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First Potomac Pays AREA $68M for DC Office Property

Bureau of Prisons HQ in Capitol Hill Trades for $527 PSF
July 1, 2010
First Potomac Realty Trust made its first entry into the downtown Washington, DC, office market with its $68 million purchase of a 129,035-square-foot building at 500 First St. NW. AREA Property Partners, formerly known as Apollo Real Estate Advisors, sold the Class B asset for $527 per square foot in the off-market transaction.

The buyer financed the purchase with a 10-year, $39 million first mortgage loan with an interest rate of 5.7 percent as well as borrowings under the firm’s unsecured revolving credit facility.

An entity of Apollo paid Gould Property Co. $44.9 million, or nearly $348 per square foot, for the nine-story structure in June 2008, according to CoStar Group information.

The Federal Bureau of Prisons, a U.S. Department of Justice agency, fully leases the 41-year-old property on 0.41 acres in the Capitol Hill submarket. The agreement runs through July 2016 and will generate an unleveraged return on the purchase price of approximately 7.5 percent upon completion of the renovation, according to First Potomac.

“In addition to being an outstanding real estate transaction, this acquisition fits well with our strategy of investing in a mix of both value-add and stable, cash flowing assets in the best submarkets. We are extremely well positioned to continue sourcing additional opportunities with a view toward creating long-term value for our shareholders,” said Douglas J. Donatelli, chairman and CEO of First Potomac.

First Potomac is a Bethesda, MD-headquartered office and industrial real estate investment trust with assets totaling more than 12 million square feet. The federal government and its contractors are the REIT’s largest tenants and account for more than 20 percent of the firm’s revenue.

AREA, a New York City-based company headed by William Mack and Lee Neibart, uses funds and joint venture partnerships to invest in real estate.

Please see CoStar COMPS #1940207 for more information.
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