TYSONS, VA—First Potomac Realty Trust is selling two offices and plans to use the proceeds to help fund its previously announced share redemption transaction.

The properties are Cedar Hill I and III, which are trading for gross proceeds of $27.3 million. They are three-story office buildings totaling 102,632 square feet. They are both fully leased.

First Potomac acquired the Cedar Hill buildings in 2011 for $22.8 million. At the time of purchase, the REIT calculated that these buildings would generate an initial un-leveraged return on the purchase price of 8.7% on a cash basis.

The REIT financed the acquisitions -- it also acquired a third building at the same time in Columbia, MD for $11 million -- by assuming an existing $30-million first-mortgage loan and drawing on its revolving credit facility.

The Cedar Hill offices' sale follow First Potomac's sale of the Newington Business Park Center in Lorton, VA, for $32.5 million, earlier this month. An affiliate of Velsor Properties LLC is the buyer of the seven-building, 256,000-square foot park.

It is using the proceeds from the sale of Newington Business Park Center as well to fund the buyback of the Series A preferred shares. It has $160 million of these shares oustanding with a 7.75% coupon, according to an investor presentation.

The Series A preferred shares are callable beginning on January 18, 2016 , with no more than 60 days notice and no less than 30 days notice. Shares are callable at par plus accrued, but unpaid dividends.

In general First Potomac has been repurchasing its common shares on the rationale that the shares deliver better value to shareholders than any acquisition it could made. During the third quarter of 2015, the REIT repurchased 925,000 common shares for an average $10.99 per unit.

The property sales and stock redemption are part of phase one of the company's strategic plan to improve its portfolio and balance sheet, according to a prepared statement by CEO Robert Milkovich.

Jones Lang LaSalle represented First Potomac in the sale of Cedar Hill I & III.

Instant Insights /

First Potomac Sells Tysons Offices To Fund Share Redemption

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