WASHINGTON, DC-First Potomac has acquired a wide range of buildings in recent months--from core office assets in the District to its usual fare of well-priced suburban industrial properties.

Two interesting trades--Atlantic Corporate Park in Sterling, VA and a 90% stake in Redland Corporate Center II and III in Rockville, MD--illustrate one of the REIT’s strengths as it powers through its latest acquisition spree. First Potomac has a knack for finding well-built properties that are empty or close to it and then rapidly leasing them up. 

Atlantic Corporate Park consists of two four-story, class A, LEED Gold-certified buildings totaling 219,980 square feet. It delivered in 2008 and was vacant when First Potomac snapped it up for $22.55 million, despite a strong marketing effort by the former owner. 

Redland Corporate Center III, a 139,120-square-foot property, is actually in good shape as it is fully leased to BAE Systems. Its sister building, the 208,342-square-foot Redland Corporate Center II, however, is 99% vacant. Both are LEED Gold certified. Again, the buildings were marketed, with efforts stepped up after the BAE lease. 

Not that the owners or marketing teams did anything wrong, First Potomac’s Doug Donatelli tells GlobeSt.com. These buildings didn’t lease up for a variety of reasons--none of which now apply to First Potomac. Donatelli says he is confident these properties will lease up quickly. 

For starters, the REIT acquired the properties, particularly Atlantic Corporate Park, at a substantial discount. “We have the dollars to get it re-tenanted.” A developer needs a certain occupancy rate to get returns for a building as well as capital to finish it or make improvements, he explains. 

Beyond the dollars and cents of a transaction, there is a psychological component that Donatelli pays close attention to when evaluating deals. The owners of some buildings, in short, he says, have lost enthusiasm for the properties--especially if lease-up efforts have not gone as planned.

Also, a building that has been vacant or near vacant for a long period of time tends to be shunned by tenant reps who fear that a client might be unhappy with a TI and then decide to chop the commission. “It is not that dissimilar to having a house on the market for a long time,” Donatelli says. “It loses its luster especially if all you are doing is dropping the price to attract buyers.”  

Then there is the First Potomac brand, Donatelli says. “The market understands we are a well capitalized company, which gives prospective tenants and tenant reps more confidence and willingness to look at a building again. That also means we don’t have to squeeze every last nickel out of a lease.”