Considering that the building is empty, its sale demonstrates the relative strength of the office market, says Kornick. It also demonstrates the ideal position companies with a cash store--such as First Potomac--are in as they seek out the best opportunities inacquiring buildings below replacement costs, as the company did with Three Flint Hill.
Lockheed Martin occupied the building for more than 20 years before its lease expired in November 2009. The defense contractor has since consolidated operations into other locations. To reposition the property, First Potomac plans to renovate all eight stories and the penthouse and then pursue LEED certification. It plans to spend an additional $5 million, or approximately $30 per square foot, on the renovations.
First Potomac financed the acquisition with a combination of availablecash and a draw on its unsecured revolving credit facility. Atstabilization the property is expected to generate a 10% to 12%unleveraged return on invested capital.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
