,530)
|
|
$
9,833
|
|
$
(21,350)
|
|
|
|
|
|
|
|
|
Depreciation and
amortization:
|
|
|
|
|
|
|
|
Real estate
assets
|
14,739
|
|
13,738
|
|
29,244
|
|
27,289
|
Discontinued
operations
|
1,255
|
|
2,482
|
|
3,659
|
|
5,053
|
Unconsolidated joint
ventures
|
1,317
|
|
1,484
|
|
2,669
|
|
2,967
|
Consolidated joint
ventures
|
(53)
|
|
(44)
|
|
(104)
|
|
(82)
|
Impairment of
real estate assets
|
1,446
|
|
-
|
|
1,446
|
|
3,021
|
Gain on sale of real
estate property
|
(18,947)
|
|
(161)
|
|
(18,947)
|
|
(161)
|
Net income (loss)
attributable to noncontrolling
interests in the Operating
Partnership
|
474
|
|
(817)
|
|
419
|
|
(1,152)
|
|
|
|
|
|
|
|
|
Funds from operations
available to common
shareholders
|
$
11,141
|
|
$
1,152
|
|
$
28,219
|
|
$
15,585
|
FIRST POTOMAC
REALTY TRUST Consolidated Statements of Operations
(unaudited, amounts in thousands, except per share
amounts)
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended June
30,
|
|
2013
|
|
2012
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
Funds from operations
(FFO)
|
$
14,241
|
|
$
4,252
|
|
|
$
34,419
|
|
$
21,349
|
Less: Dividends on
preferred shares
|
(3,100)
|
|
(3,100)
|
|
|
(6,200)
|
|
(5,764)
|
FFO available to
common shareholders
|
11,141
|
|
1,152
|
|
|
28,219
|
|
15,585
|
|
|
|
|
|
|
|
|
|
Loss on
debt extinguishment
|
4,615
|
|
13,221
|
|
|
4,615
|
|
13,325
|
Internal
investigation costs
|
-
|
|
2,533
|
|
|
-
|
|
2,533
|
Deferred
abatement and straight-line amortization
|
-
|
|
-
|
|
|
(1,567)
|
|
-
|
Acquisition costs
|
-
|
|
23
|
|
|
-
|
|
41
|
Contingent consideration related to acquisition of
property
|
75
|
|
-
|
|
|
75
|
|
-
|
Legal
costs associated with informal SEC inquiry
|
55
|
|
-
|
|
|
391
|
|
-
|
|
|
|
|
|
|
|
|
|
Core FFO
|
$
15,886
|
|
$
16,929
|
|
|
$
31,733
|
|
$
31,484
|
|
|
|
|
|
|
|
|
|
Basic and diluted
earnings per common share:
|
|
|
|
|
|
|
|
|
Loss from continuing
operations
|
$
(0.11)
|
|
$
(0.35)
|
|
|
$
(0.21)
|
|
$
(0.50)
|
Income from discontinued
operations
|
0.31
|
|
0.04
|
|
|
0.40
|
|
0.07
|
Net income (loss)
|
$
0.20
|
|
$
(0.31)
|
|
|
$
0.19
|
|
$
(0.43)
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
53,586
|
|
50,098
|
|
|
52,004
|
|
49,940
|
|
|
|
|
|
|
|
|
|
FFO available to
common shareholders per share –
basic
|
$
0.20
|
|
$
0.02
|
|
|
$
0.52
|
|
$
0.30
|
FFO available to
common shareholders per share –
diluted
|
$
0.20
|
|
$
0.02
|
|
|
$
0.52
|
|
$
0.29
|
Core FFO per share –
diluted
|
$
0.28
|
|
$
0.32
|
|
|
$
0.58
|
|
$
0.60
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares and units
outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
56,184
|
|
52,834
|
|
|
54,602
|
|
52,768
|
Diluted
|
56,289
|
|
52,889
|
|
|
54,703
|
|
52,848
|
FIRST POTOMAC
REALTY TRUST Consolidated Balance Sheets
(Amounts in thousands, except per share amounts)
|
|
|
|
June 30,
2013
|
|
December 31,
2012
|
|
(unaudited)
|
|
|
Assets:
|
|
|
|
Rental property,
net
|
$
1,219,207
|
|
$
1,450,679
|
Assets
held-for-sale
|
2,784
|
|
-
|
Cash and cash
equivalents
|
64,649
|
|
9,374
|
Escrows and
reserves
|
39,002
|
|
13,421
|
Accounts and other
receivables, net of allowance for doubtful
accounts of $1,689
and $1,799, respectively
|
13,413
|
|
15,271
|
Accrued straight-line
rents, net of allowance for doubtful
accounts of $198
and $530, respectively
|
27,975
|
|
28,133
|
Notes receivable,
net
|
54,740
|
|
54,730
|
Investment in
affiliates
|
49,651
|
|
50,596
|
Deferred costs,
net
|
39,413
|
|
40,370
|
Prepaid expenses and
other assets
|
7,095
|
|
8,597
|
Intangible assets,
net
|
39,737
|
|
46,577
|
|
|
|
|
Total
assets
|
$
1,557,666
|
|
$
1,717,748
|
|
|
|
|
Liabilities:
|
|
|
|
Mortgage
loans
|
$
338,046
|
|
$
418,864
|
Secured term
loan
|
-
|
|
10,000
|
Unsecured term
loan
|
300,000
|
|
300,000
|
Unsecured revolving
credit facility
|
50,000
|
|
205,000
|
Accounts payable and
other liabilities
|
50,254
|
|
64,920
|
Accrued
interest
|
1,906
|
|
2,653
|
Rents received in
advance
|
6,218
|
|
9,948
|
Tenant security
deposits
|
5,248
|
|
5,968
|
Deferred market rent,
net
|
1,880
|
|
3,535
|
|
|
|
|
Total
liabilities
|
753,552
|
|
1,020,888
|
|
|
|
|
Noncontrolling
interests in the Operating Partnership
|
34,786
|
|
34,367
|
|
|
|
|
Equity:
|
|
|
|
Preferred
Shares, $0.001 par value, 50,000 shares authorized;
Series A Preferred
Shares, $25 liquidation preference, 6,400
shares issued and
outstanding
|
160,000
|
|
160,000
|
Common shares,
$0.001 par value, 150,000
shares
authorized; 58,764 and
51,047 shares issued and
outstanding,
respectively
|
59
|
|
51
|
Additional paid-in
capital
|
910,206
|
|
804,584
|
Noncontrolling
interests in consolidated partnerships
|
3,715
|
|
3,728
|
Accumulated other
comprehensive loss
|
(4,186)
|
|
(10,917)
|
Dividends in excess
of accumulated earnings
|
(300,466)
|
|
(294,953)
|
|
|
|
|
Total
equity
|
769,328
|
|
662,493
|
|
|
|
|
Total liabilities,
noncontrolling interests and equity
|
$
1,557,666
|
|
$
1,717,748
|
FIRST POTOMAC
REALTY TRUST Same-Property Analysis
(unaudited, dollars in thousands)
|
|
|
Same-Property
NOI(1)
|
Three Months Ended
June 30,
|
|
Six Months Ended June
30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Total base
rent
|
$
31,484
|
|
$
30,958
|
|
$
62,837
|
|
$
62,057
|
Tenant reimbursements
and other
|
7,522
|
|
7,186
|
|
15,915
|
|
14,354
|
Property operating
expenses
|
(8,959)
|
|
(8,242)
|
|
(19,086)
|
|
(17,832)
|
Real estate taxes and
insurance
|
(4,066)
|
|
(3,922)
|
|
(8,655)
|
|
(7,773)
|
Same-Property NOI
- accrual basis
|
25,981
|
|
25,980
|
|
51,011
|
|
50,806
|
Straight-line
revenue, net
|
(330)
|
|
(389)
|
|
(719)
|
|
(940)
|
Deferred market
rental revenue, net
|
14
|
|
98
|
|
27
|
|
118
|
Same-Property NOI
- cash basis
|
$
25,665
|
|
$
25,689
|
|
$
50,319
|
|
$
49,984
|
|
|
|
|
|
|
|
|
Change in
same-property NOI - accrual basis
|
0.0%
|
|
|
|
0.4%
|
|
|
Change in
same-property NOI - cash basis
|
(0.1)%
|
|
|
|
0.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-property
percentage of total portfolio (sf)
|
94.4%
|
|
|
|
94.4%
|
|
|
|
|
|
|
Reconciliation of
Consolidated NOI to Same-Property NOI
|
Three Months Ended
June 30,
|
|
Six Months Ended June
30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Total
revenues
|
$
40,657
|
|
$
40,261
|
|
$
81,691
|
|
$
79,077
|
Property operating
expenses
|
(9,947)
|
|
(8,623)
|
|
(20,916)
|
|
(18,474)
|
Real estate taxes and
insurance
|
(4,204)
|
|
(4,027)
|
|
(8,935)
|
|
(7,955)
|
NOI
|
|
26,506
|
|
27,611
|
|
51,840
|
|
52,648
|
|
|
|
|
|
|
|
|
Less: Non-same
property NOI(2)
|
(525)
|
|
(1,631)
|
|
(829)
|
|
(1,842)
|
Same-Property NOI
– accrual basis
|
$
25,981
|
|
$
25,980
|
|
$
51,011
|
|
$
50,806
|
|
|
|
|
|
|
|
|
|
Change in Same-Property NOI by Region (accrual
basis)
|
Three Months
Ended
June 30,
2013
|
|
Percentage
of
Base Rent
|
|
Six Months Ended
June 30, 2013
|
|
Percentage
of
Base Rent
|
Washington,
D.C.
|
5.0%
|
|
14%
|
|
2.7%
|
|
14%
|
Maryland
|
(4.7)%
|
|
32%
|
|
(1.1)%
|
|
32%
|
Northern
Virginia
|
3.3%
|
|
31%
|
|
0.3%
|
|
31%
|
Southern
Virginia
|
(1.5)%
|
|
23%
|
|
1.0%
|
|
23%
|
|
|
|
|
|
|
|
|
Change in Same-Property NOI by Property Type (accrual
basis)
|
|
|
|
|
|
|
|
Business Park /
Industrial
|
(0.2)%
|
|
46%
|
|
(2.9)%
|
|
46%
|
Office
|
0.2%
|
|
54%
|
|
3.5%
|
|
54%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Same-property comparisons are based upon those consolidated
properties owned for the entirety of the periods presented.
Same-property results exclude the operating
results of the following non
same-properties that were owned as of June 30, 2013: Three Flint
Hill, 440 First Street, NW, Davis Drive and one building at
Lafayette Business
Center.
(2)
Non-same property NOI has been adjusted to reflect a normalized
management fee percentage in lieu of an administrative overhead
allocation for comparative purposes.
|
CONTACT:
Jaime N. Marcus
Manager, Investor Relations
(301) 986-9200
jmarcus@first-potomac.com
SOURCE First Potomac Realty Trust