Corporate News Blog – Government Properties Income Trust to Acquire First Potomac Realty Trust; Set to Expand its Property Portfolio in Metropolitan Washington, D.C. Area

LONDON, UK / ACCESSWIRE / June 30, 2017 / Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for First Potomac Realty Trust (NYSE: FPO) (“FPO”), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=FPO. Government Properties Income Trust (NASDAQ: GOV) (“GOV”) announced on June 28, 2017, that its Board of Directors has unanimously approved a definitive merger agreement, pursuant to which it will acquire all the outstanding common shares of First Potomac Realty Trust for about $1.4 billion, including $11.15 per FPO’s common share in cash and repayment or assumption of FPO’s debt. The transaction is subject to the approval of at least a majority of FPO’s common shareholders and other customary closing conditions and is expected to close prior to the end of 2017. For immediate access to our complimentary reports, including today’s coverage, register for free now at: http://protraderdaily.com/register/.

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The Announcement

GOV views this announcement as a step to expand its business strategy to include the acquisition, ownership, and operation of office properties leased to both government and private sector tenants in the metropolitan Washington, D.C. market area. Currently, the Metropolitan Washington D.C. market area is one of the largest office markets in the US and is the nation’s largest beneficiary of spending by the Government of United States. Outside of the particular area, GOV will incline its focus on acquiring, owning, and operating office properties that are majority leased to government tenants.

GOV believes that the high-quality office and industrial properties from FPO are well located in the metropolitan market area, and are complementary to the Company’s portfolio. Currently, FPO’s portfolio includes 39 properties, or 74 buildings comprising of about 6.5 million square feet, that was 92.2% leased as of March 31, 2017. As of March 31, 2017, government and other investment grade rated tenants represented about 43.9% of FPO’s net annualized rental income.

The Company expects this transaction to deliver multiple potential growth opportunities while realizing about $11 million of annual general and administrative expense savings, compared against FPO on a stand-alone basis.

Operating Metrics

As of March 31, 2017, before the acquisition of FPO, the Company’s portfolio included $4.1 billion of consolidated gross assets with 113 properties spanning over 18 million square feet which are 94.1% leased for 4.9 years on weighted average annualized rental income.

GOV generated 71.7% of the total annualized rental income from government and other investment grade tenants, of which 59.9% of the total annualized rental income was generated from government tenants. Currently, GOV’s properties are located in 31 states and Washington, D.C., where the Company generates 54.3% of total annualized rental income from the metropolitan Washington, D.C. market area.

Financing Details

The net payable amount of $1.4 billion includes the cash consideration to be paid to FPO’s shareholders of about $683 million in aggregate, and about $418 million of FPO’s debt and about $232 million of FPO’s mortgage debt, and the payment of transaction fees and expenses, net of FPO’s cash on hand.

GOV plans to finance this transaction on a long-term basis with the sale of common shares, additional debt, including senior unsecured notes, mortgage financing and/or bank debt, and/or with proceeds from the sale of certain properties. The Company believes that the transaction is accretive to GOV’s normalized funds from operations per share after 2018 and approximately leveraging neutral on a debt to gross assets basis after completion of GOV’s long-term financing plan.

Last Close Stock Review

First Potomac Realty Trust’s share price finished yesterday’s trading session at $11.11, rising slightly by 0.45%. A total volume of 1.77 million shares have exchanged hands, which was higher than the 3-month average volume of 352.08 thousand shares. The Company’s stock price rallied 9.03% in the last three months, 5.21% in the past six months, and 21.29% in the previous twelve months. Additionally, the stock gained 1.28% since the start of the year. Shares of the Company have a PE ratio of 17.22 and have a dividend yield of 3.60%. The stock currently has a market cap of $643.05 million.

At the closing bell, on Thursday, June 29, 2017, Government Properties Income Trust’s stock tumbled 5.28%, ending the trading session at $18.31. A total volume of 20.48 million shares have exchanged hands, which was higher than the 3-month average volume of 591.35 thousand shares. The stock is trading at a PE ratio of 26.77 and has a dividend yield of 9.39%. The stock currently has a market cap of $1.30 billion.

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