Exhibit 99.1
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CONTACT:
Barry H. Bass
Chief Financial Officer
(301) 986-9200
bbass@first-potomac.com | |  | | First Potomac Realty Trust
7600 Wisconsin Avenue
11th Floor
Bethesda, MD 20814
www.first-potomac.com
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FOR IMMEDIATE RELEASE
FIRST POTOMAC REALTY TRUST REPORTS
THIRD QUARTER 2007 RESULTS
Highlights:
| • | | Reports FFO of $10.1 million, or $0.41 per diluted share, for the third quarter of 2007 compared to $9.9 million, or $0.41 per diluted share, for the third quarter of 2006. |
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| • | | Executes 570,529 square feet of leases, consisting of 254,585 and 315,944 square feet of new and renewal leases, respectively. |
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| • | | The Company’s portfolio reaches 90.6% leased, compared to 88.7% at June 30, 2007. |
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| • | | GAAP basis rental rates per square foot increase 8% and 11% for new and renewal leases, respectively. |
BETHESDA, MD (October 30, 2007) — First Potomac Realty Trust (NYSE: FPO), a self-administered, self-managed real estate investment trust that focuses on owning, developing, redeveloping and operating industrial properties and business parks in the Washington, D.C. metropolitan area and other major markets in Virginia and Maryland, reported results for the three and nine months ended September 30, 2007.
The Company’s funds from operations (FFO) for the third quarter of 2007 increased to $10.1 million, or $0.41 per diluted share, compared with $9.9 million, or $0.41 per diluted share, during the third quarter of 2006. The Company reported net income for the third quarter of 2007 of $0.2 million, or $0.01 per diluted share, compared with net income of $0.7 million, or $0.03 per diluted share, for the third quarter of 2006.
The Company’s FFO for the first nine months of 2007 increased 11% over the prior-year period to $30.3 million, or $1.21 per diluted share, compared with $27.3 million, or $1.21 per diluted share, for the first nine months of 2006. The Company reported net income for the first nine months of 2007 of $20 thousand, compared with net income of $9.3 million, or $0.43 per diluted share, for the first nine months of 2006. During the second quarter of 2006, the Company sold its property located at 6600 Business Parkway in Elkridge, Maryland for $15.4 million in cash, which resulted in a gain of $7.5 million, or $0.34 per diluted share.
The Company’s portfolio was 90.6% leased at September 30, 2007 compared to 88.7% leased at June 30, 2007 while total portfolio occupancy was 88.1% and 87.1% as of the same respective periods. A list of the Company’s assets, as well as additional information regarding the Company’s results of operations can be found in the Company’s Third Quarter 2007 Supplemental Financial Report, which is posted on the Company’s website, www.first-potomac.com.
Douglas J. Donatelli, chief executive officer of First Potomac Realty Trust, stated, “The third quarter was very active with new leasing and redevelopment activities. After signing almost 600,000 square feet of leases during the quarter, our portfolio crossed the 90% leased threshold. In addition, we increased our redevelopment activities during the quarter, which will set us up for future growth. Our portfolio is well positioned for growth in both the short and long term.”
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Land Acquisition
On August 14, 2007, the Company acquired a parcel of undeveloped land at 7501 Whitepine Road in Chesterfield County, Virginia for $0.4 million. The three acre site is adjacent to the Chesterfield Business Center and has development rights for a 35,700 square foot warehouse.
Significant Leasing Activity
During the third quarter of 2007, the Company executed 570,529 square feet of leases, which consist of 254,585 square feet of new leases and 315,944 square feet of renewal leases. New leases executed include 163,089 square feet at Enterprise Parkway, 23,591 square feet at Gateway 270 West and 20,120 square feet at 1400 Cavalier Boulevard. Rent is expected to commence for all the new leases over the next two quarters. The Company’s larger renewal activity occurred at English Muffin Way, River’s Bend Center and 4451 Georgia Pacific, which renewed 73,640 square feet, 40,000 square feet and 34,750 square feet, respectively, to existing tenants.
Financing Activity
On August 7, 2007, the Company entered into a $50.0 million Secured Term Loan with Key Bank, N.A. The loan, which matures in August 2010, has a one-year extension option and can be expanded to $100.0 million. Borrowings on the loan bear interest at 70 to 125 basis points over LIBOR, depending on the Company’s overall leverage. The proceeds from the loan were used to pay down a portion of the Company’s unsecured revolving credit facility.
Financial Structure
At September 30, 2007, the Company’s debt-to-total-market capitalization ratio was 54.9% based on the Company’s closing stock price of $21.80. The Company’s interest coverage ratio for the quarter was 2.1 times compared with 2.2 times for the quarter ended June 30, 2007.
Of the $665.0 million of debt outstanding at September 30, 2007, $589.9 million was fixed-rate debt with a weighted average effective interest rate of 5.5% and a weighted average maturity of 4.9 years. The remaining $75.1 million was floating-rate debt, comprised of a $50.0 million term loan and $25.1 million of borrowings on the Company’s unsecured revolving credit facility. At September 30, 2007, the floating rate debt had a weighted average interest rate of 6.3% and a weighted average maturity of 2.8 years.
Dividends
On October 16, 2007, the Company declared a dividend of $0.34 per common share. The dividend is payable on November 9, 2007, to common shareholders of record as of October 31, 2007.
Earnings and FFO Guidance
The Company provided FFO guidance for the fourth quarter of 2007 of $0.43 to $0.46 per diluted share and net income guidance of $0.03 to $0.05 per diluted share.
Barry Bass, chief financial officer of First Potomac Realty, stated “We are poised to have a very strong fourth quarter as some of the leasing that we have been doing comes to fruition. We also estimate between $0.02 and $0.04 per diluted share of termination and other fee income for the quarter.”
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Investor Conference Call and Webcast
First Potomac Realty Trust will host a conference call on Wednesday, October 31, 2007 at 11:00 a.m. ET, to discuss third quarter results. The number to call for this interactive teleconference is (913) 981-4903. A replay of the conference call will be available through November 7, 2007 by dialing (719) 457-0820 and entering the confirmation number, 3443387 when prompted for the pass code.
A live broadcast of the conference call will also be available online and can be accessed from the Investor Information page of the Company’s website, www.first-potomac.com, on Wednesday, October 31, 2007, beginning at 11:00 a.m. ET. An online replay will be available on the above site 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, developing and operating industrial properties and business parks in the Washington, D.C. metropolitan area and other major markets in Virginia and Maryland. The Company’s portfolio totals approximately 11.4 million square feet. The Company’s largest tenant is the U.S. Government.
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Non-GAAP Financial Measures
Funds from Operations— Funds from operations (“FFO”) represents net income (loss) before minority interest (computed in accordance with U.S. generally accepted accounting principles (“GAAP”)), plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures, gains or losses from debt restructuring and gains or losses on the sale of property. The Company considers FFO a useful measure of performance for an equity REIT because it facilitates an understanding of the operating performance of its properties without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, the Company believes that FFO provides a meaningful indication of its performance. The Company also considers FFO an appropriate performance measure given its wide use by investors and analysts. The Company computes FFO in accordance with standards established by the Board of Governors of NAREIT in its March 1995 White Paper (as amended in November 1999 and April 2002), which may differ from the methodology for calculating FFO utilized by other equity real estate investment trusts (“REITs”) and, accordingly, may not be comparable to such other REITs. Further, FFO does not represent amounts available for management’s 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 the Company’s cash needs, including its ability to make distributions. FFO should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as an indicator of the Company’s financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of its liquidity. The Company’s FFO calculations are reconciled to net income in the Company’s Consolidated Statement of Operations included in this release.
NOI— The Company defines net operating income (“NOI”) as operating revenues (rental income, tenant reimbursements and other income) less property and related expenses (property expenses, real estate taxes and insurance). Management believes that NOI is a useful measure of the Company’s property operating performance as it provides a performance measure of the revenues and expenses directly associated with owning, developing and operating commercial real estate properties, and provides a prospective not immediately apparent from net income. Other REITs may use different methodologies for calculating NOI, and accordingly, the Company’s NOI may not be comparable to other REITs. The Company’s NOI calculations are reconciled to total revenue and total operating expenses at the end of this release.
Same-Property NOI— The Company defines same-property NOI as NOI for the Company’s properties wholly owned during the entirety of the periods reported. The Company’s same-property NOI calculations are reconciled to NOI at the end of this release.
Forward Looking Statements
The forward-looking statements contained in this press release are subject to various risks and uncertainties. Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, there can be no assurance that its expectations will be achieved. Certain factors that could cause actual results to differ materially from the Company’s expectations include changes in general or regional economic conditions; the Company’s ability to timely lease or re-lease space at current or anticipated rents; changes in interest rates; changes in operating costs; the Company’s ability to complete acquisitions on acceptable terms; and other risks detailed in the Company’s Annual Report on Form 10-K and described from time to time in the Company’s filings with the SEC. Many of these factors are beyond the Company’s ability to control or predict. Forward-looking statements are not guarantees of performance. For forward-looking statements herein, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.
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FIRST POTOMAC REALTY TRUST
Consolidated Statements of Operations
(Amounts in thousands, except per share amounts)
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| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| | | (unaudited) | | | (unaudited) | |
| Revenues: | | | | | | | | | | | | | | | | |
| Rental | | $ | 26,109 | | | $ | 22,865 | | | $ | 76,823 | | | $ | 64,277 | |
| Tenant reimbursements and other | | | 5,077 | | | | 4,264 | | | | 15,028 | | | | 12,450 | |
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| Total revenue | | | 31,186 | | | | 27,129 | | | | 91,851 | | | | 76,727 | |
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| Operating expenses: | | | | | | | | | | | | | | | | |
| Property operating | | | 6,730 | | | | 5,536 | | | | 19,456 | | | | 14,652 | |
| Real estate taxes and insurance | | | 2,933 | | | | 2,257 | | | | 8,396 | | | | 6,578 | |
| General and administrative | | | 2,362 | | | | 2,436 | | | | 7,949 | | | | 7,500 | |
| Depreciation and amortization | | | 9,915 | | | | 9,174 | | | | 30,255 | | | | 24,993 | |
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| | | | | | | | | | | | | | | | | |
| Total operating expenses | | | 21,940 | | | | 19,403 | | | | 66,056 | | | | 53,723 | |
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| | | | | | | | | | | | | | | | | |
| Operating income | | | 9,246 | | | | 7,726 | | | | 25,795 | | | | 23,004 | |
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| Other expenses (income): | | | | | | | | | | | | | | | | |
| Interest expense | | | 9,137 | | | | 7,155 | | | | 26,261 | | | | 20,998 | |
| Interest and other income | | | (123 | ) | | | (175 | ) | | | (489 | ) | | | (743 | ) |
| Loss on interest-rate lock agreement | | | — | | | | — | | | | — | | | | 671 | |
| Loss from early retirement of debt | | | — | | | | — | | | | — | | | | 121 | |
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| Total other expenses | | | 9,014 | | | | 6,980 | | | | 25,772 | | | | 21,047 | |
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| Income from continuing operations before minority interests | | | 232 | | | | 746 | | | | 23 | | | | 1,957 | |
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| Minority interests | | | (7 | ) | | | (28 | ) | | | (3 | ) | | | (95 | ) |
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| Income from continuing operations | | | 225 | | | | 718 | | | | 20 | | | | 1,862 | |
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| Discontinued operations: | | | | | | | | | | | | | | | | |
| Income from operations of disposed property | | | — | | | | — | | | | — | | | | 376 | |
| Gain on sale of disposed property | | | — | | | | — | | | | — | | | | 7,475 | |
| Minority interests in discontinued operations | | | — | | | | — | | | | — | | | | (386 | ) |
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| Income from discontinued operations | | | — | | | | — | | | | — | | | | 7,465 | |
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| Net income | | $ | 225 | | | $ | 718 | | | $ | 20 | | | $ | 9,327 | |
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| Depreciation and amortization of real estate assets | | | 9,915 | | | | 9,174 | | | | 30,255 | | | | 24,993 | |
| Discontinued operations depreciation and amortization | | | — | | | | — | | | | — | | | | 3 | |
| Minority interests | | | 7 | | | | 28 | | | | 3 | | | | 481 | |
| Gain on sale of disposed property | | | — | | | | — | | | | — | | | | (7,475 | ) |
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| Funds from operations (FFO) | | $ | 10,147 | | | $ | 9,920 | | | $ | 30,278 | | | $ | 27,329 | |
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| Net income per share — basic: | | | | | | | | | | | | | | | | |
| Continuing operations | | $ | 0.01 | | | $ | 0.03 | | | $ | — | | | $ | 0.09 | |
| Income from discontinued operations | | | — | | | | — | | | | — | | | | 0.35 | |
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| Net income | | $ | 0.01 | | | $ | 0.03 | | | $ | — | | | $ | 0.44 | |
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| | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding — basic | | | 24,068 | | | | 23,168 | | | | 24,045 | | | | 21,257 | |
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| Net income per share — diluted: | | | | | | | | | | | | | | | | |
| Continuing operations | | $ | 0.01 | | | $ | 0.03 | | | $ | — | | | $ | 0.09 | |
| Income from discontinued operations | | | — | | | | — | | | | — | | | | 0.34 | |
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| Net income | | $ | 0.01 | | | $ | 0.03 | | | $ | — | | | $ | 0.43 | |
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| | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding — dilutive | | | 24,192 | | | | 23,444 | | | | 24,239 | | | | 21,530 | |
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| FFO per share — basic | | $ | 0.41 | | | $ | 0.41 | | | $ | 1.22 | | | $ | 1.22 | |
| Weighted average common shares and units outstanding — basic FFO | | | 24,880 | | | | 24,163 | | | | 24,844 | | | | 22,361 | |
| FFO per share — diluted | | $ | 0.41 | | | $ | 0.41 | | | $ | 1.21 | | | $ | 1.21 | |
| Weighted average common shares and units outstanding — diluted FFO | | | 25,004 | | | | 24,446 | | | | 25,037 | | | | 22,634 | |
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FIRST POTOMAC REALTY TRUST
Consolidated Balance Sheets
(Amounts in thousands, except per share amounts)
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| | | September 30, 2007 | | | December 31, 2006 | |
| | | (unaudited) | | | | | |
| Assets: | | | | | | | | |
| Rental property, net | | $ | 975,539 | | | $ | 884,882 | |
| Cash and cash equivalents | | | 4,210 | | | | 41,367 | |
| Escrows and reserves | | | 12,146 | | | | 11,139 | |
| Accounts and other receivables, net of allowance for doubtful accounts of $636 and $334, respectively | | | 3,901 | | | | 4,212 | |
| Accrued straight-line rents, net of allowance for doubtful accounts of $43 and $41, respectively | | | 6,249 | | | | 4,973 | |
| Deferred costs, net | | | 11,945 | | | | 9,006 | |
| Prepaid expenses and other assets | | | 7,711 | | | | 6,191 | |
| Intangible assets, net | | | 30,347 | | | | 32,797 | |
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| Total assets | | $ | 1,052,048 | | | $ | 994,567 | |
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| Liabilities: | | | | | | | | |
| Mortgage loans | | $ | 392,220 | | | $ | 391,393 | |
| Exchangeable senior notes, net of discount | | | 122,656 | | | | 122,234 | |
| Senior notes | | | 75,000 | | | | 75,000 | |
| Secured term loan | | | 50,000 | | | | — | |
| Unsecured revolving credit facility | | | 25,100 | | | | — | |
| Accounts payable and accrued expenses | | | 13,191 | | | | 8,898 | |
| Accrued interest | | | 5,395 | | | | 2,420 | |
| Rents received in advance | | | 3,311 | | | | 3,196 | |
| Tenant security deposits | | | 5,407 | | | | 4,965 | |
| Deferred market rent | | | 9,741 | | | | 8,883 | |
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| Total liabilities | | | 702,021 | | | | 616,989 | |
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| Minority interests | | | 11,802 | | | | 13,992 | |
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| Shareholders’ equity: | | | | | | | | |
| Common shares, $0.001 par value, 100,000 shares authorized; 24,251 and 24,127 shares issued and outstanding, respectively | | | 24 | | | | 24 | |
| Additional paid-in capital | | | 429,555 | | | | 430,271 | |
| Dividends in excess of accumulated earnings | | | (91,354 | ) | | | (66,709 | ) |
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| | | | | | | | | |
| Total shareholders’ equity | | | 338,225 | | | | 363,586 | |
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| Total liabilities and shareholders’ equity | | $ | 1,052,048 | | | $ | 994,567 | |
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FIRST POTOMAC REALTY TRUST
Net Operating Income (NOI)
Same-Property Analysis
(unaudited, dollars in thousands)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| Total base rent | | $ | 21,838 | | | $ | 22,301 | | | $ | 57,866 | | | $ | 58,271 | |
| Tenant reimbursement and other | | | 4,310 | | | | 4,014 | | | | 11,624 | | | | 11,385 | |
| Property operating expenses | | | (5,468 | ) | | | (5,424 | ) | | | (14,386 | ) | | | (13,620 | ) |
| Real estate taxes and insurance | | | (2,500 | ) | | | (2,165 | ) | | | (6,261 | ) | | | (5,863 | ) |
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| | | | | | | | | | | | | | | | | |
Same-property1 NOI — accrual basis | | | 18,180 | | | | 18,726 | | | | 48,843 | | | | 50,173 | |
| | | | | | | | | | | | | | | | | |
| Straight-line revenue, net | | | (37 | ) | | | (256 | ) | | | (156 | ) | | | (799 | ) |
| Deferred market rental revenue | | | (354 | ) | | | (671 | ) | | | (909 | ) | | | (1,452 | ) |
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Same-property1 NOI — cash basis | | $ | 17,789 | | | $ | 17,799 | | | $ | 47,778 | | | $ | 47,922 | |
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Changes in Same Property NOI — accrual basis | | | | | | | | | | | | | | | | |
| Rental revenue (decrease) increase | | $ | (303 | ) | | | | | | $ | 217 | | | | | |
| Tenant reimbursement and other increase | | | 296 | | | | | | | | 239 | | | | | |
| Occupancy decrease | | | (160 | ) | | | | | | | (622 | ) | | | | |
| Expense increase | | | (379 | ) | | | | | | | (1,164 | ) | | | | |
| | | | | | | | | | | | | | | |
| | | $ | (546 | ) | | | | | | $ | (1,330 | ) | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Same property percentage of total portfolio (sf) | | | 84.7 | % | | | 95.1 | % | | | 72.5 | % | | | 81.4 | % |
| | | | | | | | | | | | | | | | | |
| Total revenue | | $ | 31,186 | | | $ | 27,129 | | | $ | 91,851 | | | $ | 76,727 | |
| Property operating expenses | | | 6,730 | | | | 5,536 | | | | 19,456 | | | | 14,652 | |
| Real estate taxes and insurance | | | 2,933 | | | | 2,257 | | | | 8,396 | | | | 6,578 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| NOI | | | 21,523 | | | | 19,336 | | | | 63,999 | | | | 55,497 | |
Less: Non-same property NOI2 | | | (3,343 | ) | | | (610 | ) | | | (15,156 | ) | | | (5,324 | ) |
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| | | | | | | | | | | | | | | | | |
Same-property1 NOI — accrual basis | | | 18,180 | | | | 18,726 | | | | 48,843 | | | | 50,173 | |
| | | | | | | | | | | | | | | | | |
| Straight-line revenue, net | | | (37 | ) | | | (256 | ) | | | (156 | ) | | | (799 | ) |
| Deferred market rental revenue | | | (354 | ) | | | (671 | ) | | | (909 | ) | | | (1,452 | ) |
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Same-property1 NOI — cash basis | | $ | 17,789 | | | $ | 17,799 | | | $ | 47,778 | | | $ | 47,922 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Change in same-property NOI — accrual basis | | | -2.9 | % | | | | | | | -2.7 | % | | | | |
| Change in same-property NOI — cash basis | | | -0.1 | % | | | | | | | -0.3 | % | | | | |
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| (1) | | Same property comparisons are based upon those properties owned for the entirety of the periods presented. Same property results exclude the results of the following non same-properties: 6600 Business Parkway, Gateway 270 West, Davis Drive, Indian Creek Court, Gateway II, Owings Mills Commerce Center, Park Central, Greenbrier Circle Corporate Center, Greenbrier Technology Center I, Pine Glen, Ammendale Commerce Center, John Marshall Highway (Building II), River’s Bend Center II and Annapolis Commerce Park East. Also, same property results for the nine months ended September 30, 2007 and 2006 exclude Northridge I & II, River’s Bend Center, Crossways I, Sterling Park Business Center, 1408 Stephanie Way, Airpark Business Center, Chesterfield Business Center and Hanover Business Center. |
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| (2) | | Non-same property NOI has been adjusted to reflect a normalized management fee percentage in lieu of an administrative overhead allocation for comparative purposes. |
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