First Potomac Faces Lawsuit From Shareholder Ahead Of Vote On $1.4B Merger
First Potomac Realty Trust shareholders are scheduled to vote next month on the $1.4B deal it reached to be acquired by a Boston-based REIT, but it already faces investor opposition.
Shareholder John Geml filed a lawsuit Thursday in Maryland District Court alleging First Potomac did not provide enough information to its investors to prepare for the Sept. 26 vote. First Potomac declined to comment.
On June 28, Government Properties Income Trust announced it had reached a deal to acquire First Potomac for $1.4B, with $11.15 per share paid to First Potomac investors. First Potomac's portfolio includes 39 office properties in D.C., Maryland and Virginia totaling 6.5M SF.
The lawsuit, first reported by Law 360, claims First Potomac disclosed accounting metrics such as Net Operating Income, Adjusted EBITDA and Funds From Operation (FFO), but did not provide the line item numbers used to calculate the metrics. The suit names over two dozen financial metrics First Potomac failed to disclose, which include total revenues, operating expenses, gains and losses on property sales, and real estate depreciation and amortization.
Geml, represented by D.C.-based law firm Levi & Korsinsky, filed the complaint as a class-action suit on behalf of all First Potomac shareholders who it said could be harmed. No other shareholders were named as plaintiffs in the suit. Geml's lawyers declined further comment on the suit.
The complaint alleges First Potomac violated two sections of the Securities Exchange Act of 1934. Geml is asking the court to force First Potomac to release more detailed financial information. In the event the deal is approved next month, the lawsuit asks the court to rescind the merger or award damages to the shareholders.