First Potomac Realty Trust Reports Third Quarter 2016 Results

Strong Results Reflect Continued Successful Execution of Strategic Plan to Create Shareholder Value

Completed Construction and Commenced Revenue Recognition on Fully-Leased Northern Virginia Build-to-Suit, Development Project

Marketing Additional Non-Core Assets for Sale

Company Release - 10/27/2016 4:30 PM ET

BETHESDA, Md., Oct. 27, 2016 /PRNewswire/ -- First Potomac Realty Trust (NYSE: FPO), a leader in the ownership, management, development and redevelopment of office and business park properties in the greater Washington, D.C. region, reported results for the three and nine months ended September 30, 2016.

Logo - http://photos.prnewswire.com/prnh/20130604/MM26388LOGO

Third Quarter 2016 Highlights

  • Reported net income attributable to common shareholders of $1.6 million, or $0.03 per diluted share.
  • Reported Core Funds From Operations of $17.0 million, or $0.28 per diluted share.
  • Increased same property net operating income ("Same Property NOI") by 4.1% on an accrual basis compared with the same period in 2015.
  • Increased occupied percentage to 92.8% from 89.9% at September 30, 2015.
  • Increased leased percentage to 94.1% from 91.0% at September 30, 2015.
  • Redeemed the remaining 0.6 million 7.750% Series A Cumulative Redeemable Perpetual Preferred Shares (the "7.750% Series A Preferred Shares").
  • Completed the sale of Storey Park, a development site located in Washington, D.C, for a contractual sales price of $54.5 million, which generated net proceeds of $52.7 million.
  • Retained sales brokers to market Plaza 500 and One Fair Oaks, located in Northern Virginia, as well as Aviation Business Park and Rivers Park I and II, located in Maryland and owned through unconsolidated joint ventures, as part of plan to dispose of at least $350 million of assets.

Bob Milkovich, Chief Executive Officer of First Potomac Realty Trust stated, "We are pleased to announce our fourth consecutive quarter of strong operational and financial results, as we continue to execute on our strategic plan to de-risk our portfolio, de-lever our balance sheet, and create value for our shareholders.  In the third quarter, we delivered strong same property growth, increased our leased and occupied percentages year-over-year, and continued to make progress on dispositions.  We have made significant strides towards achieving our stated goals and believe that we are well positioned to continue delivering value for First Potomac shareholders."

Third Quarter Results

For the three months ended September 30, 2016 and 2015, net income attributable to common shareholders was $1.6 million, or $0.03 per diluted share, and $0.9 million, or $0.01 per diluted share, respectively. For the nine months ended September 30, 2016 and 2015, net loss attributable to common shareholders was $8.0 million, or $0.14 per diluted share, and $4.1 million, or $0.07 per diluted share, respectively. The increase in net income for the three months ended September 30, 2016 compared with the same period in 2015 was primarily due to an increase in Same Property NOI, which was the result of an increase in occupancy in our comparable portfolio. The increase in net loss for the nine months ended September 30, 2016 compared with the same period in 2015 was primarily due to the write off of $5.5 million of original issuance costs during the nine months ended September 30, 2016 associated with the redemption of 6.4 million shares of our 7.750% Series A Preferred Shares. The original issuance costs are deducted from net income attributable to First Potomac Realty Trust to calculate net income (loss) attributable to common shareholders on our consolidated statements of operations.

Core Funds From Operations ("Core FFO") increased for the three months ended September 30, 2016 to $17.0 million, or $0.28 per diluted share, from $15.3 million, or $0.25 per diluted share, for the same period in 2015. Core FFO increased for the nine months ended September 30, 2016 to $47.9 million, or $0.79 per diluted share, from $44.9 million, $0.74 per diluted share, for the same period in 2015. These increases were primarily due to increases in Same Property NOI, which was a result of higher occupancy in our portfolio, as well as decreases in general and administrative expenses and lower accrued preferred dividends due to the redemption of our 7.750% Series A Preferred Shares. The increases in Core FFO for the three and nine months ended September 30, 2016 compared with the same periods in 2015 were partially offset by decreases in net operating income as a result of property dispositions, and a reduction in interest income due to the repayment of the $29.7 million mezzanine loan on America's Square in the first quarter of 2015 and the repayment of the $34.0 million mezzanine loan on 950 F St., NW in the second quarter of 2016.

Funds From Operations ("FFO") available to common shareholders and unitholders increased to $16.5 million, or $0.27 per diluted share, for the three months ended September 30, 2016, from $15.3 million, or $0.25 per diluted share, for the same period in 2015. FFO available to common shareholders and unitholders decreased to $42.3 million, or $0.70 per diluted share, for the nine months ended September 30, 2016 from $45.6 million, or $0.75 per diluted share, for the same period in 2015. FFO for the three and nine months ended September 30, 2016 included the write-off of $0.5 million and $5.5 million, respectively, of original issuance costs associated with the redemption of 0.6 million shares and  6.4 million shares, respectively, of our 7.750% Series A Preferred Shares. In addition, FFO for the nine months ended September 30, 2015 included a $2.4 million yield maintenance payment that we received with the prepayment of the $29.7 million mezzanine loan on America's Square in the first quarter of 2015.

A reconciliation between net income (loss) attributable to common shareholders and FFO, FFO available to common shareholders and unitholders and Core FFO for the three and nine months ended September 30, 2016 and 2015 is presented below (in thousands, except per share amounts):


Three Months Ended
September 30,


Nine Months Ended
September 30,


2016


2015


2016


2015

Net income (loss) attributable to common shareholders

$

1,607



$

859



$

(7,989)



$

(4,146)


Depreciation and amortization:








   Rental property

13,928



16,758



44,075



49,909


   Discontinued operations







1,222


Unconsolidated joint ventures

895



1,006



2,671



3,049


Impairment of rental property(1)





2,772




(Gain) loss on sale of rental property



(3,384)



1,155



(4,241)


Net income (loss) attributable to noncontrolling interests in
the Operating Partnership

71



38



(356)



(186)


Dividends on preferred shares

11



3,100



3,053



9,300


Issuance costs of redeemed preferred shares

517





5,515




Funds from operations ("FFO")

17,029



18,377



50,896



54,907


Dividends on preferred shares

(11)



(3,100)



(3,053)



(9,300)


Issuance costs of redeemed preferred shares

(517)





(5,515)




FFO available to common shareholders and unitholders

16,501



15,277



42,328



45,607


Issuance costs of redeemed preferred shares(2)

517





5,515




Yield maintenance payment(3)







(2,426)


Personnel separation costs







405


Loss on debt extinguishment





48



489


Deferred abatement and straight-line amortization(4)







854


Core FFO

$

17,018



$

15,277



$

47,891



$

44,929










Net income (loss) attributable to common shareholders per share - basic and diluted

$

0.03



$

0.01



$

(0.14)



$

(0.07)


Weighted average common shares outstanding:








Basic

57,597



57,961



57,572



58,155


Diluted

57,825



58,045



57,572



58,155










FFO available to common shareholders and unitholders per share – basic and diluted

$

0.27



$

0.25



$

0.70



$

0.75


Core FFO per share – diluted

$

0.28



$

0.25



$

0.79



$

0.74


Weighted average common shares and units outstanding:








Basic

60,175



60,580



60,160



60,779


Diluted

60,402



60,664



60,373



60,857


 

(1)

In the second quarter of 2016, we recorded a $2.8 million impairment charge related to the sale of Storey Park, which was subsequently sold in July 2016.

(2)

Represents original issuance costs associated with the 7.750% Series A Preferred Shares that were redeemed during the periods presented. These costs, which are included in FFO, but excluded from Core FFO, are deducted from net income (loss) attributable to First Potomac Realty Trust to calculate at net income (loss) attributable to common shareholders.

(3)

On February 24, 2015, the owners of America's Square, a 461,000 square foot office complex located in Washington, D.C., prepaid a mezzanine loan that had an outstanding balance of $29.7 million, which was scheduled to mature on May 1, 2016. We received a yield maintenance payment of $2.4 million associated with the prepayment of the loan.

(4)

As a result of the sale of the Richmond Portfolio in March 2015, we accelerated the amortization of straight-line rents and deferred rent abatements related to those properties.

 

The definitions of FFO, FFO available to common shareholders and unitholders and Core FFO, as well as the statements of purpose are included below under "Non-GAAP Financial Measures."

Operating Performance

At September 30, 2016, our consolidated portfolio consisted of 74 buildings totaling 6.7 million square feet. Our consolidated portfolio was 94.1% leased and 92.8% occupied at September 30, 2016 compared with 94.4% leased and 93.1% occupied at June 30, 2016 and 91.0% leased and 89.9% occupied at September 30, 2015. Year-over-year, we achieved a 310 basis-point increase in our leased percentage and a 290 basis-point increase in our occupied percentage across our consolidated portfolio. The increase in occupancy during the third quarter of 2016 compared with the same period in 2015 is primarily a result of tenant move-ins at 440 First Street, NW, Greenbrier Business Park and Cloverleaf.

During the third quarter of 2016, we executed 280,000 square feet of leases, which consisted of 74,000 square feet of new leases and 206,000 square feet of renewal leases. The 206,000 square feet of renewal leases in the quarter, which included a 107,000 square foot renewal at Plaza 500 in Northern Virginia, reflected a tenant retention rate of 81%. We experienced positive net absorption of 152,000 square feet in the third quarter of 2016, which includes the 167,000 square foot lease at the Northern Virginia build-to-suit.

For the nine months ended September 30, 2016, we executed 739,000 square feet of leases, including 245,000 square feet of new leases and 494,000 square feet of renewal leases, achieved a tenant retention rate of 81% and had positive net absorption of 166,000 square feet. Our executed new and renewal leases for the nine months ended September 30, 2016 do not include a one-year lease extension with the Bureau of Prisons at 500 First Street, NW, which expires in July 2017, or the 125,000 square feet of combined new and renewal leases at our unconsolidated joint venture properties.

Same Property NOI increased 4.1% on an accrual basis for the three months ended September 30, 2016 compared with the same period in 2015. Specifically, Same Property NOI increased 9.3% in Southern Virginia, 7.9% in Maryland and 1.1% in Washington, D.C. for the three months ended September 30, 2016 compared with the same period in 2015. The increases in Same Property NOI in these regions were primarily due to increases in occupancy, particularly at the following properties: 440 First Street, NW, which is located in Washington D.C., Cloverleaf, which is located in Maryland, and Greenbrier Business Park, which is located in Southern Virginia. Same Property NOI decreased 1.2% in Northern Virginia for the three months ended September 30, 2016 compared with the same period in 2015 primarily due to a decrease in occupancy.

Same Property NOI increased 5.1% on an accrual basis for the nine months ended September 30, 2016 compared with the same period in 2015. More specifically, Same Property NOI increased 9.1% in Maryland, 8.2% in Southern Virginia and 4.0% in Washington, D.C., primarily due to increases in occupancy across the portfolio in these regions. Same Property NOI decreased 0.9% in Northern Virginia for the nine months ended September 30, 2016 compared with the same period in 2015 primarily due to an increase in bad debt reserves at several non-core properties in the second quarter of 2016.

A reconciliation of net income (loss) from our consolidated statements of operations to Same Property NOI and a definition and statement of purpose are included below in the financial tables accompanying this press release and under "Non-GAAP Financial Measures," respectively.

A list of our properties, as well as additional information regarding our results of operations, and our definition of "strategic hold," "reposition" and "non-core" as they relate to our portfolio, can be found in our Third Quarter 2016 Supplemental Financial Information Report, which is posted on our website, www.first-potomac.com.

Dispositions

On July 25, 2016, we sold Storey Park, a development site located in the NoMa submarket of Washington, D.C., for net proceeds of $52.7 million. We used the proceeds from the sale to prepay, without penalty, debt encumbering the Storey Park land, to make a distribution to our 3% joint venture partner for its allocable share of the joint venture's net assets and to pay down a portion of the outstanding balance of our unsecured revolving credit facility.

Aggregate gross proceeds from dispositions identified as part of our Strategic Plan now total $205.9 million toward our stated goal of $350 million. This amount reflects the sales of Storey Park, the combined sale of Enterprise Center, Gateway Centre Manassas, Linden Business Center, Herndon Corporate Center, Prosperity Business Center, Reston Business Campus, Windsor at Battlefield and Van Buren Office Park (collectively, the "NOVA Non-Core Portfolio"), which was sold in the first quarter of 2016, as well as Cedar Hill I and III and Newington Business Park Center, which were both sold in the fourth quarter of 2015.

Consistent with our previously announced plan to sell at least $350 million of assets, we have engaged sales brokers to sell Plaza 500 and One Fair Oaks, which are located in Northern Virginia, as well as Aviation Business Park and Rivers Park I and II, which are located in Maryland and are owned through unconsolidated joint ventures. We anticipate completing the sales in late 2016 or early 2017. However, we can provide no assurances regarding the timing or pricing of such sales, or that such sales will ultimately occur.

Northern Virginia Build-to-Suit

During the third quarter of 2016, we substantially completed construction of the tenant improvements at the build-to-suit office building in Northern Virginia (the "NOVA build-to-suit"). We commenced revenue recognition of the fully leased building in August 2016, at which time the building was placed into service.

7.750% Series A Preferred Shares Redemption

As previously disclosed, on January 19, 2016 and April 27, 2016, we used proceeds from dispositions to redeem 2.2 million shares and 3.6 million shares, respectively, of our 7.750% Series A Preferred Shares at a redemption price of $25.00 per share, plus accrued dividends up to the date of redemption.

On July 6, 2016, we used a portion of the proceeds from the repayment of the 950 F Street, NW mezzanine loan in June 2016 to redeem the remaining 0.6 million outstanding shares of our 7.750% Series A Preferred Shares at a redemption price of $25.00 per share, plus accrued dividends up to the date of redemption. Subsequent to the redemption, the 7.750% Series A Preferred Shares (NYSE: FPO-PA) were delisted from trading on the New York Stock Exchange.

Financing Activity

On July 25, 2016, we used a portion of the proceeds from the sale of Storey Park to prepay, without penalty, the $22.0 million loan encumbering the Storey Park land. The loan had a variable interest rate of LIBOR + 2.50% and was scheduled to mature in October 2016.

On October 6, 2016, we prepaid, without penalty, the $12.2 million loan encumbering Hillside I and II. The loan had a fixed interest rate of 5.75% and was scheduled to mature in December 2016. The prepayment was funded with a draw on the unsecured revolving credit facility.

Balance Sheet

We had $745.5 million of gross debt outstanding at September 30, 2016, of which $245.7 million was fixed-rate debt, $240.0 million was hedged variable-rate debt and $259.8 million was unhedged variable-rate debt. The weighted average interest rate of our debt was 3.5% at September 30, 2016.

Dividends

On October 24, 2016, we declared a dividend of $0.10 per common share, equating to an annualized dividend of $0.40 per common share. The dividend will be paid on November 15, 2016 to common shareholders of record as of November 8, 2016.

2016 Core FFO Guidance

We are raising our full-year 2016 Core FFO guidance from our previous range of $1.00 to$1.05 to a current range of $1.03 to $1.06 per diluted share.  The following is a summary of the assumptions that we used in arriving at our guidance (unaudited, amounts in thousands except percentages and per share amounts):



Expected Ranges

Portfolio Net Operating Income


$

100,000


-

$

103,000


Interest and Other Income(1)



$

2,300



FFO from Unconsolidated Joint Ventures


$

5,750


-

$

6,250


Interest Expense


$

26,500


-

$

27,500


General and Administrative Expense


$

17,000


-

$

18,000


Preferred Dividends(2)



$

3,050



Weighted Average Shares and OP Units


60,200


-

60,500


Year-End Occupancy


92.0%


-

93.0%


Same Property NOI Growth - Accrual Basis


+2.0%


-

+3.5%



(1)       The $34.0 million 950 F Street, NW mezzanine loan was prepaid in the second quarter of 2016.

(2)       As of July 6, 2016 there were no remaining preferred shares outstanding.

 

Our guidance is also based on a number of other assumptions, many of which are outside our control and all of which are subject to change. We may change our guidance as actual and anticipated results vary from these assumptions.

Guidance Range for 2016


Low Range


High Range

Net loss attributable to common shareholders per diluted share


$

(0.21)



$

(0.20)


Real estate depreciation(1)


1.06



1.08


Net loss attributable to noncontrolling interests and items excluded
                 
from Core FFO per diluted share(2)


0.18



0.18


Core FFO per diluted share


$

1.03



$

1.06








(1)       Includes our pro-rata share of depreciation from our unconsolidated joint ventures and depreciation related to disposed properties.

(2)       Items excluded from Core FFO consist of personnel separation costs, the gains or losses associated with disposed properties, 
          property impairment, loss on debt extinguishment, original issuance costs on redeemed preferred shares and other non-recurring items.

 

Investor Conference Call and Webcast

We will host a conference call on October 28, 2016 at 9:00 AM ET to discuss third quarter 2016 results. The conference call can be accessed by dialing (877) 705-6003 or (201) 493-6725 for international participants.  A replay of the call will be available from 12:00 PM ET on October 28, 2016, until midnight ET on November 4, 2016.  The replay can be accessed by dialing (844) 512-2921 or (412) 317-6671 for international callers, and entering pin number 13646097.

A live broadcast of the conference call will also be available online at the Company's website, www.first-potomac.com, on October 28, 2016 beginning at 9:00 AM ET.  An online replay will follow shortly after the call and will continue for 90 days. 

About First Potomac Realty Trust

First Potomac Realty Trust is a self-administered, self-managed real estate investment trust that focuses on owning, operating, developing and redeveloping office and business park properties in the greater Washington, D.C. region.  FPO common shares (NYSE: FPO) are publicly traded on the New York Stock Exchange.  As of September 30, 2016, our consolidated portfolio totaled 6.7 million square feet. Based on annualized cash basis rent, our portfolio consists of 65% office properties and 35% business park and industrial properties. A key element of First Potomac's overarching strategy is its dedication to sustainability. Over one million square feet of First Potomac property is LEED Certified and over half of the portfolio's multi-story office square footage is LEED or Energy Star Certified.  

Non-GAAP Financial Measures

Funds from Operations - Funds from operations ("FFO"), which is a non-GAAP measure used by many investors and analysts that follow the public real estate industry, represents net income (computed in accordance with U.S. generally accepted accounting principles ("GAAP")), excluding gains (losses) on sales of rental property and impairments of rental property, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. We also exclude from our FFO calculation, the impact related to third parties from our consolidated joint venture.  FFO available to common shareholders and unitholders is calculated as FFO less accumulated dividends on our preferred shares for the applicable periods presented.  We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"), which may differ from the methodology for calculating FFO, or similarly titled measures, utilized by other equity REITs and, accordingly, may not be comparable to such other REITs.

We consider FFO and FFO available to common shareholders and unitholders useful measures of performance for an equity real estate investment trust ("REIT") as they facilitate an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assume that the value of rental property diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, we believe that FFO provides a meaningful indication of our performance. We also consider FFO an appropriate supplemental performance measure given its wide use by investors and analysts. However, FFO does not represent amounts available for our discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments and uncertainties, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions. Our methodology for computing FFO adds back noncontrolling interests in the income from our Operating Partnership in determining FFO. We believe this is appropriate as common Operating Partnership units are presented on an as-converted, one-for-one basis for shares of stock in determining FFO per diluted share.

Our presentation of FFO in accordance with NAREIT's definition should not be considered as an alternative to net (loss) income attributable to common shareholders (computed in accordance with GAAP) as an indicator of our financial performance.

Core FFO - We believe that the computation of FFO in accordance with NAREIT's definition includes certain items that are not indicative of the results provided by our operating portfolio and affect the comparability of our period-over-period performance. These items include, but are not limited to, gains and losses on the retirement of debt, legal costs associated with the informal U.S. Securities and Exchange Commission's ("SEC") inquiry, personnel separation costs, contingent consideration charges, acceleration of deferred abatement and straight-line amortization, gains on the receipt of yield maintenance payments from the prepayment of a note receivable, issuance costs of redeemed preferred shares and acquisition costs. Core FFO is presented less accumulated dividends on our preferred shares for all the periods presented.

Our presentation of Core FFO should not be considered as an alternative to net (loss) income attributable to common shareholders (computed in accordance with GAAP) as an indicator of our financial performance.  Our FFO and Core FFO calculations are reconciled to net (loss) income attributed to common shareholders in this release.

Same Property NOI - Same Property Net Operating Income ("Same Property NOI"), defined as property revenues (rental and tenant reimbursements and other revenues) less property operating expenses (real estate taxes, property operating and insurance expenses) from the consolidated properties owned by us and in-service for the entirety of the periods presented, is a primary performance measure we use to assess the results of operations at our properties.  Same Property NOI is a non-GAAP measure.  As an indication of our operating performance, Same Property NOI should not be considered an alternative to net income (loss) calculated in accordance with GAAP.  A reconciliation of our Same Property NOI to net income is presented below.  The Same Property NOI results exclude the collection of termination fees, as these items vary significantly period-over-period, thus impacting trends and comparability.  Also, Same Property NOI includes a normalized management fee percentage in lieu of an administrative overhead allocation for comparative purposes.  We eliminate depreciation and amortization expense, which are property level expenses, in computing Same Property NOI as these are non-cash expenses that are based on historical cost accounting assumptions and management believes these expenses do not offer the investor significant insight into the operations of the property. This presentation allows management and investors to determine whether growth or declines in net operating income are a result of increases or decreases in property operations or the acquisition or disposition of additional properties. While this presentation provides useful information to management and investors, the results below should be read in conjunction with the results from the consolidated statements of operations to provide a complete depiction of our total performance.

Forward Looking Statements

The forward-looking statements contained in this press release, including statements regarding our 2016 Core FFO guidance and related assumptions, the execution of our strategic plan, potential dispositions and the timing and pricing of such dispositions, future acquisition and growth opportunities, and the timing of future tenant occupancies, are subject to various risks and uncertainties. Although we believe the expectations reflected in any forward-looking statements contained herein are based on reasonable assumptions, there can be no assurance that our expectations will be achieved. Certain factors that could cause actual results to differ materially from our expectations include changes in general or regional economic conditions; our ability to timely lease or re-lease space at current or anticipated rents; changes in interest rates; changes in operating costs; our ability to complete acquisitions and dispositions on acceptable terms, or at all; our ability to manage our current debt levels and repay or refinance our indebtedness upon maturity or other required payment dates; our ability to maintain financial covenant compliance under our debt agreements; our ability to maintain effective internal controls over financial reporting and disclosure controls and procedures; any impact of the informal inquiry initiated by the SEC; our ability to obtain debt and/or financing on attractive terms, or at all; changes in the assumptions underlying our earnings and Core FFO guidance and other risks detailed in our Annual Report on Form 10-K and described from time to time in our filings with the SEC. Many of these factors are beyond our ability to control or predict. Forward-looking statements are not guarantees of performance. For forward-looking statements herein, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. We do not intend to, and expressly disclaim any duty to, update or revise the forward-looking statements in this discussion to reflect changes in underlying assumptions or factors, new information, future events or otherwise, after the date hereof, except as may be required by law. In light of these risks and uncertainties, you should not rely upon these forward-looking statements after the date of this report and should keep in mind that any forward-looking statement made in this discussion, or elsewhere, might not occur.

 

 


Consolidated Statements of Operations

(unaudited, amounts in thousands, except per share amounts)




Three Months Ended
September 30,


Nine Months Ended
September 30,


2016


2015


2016


2015

Revenues:








Rental

$

32,416



$

34,828



$

97,813



$

104,051


Tenant reimbursements and other

7,756



8,026



23,548



25,690


Total revenues

40,172



42,854



121,361



129,741


Operating expenses:








Property operating

9,500



10,901



29,580



34,676


Real estate taxes and insurance

4,755



4,815



14,891



14,668


General and administrative

4,112



4,605



12,995



15,110


Depreciation and amortization

13,928



16,758



44,075



49,909


Impairment of rental property





2,772




Total operating expenses

32,295



37,079



104,313



114,363


Operating income

7,877



5,775



17,048



15,378


Other expenses (income):








Interest expense

6,414



6,589



19,798



20,222


Interest and other income

(115)



(995)



(2,219)



(5,797)


Equity in earnings of affiliates

(664)



(432)



(1,883)



(1,235)


(Gain) Loss on sale of rental property



(3,384)



1,155



(3,384)


Loss on debt extinguishment





48




Total other expenses (income)

5,635



1,778



16,899



9,806


Income from continuing operations

2,242



3,997



149



5,572


Discontinued operations:








Loss from operations







(975)


Loss on debt extinguishment







(489)


Gain on sale of rental property







857


Loss from discontinued operations







(607)


Net income

2,242



3,997



149



4,965


     Less: Net (income) loss attributable to noncontrolling interests

(107)



(38)



430



189


Net income attributable to First Potomac Realty Trust

2,135



3,959



579



5,154


     Less: Dividends on preferred shares

(11)



(3,100)



(3,053)



(9,300)


     Less: Issuance costs of redeemed preferred shares

(517)





(5,515)




Net income (loss) attributable to common shareholders

$

1,607



$

859



$

(7,989)



$

(4,146)










Basic and diluted earnings per common share:








Income (loss) from continuing operations available to common shareholders

$

0.03



$

0.01



$

(0.14)



$

(0.06)


Loss from discontinued operations available to common shareholders







(0.01)


     Net income (loss) available to common shareholders

$

0.03



$

0.01



$

(0.14)



$

(0.07)


Weighted average common shares outstanding:








Basic

57,597



57,961



57,572



58,155


Diluted

57,825



58,045



57,572



58,155


 

 


Consolidated Balance Sheets

(amounts in thousands, except per share amounts)



September 30, 2016


December 31, 2015


(unaudited)



Assets:




Rental property, net

$

1,079,970



$

1,130,266


Assets held-for-sale



90,674


Cash and cash equivalents

14,767



13,527


Escrows and reserves

931



2,514


Accounts and other receivables, net of allowance for doubtful accounts of $1,201 and $876, respectively

6,750



9,868


Accrued straight-line rents, net of allowance for doubtful accounts of $449 and $105,
respectively

40,975



36,888


Notes receivable



34,000


Investment in affiliates

49,109



48,223


Deferred costs, net

44,702



36,537


Prepaid expenses and other assets

6,755



6,950


Intangibles assets, net

26,711



32,959


Total assets

$

1,270,670



$

1,442,406


Liabilities:




Mortgage loans, net

$

309,116



$

307,769


Unsecured term loan, net

299,374



299,404


Unsecured revolving credit facility, net

130,353



116,865


Liabilities held-for-sale



1,513


Accounts payable and other liabilities

44,373



47,972


Accrued interest

1,512



1,603


Rents received in advance

7,907



6,003


Tenant security deposits

5,183



4,982


Deferred market rent, net

1,874



2,154


Total liabilities

799,692



788,265


Noncontrolling interests in the Operating Partnership

26,155



28,813


Equity:




Preferred Shares, $0.001 par value per share, 50,000 shares authorized:




7.750% Series A Preferred Shares, $25 per share liquidation preference, 0 and
6,400 shares issued and outstanding, respectively



160,000


Common shares, $0.001par value per share, 150,000 shares authorized; 58,315
and 57,718 shares issued and outstanding, respectively

58



58


Additional paid-in capital

915,413



907,220


Noncontrolling interests in consolidated partnerships



800


Accumulated other comprehensive loss

(1,928)



(2,360)


Dividends in excess of accumulated earnings

(468,720)



(440,390)


Total equity

444,823



625,328


Total liabilities, noncontrolling interests and equity

$

1,270,670



$

1,442,406


 

 

 Same Property Analysis

(unaudited, dollars in thousands)



Reconciliation of net income to same property
net operating income(1):









Three Months Ended
 September 30,


Nine Months Ended
 September 30,


2016


2015


2016


2015

Number of buildings

73



73



73



73










Net income

$

2,242



$

3,997



$

149



$

4,965


Loss from discontinued operations







607


Total other expenses (income)

5,635



1,778



16,899



9,806


Impairment of rental property





2,772




Depreciation and amortization

13,928



16,758



44,075



49,909


General and administrative expenses

4,112



4,605



12,995



15,110


Non-comparable net operating income(2)

(984)



(3,192)



(2,558)



(9,701)


Same property net operating income

$

24,933



$

23,946



$

74,332



$

70,696










Same property revenues








Rental

$

31,922



$

30,750



$

94,626



$

90,863


Tenant reimbursements and other(3)

7,128



6,815



21,837



21,542


Total same property revenues

39,050



37,565



116,463



112,405


Same property operating expenses








Property(4)

9,437



9,195



28,044



28,612


Real estate taxes and insurance

4,680



4,424



14,087



13,097


Total same property operating expenses

14,117



13,619



42,131



41,709


Same property net operating income

$

24,933



$

23,946



$

74,332



$

70,696










Same property net operating income growth

4.1

%




5.1

%




















Weighted Average Occupancy For the 
Three Months Ended September 30,


Weighted Average Occupancy For the
Nine Months Ended September 30,


2016


2015


2016


2015

Same Properties

92.8

%


91.5

%


92.4

%


90.1

%









Change in Same Property NOI (accrual basis)








By Region

Three Months Ended
 September 30, 2016


Percentage of 
Base Rent


Nine Months Ended
 September 30, 2016


Percentage of
Base Rent

Washington, D.C.

1.1%


29%


4.0%


29%

Maryland

7.9%


29%


9.1%


29%

Northern Virginia

(1.2)%


23%


(0.9)%


23%

Southern Virginia

9.3%


19%


8.2%


19%









By Type








Business Park / Industrial

3.8%


32%


3.2%


32%

Office

4.3%


68%


6.4%


68%

 

(1)

Same property comparisons are based upon those consolidated properties owned and in-service for the entirety of the periods presented. Same property results for the three and nine months ended September 30, 2016 and 2015 exclude the operating results of all disposed properties and the results of the following non-same property that was owned as of September 30, 2016: the NOVA build-to-suit.

(2)

Includes property results for the NOVA build-to-suit, and all properties that were disposed of prior to September 30, 2016 and whose operations remained classified within continuing operations for the periods presented. Also includes an administrative overhead allocation, which was replaced by a normalized management fee for comparative purposes, and termination fee income.

(3)

Excludes termination fee income for comparative purposes.

(4)

Same property operating expenses have been adjusted to reflect a normalized management fee in lieu of an administrative overhead allocation for comparative purposes.

 

 

Company Contact:
Jaime N. Marcus
Director, Investor Relations
(301) 986-9200
jmarcus@first-potomac.com

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/first-potomac-realty-trust-reports-third-quarter-2016-results-300352902.html

SOURCE First Potomac Realty Trust

Contact Information
First Potomac Realty Trust
7600 Wisconsin Avenue
11th Floor
Bethesda, MD 20814
(301) 986-9200



Investor Relations
(301) 244-6200
investorrelations@first-potomac.com


Transfer Agent
American Stock Transfer & Trust Co.
59 Maiden Lane
Plaza Level
New York, NY 10038
(800) 937-5449