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First Potomac signs 2 leases in Chesapeake

Updated: August 19, 2011 - 4:53 pm

Posted: August 19, 2011

By Philip Newswanger

First Potomac Realty Trust signed two new leases totaling 115,000 square feet in Chesapeake.

The real estate investment trust, whose stock is traded on the New York Stock Exchange under the symbol FPO, develops and owns office and industrial space in the mid-Atlantic - 5.3 million square feet in Hampton Roads and Richmond. The company is based in Bethesda, Md.

Carrier Enterprises LLC signed a 63,012-square-foot lease at Crossways Commerce

Center for seven years. The property is now 88 percent leased.

In addition, Serco Inc. signed a five-year lease for 52,054 square feet at Diamond Hill Distribution Center in Chesapeake. Diamond Hill is now 90 percent leased.

Crossways Commerce Center consists of nine buildings totaling 1.09 million square feet

on approximately 80 acres adjacent to Interstate 64.

Diamond Hill Distribution Center includes four industrial buildings totaling 712,500

square feet on 37 acres of land.

First Potomac's stock has bounced around over the past 12 months.

Its stock hit a 52-week high of $17.25 Jan. 4 and a 52-week low of $11.31 Aug. 8.

The stock closed at $13.26 a share Aug. 16.

The company reported its financials July 28. It reports both core funds from operations, a measure of profitability for real estate investment trusts, as well as net income.

Core FFO rose to $27.1 million, or 53 cents per diluted share, for the first six months of this year from $20.9 million, or 61 cents per diluted share, for the same period last year.

The company reported a loss of $3.1 million for the first six months of this year, up from a loss of $2.1 million last year.

The loss is due to increased acquisition costs and a $2.7 million impairment charge - or a loss in value of property - on the sale of property in the second quarter of this year.

The company bought two new properties for a total of $77 million and sold two properties, netting $16.1 million.

The company's president, Douglas Donatelli, said in a press release that leasing momentum is accelerating, although the occupancy rate in its buildings dropped during the second quarter.

The company's portfolio of properties was 83 percent leased at the end of June, down from 84.3 percent for the first quarter of this year.

During the second quarter, the company signed leases totaling 671,000 square feet.

New leases totaled 238,000 square feet while renewals totaled 433,000 square feet.

Two lease renewals were at Cavalier Industrial Park for 119,000 square feet and at 1434 Crossways Blvd. for 107,000 square feet in Chesapeake.

Acquisitions included One Fair Oaks, a 12-story, 214,000 square foot office building in Fairfax for $60.3 million and the Greenbrier Towers I and II in Chesapeake for $16.7 million.

The company reported $811.2 million in debt at the end of June. The majority of the debt, $547 million, was fixed at 6 percent interest.

The company's variable rate debt consisted of a $164 million credit line and $100 million on three secured loans.

In the wake of Standard & Poor's downgrade of America's credit rating, an index of real estate investment trusts fell 9.6 percent on Aug. 8, according to the National Association of Real Estate Investment Trusts, an industry group.

Yet the index rose 9.74 percent the next day, recouping all its losses.

REITS are appealing to investors because they must distribute at least 90 percent of their taxable income to shareholders each year as dividends.

In return a REIT can deduct dividends paid to shareholders from its taxable income.