First Potomac Takes DC Office for $90M

WASHINGTON, DC-Continuing its acquisition spree in the District, First Potomac Realty Trust has acquired 840 First St., NE. It is a fully-leased class A office building next to Union Station and the fourteenth property the firm has acquired since late 2009.

It is also part of a growing handful of core office buildings in the District First Potomac has bought lately; a group that includes 1211 Connecticut Ave.; 1750 H St., NW; and 500 First St., NW.  First Potomac began to emphasis this strategy--a departure from its earlier sweet spot of investing in value-add office and industrial suburban properties--about a year ago. This week it brought on CBRE’s Ernest Jarvis as SVP. Jarvis has strong ties to DC’s commercial real estate market and is expected to help First Potomac build out its presence here, according to COO Skip Dawson.

First Potomac acquired the building from the Stephen A. Goldberg Co. The contract leaves room for an additional $10 million of consideration payable depending on the terms of any lease renewal by the existing tenant or re-tenanting of the property. Right now, the building is fully leased to Group Hospitalization and Medical Services, an independent licensee of the Blue Cross and Blue Shield Association. The building was acquired at below replacement cost, says CIO Nicholas R. Smith.First Potomac financed the deal through the assumption of a $57.2 million mortgage with an interest rate of 5.2% and a remaining term of 2.5 years, the issuance of approximately 1.4-million operating partnership units and a draw on its line of credit. The company expects the property to generate an initial unleveraged return of 8.6% on a cash basis.