WASHINGTON, DC-First Potomac acquired its second office building in the District, following this summer’s purchase of 500 First St., NW for $68 million. Now the REIT has acquired 1750 H St., NW for $65 million in an off market trade.
It is acquiring the building in a 50-50 joint venture with AEW Capital Management L.P. The deal is a sale-leaseback transaction, with seller National Treasury Employee’s Union occupying 46,900-square feet on the top four floors of the 10-story, 111,000-square-foot CBD building. The building is fully leased to six tenants.
First Potomac CEO Doug Donatelli tells GlobeSt.com that the company plans to continue along this strategy of acquiring core office buildings in the District--possibly again with long-term partner AEW. “We are very bullish on downtown in particular,” he says. In general, Donatelli adds, the REIT is looking for buildings that can benefit from the current supply dynamics that are favorable to landlords in most of the city. But he rules out the Baseball District, for instance, as an area in which First Potomac might invest. “We are not crazy about it--you won’t see us too much there.”
The REIT also plans to continue its strategy of acquiring suburban properties, Donatelli says. In separate transactions, First Potomac also acquired the first mortgage loan on an office park next to BWI Airport and a single-story office building in Chesapeake, VA.
The latter, the Battlefield Corporate Center is a fully-leased, single-tenant, 97,000-square-foot business park that First Potomac snapped up for $8 million. It financed the deal with a new 10-year, $4.3-million mortgage loan at an interest rate of 4.26%. It also acquired the first mortgage loan collateralized by Aviation Business Park, a three-building, single-story office park totaling 121,000 square feet in Glen Burnie, MD for $10.6 million.
First Potomac is financing 1750 H St. in part through the assumption of a $31.4-million mortgage loan, which carries an interest rate of 5.6% and matures in July 2014. The remainder of the purchase price was split between First Potomac and AEW. It projects an initial cash yield of 6.5% and an initial accrual yield of 7% on the investment.
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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.
