Government Properties Income Trust announced a significant merger of office property owners in the Washington, D.C., area Wednesday.
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Government Properties will be acquiring First Potomac Realty Trust for $1.4B, with $683M, or $11.15 per share, paid to First Potomac investors, plus the repayment of $418M of First Potomac's debt, and the assumption of a further $232M in mortgage debt, according to an announcement posted to Government Properties' website. The transaction is pending approval from First Potomac shareholders, but is expected to close by the end of the year.
First Potomac's portfolio includes 39 properties covering a total of 6.5M SF that is 92.2% leased. Government Properties Income Trust's existing stock, consisting mostly of government tenants, comprises 113 properties totaling about 18M SF that are 94% leased across 31 states and D.C. Government Properties announced that the cap rate of its acquisition is estimated at 7%.
First Potomac had floated an acquisition earlier this year, but an analyst in May categorized it as a "rope-a-dope" move to drive investor interest. The REIT has been in sell mode for two years as it tried to shed underperforming properties.
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