WASHINGTON, DC-First Potomac Realty Trust has just unveiled an updated strategic and capital plan that includes both a possible sale of its 4.3-million square foot industrial portfolio and, unfortunately for its shareholders, a 25% decrease in the quarterly dividend. The end result, the company said, will be a portfolio with a greater concentration of high-quality office properties in the Washington, D.C. area and additional financial flexibility.
Sixteen, or 2.6-million square feet, of the industrial assets First Potomac is marketing are in Southern Virginia. The industrial portfolio, which is being marketed by Eastdil Secured, was approximately 80% leased as of September 30, 2012 and represents approximately 17% of First Potomac’s net operating income.
First Potomac said that a portfolio sale of its industrial properties is the most efficient means of de-levering the balance sheet. After the sale First Potomac’s office portfolio will represent more than 50% of total revenue.
First Potomac is divesting itself of its industrial properties at a peak time for this asset class. On a nationwide basis, industrial vacancy is tightening quickly, according to a Cassidy Turley report. In the fourth quarter, vacancy declined by 20 basis points from the previous quarter to 8.9%. For certain product, such as big box distribution centers, vacancy is below 4% in some locations. Sales of industrial properties closed the year on a high note, up 20% year over year.
In the Mid-Atlantic region specifically, institutional interest in these assets is very high, with serious money starting to flood the region last year. Cassidy Turley estimates that the volume of deals in the area was up 75% to 80% year over year in 2012, much of which was driven by institutional investors.