þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
MARYLAND | 37-1470730 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
o Large Accelerated Filer | þ Accelerated Filer | o Non-Accelerated Filer | o Smaller Reporting Company |
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59 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT |
2
September 30, 2011 | December 31, 2010 | |||||||
(unaudited) | ||||||||
Assets: |
||||||||
Rental property, net |
$ | 1,427,788 | $ | 1,217,897 | ||||
Cash and cash equivalents |
14,646 | 33,280 | ||||||
Escrows and reserves |
16,730 | 8,070 | ||||||
Accounts and other receivables, net of allowance
for doubtful accounts of $3,138 and $3,246,
respectively |
7,935 | 7,238 | ||||||
Accrued straight-line rents, net of allowance for
doubtful accounts of $360 and $849, respectively |
16,337 | 12,771 | ||||||
Notes receivable, net |
54,644 | 24,750 | ||||||
Investment in affiliates |
24,338 | 23,721 | ||||||
Deferred costs, net |
33,447 | 20,174 | ||||||
Prepaid expenses and other assets |
18,331 | 14,230 | ||||||
Intangible assets, net |
59,587 | 34,551 | ||||||
Total assets |
$ | 1,673,783 | $ | 1,396,682 | ||||
Liabilities: |
||||||||
Mortgage loans |
$ | 420,089 | $ | 319,096 | ||||
Exchangeable senior notes, net |
30,357 | 29,936 | ||||||
Senior notes |
75,000 | 75,000 | ||||||
Secured term loans |
30,000 | 110,000 | ||||||
Unsecured term loan |
175,000 | | ||||||
Unsecured revolving credit facility |
142,000 | 191,000 | ||||||
Accounts payable and other liabilities |
50,902 | 16,827 | ||||||
Accrued interest |
4,157 | 2,170 | ||||||
Rents received in advance |
7,129 | 7,049 | ||||||
Tenant security deposits |
5,574 | 5,390 | ||||||
Deferred market rent, net |
5,049 | 6,032 | ||||||
Total liabilities |
945,257 | 762,500 | ||||||
Noncontrolling interests in the Operating Partnership
(redemption value of $36,419 and $16,122,
respectively) |
39,360 | 16,122 | ||||||
Equity: |
||||||||
Series A Preferred Shares, $25 par value, 50,000
shares authorized: 4,600 and 0 shares issued and
outstanding, respectively |
115,000 | | ||||||
Common shares, $0.001 par value, 150,000 common
shares authorized: 50,061 and 49,922 shares issued
and outstanding, respectively |
50 | 50 | ||||||
Additional paid-in capital |
795,480 | 794,051 | ||||||
Noncontrolling interests in consolidated partnerships |
5,237 | 3,077 | ||||||
Accumulated other comprehensive loss |
(5,405 | ) | (545 | ) | ||||
Dividends in excess of accumulated earnings |
(221,196 | ) | (178,573 | ) | ||||
Total equity |
689,166 | 618,060 | ||||||
Total liabilities, noncontrolling interests and equity |
$ | 1,673,783 | $ | 1,396,682 | ||||
3
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues: |
||||||||||||||||
Rental |
$ | 36,121 | $ | 27,520 | $ | 103,025 | $ | 80,665 | ||||||||
Tenant reimbursements and other |
8,993 | 6,179 | 24,776 | 19,791 | ||||||||||||
Total revenues |
45,114 | 33,699 | 127,801 | 100,456 | ||||||||||||
Operating expenses: |
||||||||||||||||
Property operating |
11,211 | 7,672 | 31,476 | 24,272 | ||||||||||||
Real estate taxes and insurance |
4,253 | 2,948 | 12,284 | 9,339 | ||||||||||||
General and administrative |
4,354 | 3,475 | 12,546 | 10,859 | ||||||||||||
Acquisition costs |
1,737 | 361 | 4,475 | 2,025 | ||||||||||||
Depreciation and amortization |
16,088 | 10,608 | 45,381 | 30,487 | ||||||||||||
Impairment of real estate asset |
3,111 | | 3,111 | | ||||||||||||
Change in contingent consideration related to
acquisition of property |
(1,487 | ) | | (1,487 | ) | 710 | ||||||||||
Total operating expenses |
39,267 | 25,064 | 107,786 | 77,692 | ||||||||||||
Operating income |
5,847 | 8,635 | 20,015 | 22,764 | ||||||||||||
Other expenses, net: |
||||||||||||||||
Interest expense |
11,207 | 8,431 | 30,307 | 25,333 | ||||||||||||
Interest and other income |
(1,534 | ) | (89 | ) | (3,769 | ) | (285 | ) | ||||||||
Equity in losses of affiliates |
81 | 75 | 112 | 134 | ||||||||||||
Gain on early retirement of debt |
| | | (164 | ) | |||||||||||
Total other expenses, net |
9,754 | 8,417 | 26,650 | 25,018 | ||||||||||||
(Loss) income from continuing operations before income
taxes |
(3,907 | ) | 218 | (6,635 | ) | (2,254 | ) | |||||||||
Benefit from income taxes |
195 | | 655 | | ||||||||||||
(Loss) income from continuing operations |
(3,712 | ) | 218 | (5,980 | ) | (2,254 | ) | |||||||||
Discontinued operations: |
||||||||||||||||
Loss from operations of disposed properties |
| (3,153 | ) | (2,827 | ) | (3,412 | ) | |||||||||
Gain on sale of real estate properties |
| | 1,954 | 557 | ||||||||||||
Loss from discontinued operations |
| (3,153 | ) | (873 | ) | (2,855 | ) | |||||||||
Net loss |
(3,712 | ) | (2,935 | ) | (6,853 | ) | (5,109 | ) | ||||||||
Less: Net loss attributable to noncontrolling interests |
265 | 55 | 469 | 103 | ||||||||||||
Net loss attributable to First Potomac Realty Trust |
(3,447 | ) | (2,880 | ) | (6,384 | ) | (5,006 | ) | ||||||||
Less: Dividends on preferred shares |
(2,228 | ) | | (6,239 | ) | | ||||||||||
Net loss attributable to common shareholders |
$ | (5,675 | ) | $ | (2,880 | ) | $ | (12,623 | ) | $ | (5,006 | ) | ||||
Basic and diluted earnings per share: |
||||||||||||||||
(Loss) income from continuing operations |
$ | (0.12 | ) | $ | | $ | (0.25 | ) | $ | (0.08 | ) | |||||
Loss from discontinued operations |
| (0.08 | ) | (0.02 | ) | (0.08 | ) | |||||||||
Net loss |
$ | (0.12 | ) | $ | (0.08 | ) | $ | (0.27 | ) | $ | (0.16 | ) | ||||
Weighted average common shares outstanding: |
||||||||||||||||
Basic and diluted |
49,308 | 37,269 | 49,275 | 34,804 |
4
Nine Months Ended September 30, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net loss |
$ | (6,853 | ) | $ | (5,109 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating
activities: |
||||||||
Discontinued operations: |
||||||||
Gain on sale of real estate properties |
(1,954 | ) | (557 | ) | ||||
Depreciation and amortization |
520 | 231 | ||||||
Impairment of real estate assets |
2,710 | 4,013 | ||||||
Depreciation and amortization |
45,949 | 31,978 | ||||||
Stock based compensation |
2,012 | 2,869 | ||||||
Bad debt expense |
667 | 767 | ||||||
Benefit from income taxes |
(656 | ) | | |||||
Amortization of deferred market rent |
(505 | ) | (1,044 | ) | ||||
Amortization of financing costs and discounts |
1,891 | 539 | ||||||
Amortization of rent abatement |
2,042 | 1,806 | ||||||
Equity in losses of affiliates |
112 | 134 | ||||||
Distributions from investments in affiliates |
84 | 437 | ||||||
Contingent consideration related to acquisition of property |
(1,487 | ) | 710 | |||||
Gain on early retirement of debt |
| (164 | ) | |||||
Impairment of real estate assets |
3,111 | | ||||||
Changes in assets and liabilities: |
||||||||
Escrows and reserves |
(6,411 | ) | (955 | ) | ||||
Accounts and other receivables |
(167 | ) | (1,349 | ) | ||||
Accrued straight-line rents |
(5,771 | ) | (1,220 | ) | ||||
Prepaid expenses and other assets |
(1,683 | ) | (497 | ) | ||||
Tenant security deposits |
183 | (155 | ) | |||||
Accounts payable and accrued expenses |
5,773 | 1,160 | ||||||
Accrued interest |
1,986 | 1,716 | ||||||
Rents received in advance |
89 | (174 | ) | |||||
Deferred costs |
(14,841 | ) | (5,500 | ) | ||||
Total adjustments |
33,654 | 34,745 | ||||||
Net cash provided by operating activities |
26,801 | 29,636 | ||||||
Cash flows from investing activities: |
||||||||
Purchase deposit on future acquisitions |
(8,168 | ) | (3,018 | ) | ||||
Purchase of mortgage loan |
| (7,970 | ) | |||||
Proceeds from sales of real estate assets |
26,883 | 11,414 | ||||||
Change in escrow and reserves |
(2,020 | ) | | |||||
Investment in note receivable |
(29,350 | ) | | |||||
Acquisition of rental property and associated intangible assets |
(67,583 | ) | (81,492 | ) | ||||
Additions to rental property |
(26,540 | ) | (12,017 | ) | ||||
Acquisition of land parcel |
(7,500 | ) | | |||||
Additions to construction in progress |
(11,938 | ) | (2,484 | ) | ||||
Investment in unconsolidated joint ventures |
(650 | ) | | |||||
Deconsolidation of joint venture |
| (896 | ) | |||||
Net cash used in investing activities |
(126,866 | ) | (96,463 | ) | ||||
Cash flows from financing activities: |
||||||||
Financing costs |
(4,063 | ) | (1,327 | ) | ||||
Issuance of debt |
348,000 | 90,000 | ||||||
Issuance of common shares, net |
| 94,258 | ||||||
Issuance of preferred shares, net |
110,997 | | ||||||
Contributions from joint venture partners |
2,152 | | ||||||
Repayments of debt |
(339,471 | ) | (94,782 | ) | ||||
Dividends to common shareholders |
(30,000 | ) | (21,115 | ) | ||||
Dividends to preferred shareholders |
(5,125 | ) | | |||||
Distributions to noncontrolling interests |
(1,142 | ) | (439 | ) | ||||
Stock option exercises |
83 | 22 | ||||||
Net cash provided by financing activities |
81,431 | 66,617 | ||||||
Net decrease in cash and cash equivalents |
(18,634 | ) | (210 | ) | ||||
Cash and cash equivalents, beginning of period |
33,280 | 9,320 | ||||||
Cash and cash equivalents, end of period |
$ | 14,646 | $ | 9,110 | ||||
5
2011 | 2010 | |||||||
Cash paid for interest, net |
$ | 26,292 | $ | 23,059 | ||||
Cash paid for income based franchise taxes |
242 | | ||||||
Non-cash investing and financing activities: |
||||||||
Debt assumed in connection with
acquisitions of real estate |
139,373 | | ||||||
Contingent consideration recorded in
connection with acquisition of real
estate |
745 | | ||||||
Conversion of Operating Partnership
units into common shares |
19 | 55 | ||||||
Issuance of Operating Partnership units
in connection with acquisitions of real
estate |
28,845 | |
6
7
Buildings
|
39 years | |
Building improvements
|
5 to 20 years | |
Furniture, fixtures and equipment
|
5 to 15 years | |
Tenant improvements
|
Shorter of the useful lives of the assets or the terms of the related leases | |
Lease related intangible assets
|
Shorter of the term of related lease or the period the tenant occupies the space |
8
9
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Numerator for basic and diluted earnings per share: |
||||||||||||||||
(Loss) income from continuing operations |
$ | (3,712 | ) | $ | 218 | $ | (5,980 | ) | $ | (2,254 | ) | |||||
Loss from discontinued operations |
| (3,153 | ) | (873 | ) | (2,855 | ) | |||||||||
Net loss |
(3,712 | ) | (2,935 | ) | (6,853 | ) | (5,109 | ) | ||||||||
Less: Net loss (income) from continuing operations
attributable to noncontrolling interests |
265 | (4 | ) | 487 | 48 | |||||||||||
Less: Net loss (income) from discontinued operations
attributable to noncontrolling interests |
| 59 | (18 | ) | 55 | |||||||||||
Net loss attributable to First Potomac Realty
Trust |
(3,447 | ) | (2,880 | ) | (6,384 | ) | (5,006 | ) | ||||||||
Less: Dividends on preferred shares |
(2,228 | ) | | (6,239 | ) | | ||||||||||
Net loss attributable to common shareholders |
(5,675 | ) | (2,880 | ) | (12,623 | ) | (5,006 | ) | ||||||||
Less: Allocation to participating securities |
(150 | ) | (151 | ) | (442 | ) | (455 | ) | ||||||||
Net loss attributable to common shareholders |
$ | (5,825 | ) | $ | (3,031 | ) | $ | (13,065 | ) | $ | (5,461 | ) | ||||
Denominator for basic and diluted earnings per share: |
||||||||||||||||
Weighted average shares outstanding basic and
diluted |
49,308 | 37,269 | 49,275 | 34,804 | ||||||||||||
Basic and diluted earnings per share: |
||||||||||||||||
(Loss) income from continuing operations |
$ | (0.12 | ) | $ | | $ | (0.25 | ) | $ | (0.08 | ) | |||||
Loss from discontinued operations |
| (0.08 | ) | (0.02 | ) | (0.08 | ) | |||||||||
Net loss |
$ | (0.12 | ) | $ | (0.08 | ) | $ | (0.27 | ) | $ | (0.16 | ) | ||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Stock option awards |
903 | 832 | 907 | 843 | ||||||||||||
Non-vested share awards |
388 | 310 | 406 | 327 | ||||||||||||
Conversion of Exchangeable Senior Notes(1) |
854 | 854 | 854 | 1,180 | ||||||||||||
Series A Preferred Shares(2) |
8,303 | | 7,636 | | ||||||||||||
10,448 | 1,996 | 9,803 | 2,350 | |||||||||||||
(1) | At September 30, 2011 and 2010, each $1,000 principal amount of the
Exchangeable Senior Notes was convertible into 28.039 shares. |
|
(2) | The Companys Series A Preferred Shares are only convertible into the Companys
common shares upon certain changes of control of the Company. |
10
September 30, 2011 | December 31, 2010 | |||||||
Land and land improvements |
$ | 385,306 | $ | 315,229 | ||||
Buildings and improvements |
1,045,358 | 930,077 | ||||||
Construction in process |
63,331 | 41,685 | ||||||
Tenant improvements |
108,361 | 92,002 | ||||||
Furniture, fixtures and equipment |
5,381 | 9,894 | ||||||
1,607,737 | 1,388,887 | |||||||
Less: accumulated depreciation |
(179,949 | ) | (170,990 | ) | ||||
$ | 1,427,788 | $ | 1,217,897 | |||||
Square Feet | Cost to Date of | Square Feet | Cost to Date of | |||||||||||||||||
Reporting | Developable | Under | Development | Under | Redevelopment | |||||||||||||||
Segment | Square Feet | Development | Activities | Redevelopment | Activities | |||||||||||||||
Maryland |
250 | | $ | | | $ | | |||||||||||||
Northern Virginia |
568 | | | 15 | | |||||||||||||||
Southern Virginia |
841 | 166 | 477 | | | |||||||||||||||
Washington, D.C. |
742 | | | 135 | 1,225 | |||||||||||||||
2,401 | 166 | $ | 477 | 150 | $ | 1,225 | ||||||||||||||
11
Aggregate | ||||||||||||||
Acquisition | Property | Square | Purchase | |||||||||||
Location | Date | Type | Feet | Price | ||||||||||
Greenbrier Towers |
Southern Virginia | July 19 | Office | 171,894 | $ | 16,641 | ||||||||
1005 First Street, NE |
Washington, D.C. | August 4 | Office | 30,414 | 45,240 | (1) | ||||||||
202,308 | $ | 61,881 | ||||||||||||
(1) | Includes a deferred purchase price liability of $8.6 million. |
The fair values of the assets and liabilities acquired in the third quarter of 2011 are as
follows (amounts in thousands): |
Land |
$ | 46,497 | ||
Acquired tenant improvements |
1,325 | |||
Building and improvements |
13,264 | |||
In-place leases |
2,249 | |||
Acquired leasing commissions |
351 | |||
Marketing and legal intangible |
188 | |||
Above-market leases acquired |
448 | |||
Total assets acquired |
64,322 | |||
Below-market leases assumed |
(91 | ) | ||
Environmental remediation obligation |
(2,350 | ) | ||
Deferred purchase price obligation |
(6,840 | ) | ||
Net assets acquired |
$ | 55,041 | ||
12
Balance At September 30, 2011 | ||||||||||||||||||||
Unamortized | ||||||||||||||||||||
Origination | Interest | |||||||||||||||||||
Issued | Face Amount | Costs | Balance | Rate | Secured Property | |||||||||||||||
December 2010 |
$ | 25,000 | $ | (220 | ) | $ | 24,780 | 12.5 | % | 950 F Street, NW | ||||||||||
April 2011 |
30,000 | (136 | ) | 29,864 | 9.0 | % | Americas Square | |||||||||||||
$ | 55,000 | $ | (356 | ) | $ | 54,644 | ||||||||||||||
September 30, 2011 | December 31, 2010 | |||||||
Assets: |
||||||||
Rental property, net |
$ | 103,415 | $ | 104,559 | ||||
Cash and cash equivalents |
2,919 | 1,706 | ||||||
Other assets |
9,838 | 11,442 | ||||||
Total assets |
116,172 | 117,707 | ||||||
Liabilities: |
||||||||
Mortgage loans(1) |
59,111 | 59,914 | ||||||
Other liabilities |
2,287 | 4,316 | ||||||
Total liabilities |
61,398 | 64,230 | ||||||
Net assets |
$ | 54,774 | $ | 53,477 | ||||
(1) | Of the total mortgage debt that encumbers the Companys unconsolidated
properties, $7.0 million is recourse to the Company. |
13
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Total revenues |
$ | 2,896 | $ | 1,158 | $ | 8,860 | $ | 3,459 | ||||||||
Total operating expenses |
(995 | ) | (237 | ) | (2,917 | ) | (887 | ) | ||||||||
Net operating income |
1,901 | 921 | 5,943 | 2,572 | ||||||||||||
Depreciation and amortization |
(1,274 | ) | (751 | ) | (3,835 | ) | (1,705 | ) | ||||||||
Other expenses, net |
(854 | ) | (471 | ) | (2,429 | ) | (1,402 | ) | ||||||||
Net loss |
$ | (227 | ) | $ | (301 | ) | $ | (321 | ) | $ | (535 | ) | ||||
Reporting | Disposition | Square | ||||||||
Segment | Date | Property Type | Feet | |||||||
Aquia Commerce Center I & II |
Northern Virginia | 6/22/2011 | Office | 64,488 | ||||||
Gateway West |
Maryland | 5/27/2011 | Office | 111,481 | ||||||
Old Courthouse Square |
Maryland | 2/18/2011 | Retail | 201,208 | ||||||
7561 Lindbergh Drive |
Maryland | 6/16/2010 | Industrial | 36,000 | ||||||
Deer Park |
Maryland | 4/23/2010 | Business Park | 171,125 | ||||||
584,302 | ||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues |
$ | | $ | 957 | $ | 1,055 | $ | 3,146 | ||||||||
Net loss, before gain on sale or taxes |
| (3,153 | ) | (2,827 | ) | (3,412 | ) | |||||||||
Gain on sale of real estate properties |
| | 1,954 | 557 |
14
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
Mortgage loans, effective interest rates ranging from 4.40% to 7.29%, maturing at various dates
through June 2021 |
$ | 420,089 | $ | 319,096 | ||||
Exchangeable senior notes, net of discounts, effective interest rate of 5.84%, maturing December
2011(1) |
30,357 | 29,936 | ||||||
Series A senior notes, effective interest rate of 6.41%, maturing June 2013 |
37,500 | 37,500 | ||||||
Series B senior notes, effective interest rate of 6.55%, maturing June 2016 |
37,500 | 37,500 | ||||||
Secured term loan, effective interest rate of LIBOR plus 3.50%, maturing January 2014(2)(3) |
30,000 | 40,000 | ||||||
Secured term loan, effective interest rate of LIBOR plus 2.50%, matured August 2011(3)(4) |
| 20,000 | ||||||
Secured term loan, effective interest rate of LIBOR plus 3.50%, matured August 2011(3)(5) |
| 50,000 | ||||||
Unsecured term loan, effective interest rates ranging from LIBOR plus 2.15% to LIBOR plus 2.30%, with
staggered maturity dates ranging from July 2016 to July 2018(3)(5) |
175,000 | | ||||||
Unsecured revolving credit facility, effective interest rate of LIBOR plus 2.50%, maturing January
2015(3)(5)(6) |
142,000 | 191,000 | ||||||
$ | 872,446 | $ | 725,032 | |||||
(1) | The principal balance of the Exchangeable Senior Notes was $30.4
million at September 30, 2011 and December 31, 2010. |
|
(2) | On January 1, 2011, the loans applicable interest rate increased to LIBOR
plus 3.50% and will continue to increase by 100 basis points every year, to a maximum of 550
basis points. |
|
(3) | At September 30, 2011, LIBOR was 0.24%. |
|
(4) | On August 11, 2011, the Company repaid its $20.0 million secured term loan
with borrowings under its unsecured revolving credit facility. |
|
(5) | On July 18, 2011, the Company repaid its $50.0 million secured term loan
and paid down $117.0 million of the outstanding balance on its unsecured revolving credit
facility with proceeds from the issuance of a three-tranche $175.0 million unsecured term
loan. |
|
(6) | The unsecured revolving credit facility matures in January 2014 with a
one-year extension at the Companys option, which it intends to exercise. |
Effective | ||||||||||||||||||||
Contractual | Interest | Maturity | September 30, | December 31, | ||||||||||||||||
Encumbered Property | Interest Rate | Rate | Date | 2011 | 2010 | |||||||||||||||
Indian Creek Court (1) |
7.80 | % | 5.90 | % | January 2011 | $ | | $ | 11,982 | |||||||||||
403/405 Glenn Drive (2) |
7.60 | % | 5.50 | % | July 2011 | | 7,960 | |||||||||||||
4612 Navistar Drive (2) |
7.48 | % | 5.20 | % | July 2011 | | 12,189 | |||||||||||||
Campus at Metro Park (3) |
7.11 | % | 5.25 | % | February 2012 | 21,917 | 22,556 | |||||||||||||
One Fair Oaks |
6.31 | % | 6.72 | % | June 2012 | 52,706 | | |||||||||||||
1434 Crossways Blvd Building II |
7.05 | % | 5.38 | % | August 2012 | 9,196 | 9,484 | |||||||||||||
Crossways Commerce Center |
6.70 | % | 6.70 | % | October 2012 | 23,839 | 24,179 | |||||||||||||
Newington Business Park Center |
6.70 | % | 6.70 | % | October 2012 | 15,037 | 15,252 | |||||||||||||
Prosperity Business Center |
6.25 | % | 5.75 | % | January 2013 | 3,414 | 3,502 | |||||||||||||
Aquia Commerce Center I(4) |
7.28 | % | 7.28 | % | February 2013 | | 353 | |||||||||||||
Cedar Hill |
6.00 | % | 6.58 | % | February 2013 | 15,944 | | |||||||||||||
Merrill Lynch Building |
6.00 | % | 7.29 | % | February 2013 | 13,639 | | |||||||||||||
1434 Crossways Blvd Building I |
6.25 | % | 5.38 | % | March 2013 | 8,014 | 8,225 | |||||||||||||
Linden Business Center |
6.01 | % | 5.58 | % | October 2013 | 6,959 | 7,080 | |||||||||||||
840 First Street, NE |
5.18 | % | 6.05 | % | October 2013 | 55,999 | | |||||||||||||
Owings Mills Business Center |
5.85 | % | 5.75 | % | March 2014 | 5,367 | 5,448 | |||||||||||||
Annapolis Commerce Park East |
5.74 | % | 6.25 | % | June 2014 | 8,394 | 8,491 | |||||||||||||
Cloverleaf Center |
6.75 | % | 6.75 | % | October 2014 | 16,984 | 17,204 | |||||||||||||
Plaza 500, Van Buren Business
Park, Rumsey Center, Snowden
Center, Greenbrier Technology
Center II, Norfolk Business Center,
Northridge I & II and 15395 John
Marshall Highway |
5.19 | % | 5.19 | % | August 2015 | 98,056 | 99,151 |
15
Effective | ||||||||||||||||||||
Contractual | Interest | Maturity | September 30, | December 31, | ||||||||||||||||
Encumbered Property | Interest Rate | Rate | Date | 2011 | 2010 | |||||||||||||||
Hanover Business Center: |
||||||||||||||||||||
Building D |
8.88 | % | 6.63 | % | August 2015 | 551 | 642 | |||||||||||||
Building C |
7.88 | % | 6.63 | % | December 2017 | 951 | 1,041 | |||||||||||||
Chesterfield Business Center: |
||||||||||||||||||||
Buildings C,D,G and H |
8.50 | % | 6.63 | % | August 2015 | 1,449 | 1,681 | |||||||||||||
Buildings A,B,E and F |
7.45 | % | 6.63 | % | June 2021 | 2,277 | 2,398 | |||||||||||||
7458 Candlewood Road Note 1 |
4.67 | % | 6.04 | % | January 2016 | 4,722 | 4,761 | |||||||||||||
7458 Candlewood Road Note 2 |
6.57 | % | 6.30 | % | January 2016 | 9,779 | 9,938 | |||||||||||||
Gateway Centre, Building I |
7.35 | % | 5.88 | % | November 2016 | 1,060 | 1,189 | |||||||||||||
500 First Street, NW |
5.72 | % | 5.79 | % | July 2020 | 38,409 | 38,793 | |||||||||||||
Battlefield Corporate Center |
4.26 | % | 4.40 | % | November 2020 | 4,184 | 4,289 | |||||||||||||
Airpark Business Center |
7.45 | % | 6.63 | % | June 2021 | 1,242 | 1,308 | |||||||||||||
Total Mortgage Debt |
5.98 | %(5) | $ | 420,089 | $ | 319,096 | ||||||||||||||
(1) | The loan was repaid in January 2011 with available cash. |
|
(2) | The loan was repaid in July 2011 with borrowings under the Companys
unsecured revolving credit facility. |
|
(3) | The maturity date presented for the loan represents the anticipated
repayment date of the loan, after which date the interest rate on the loan will increase to a
predetermined amount identified in the debt agreement. The effective interest rate was
calculated based on the anticipated period the debt is expected to be outstanding. |
|
(4) | The loan was repaid in April 2011 with available cash. |
|
(5) | Weighted average interest rate on total mortgage debt. |
16
17
| available interest rate hedging may not correspond directly with the interest rate risk
for which the Company seeks protection; |
| the duration of the hedge may not match the duration of the related liability; |
| the party owing money in the hedging transaction may default on its obligation to pay;
and |
| the credit quality of the party owing money on the hedge may be downgraded to such an
extent that it impairs the Companys ability to sell or assign its side of the hedging
transaction. |
Interest Rate | ||||||||||||||||
Contractual | Fixed LIBOR | |||||||||||||||
Effective Date | Maturity Date | Amount | Component | Interest Rate | ||||||||||||
January 2011(1) |
January 2014 | $ | 50,000 | LIBOR | 1.474 | % | ||||||||||
July 2011 |
July 2016 | 35,000 | LIBOR | 1.754 | % | |||||||||||
July 2011 |
July 2016 | 25,000 | LIBOR | 1.7625 | % | |||||||||||
July 2011 |
July 2017 | 30,000 | LIBOR | 2.093 | % | |||||||||||
July 2011 |
July 2017 | 30,000 | LIBOR | 2.093 | % | |||||||||||
September 2011 |
July 2018 | 30,000 | LIBOR | 1.660 | % | |||||||||||
$ | 200,000 | |||||||||||||||
(1) | The Company entered into this interest rate swap agreement in July 2010. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net loss |
$ | (3,712 | ) | $ | (2,935 | ) | $ | (6,853 | ) | $ | (5,109 | ) | ||||
Unrealized (loss)
gain on derivative
instruments |
(4,817 | ) | (518 | ) | (5,100 | ) | 605 | |||||||||
Total comprehensive loss |
(8,529 | ) | (3,453 | ) | (11,953 | ) | (4,504 | ) | ||||||||
Comprehensive loss
attributable to
noncontrolling
interests |
494 | 65 | 716 | 89 | ||||||||||||
Comprehensive loss
attributable to First
Potomac Realty Trust |
$ | (8,035 | ) | $ | (3,388 | ) | $ | (11,237 | ) | $ | (4,415 | ) | ||||
18
Balance at | ||||||||||||||||
September 30, 2011 | Level 1 | Level 2 | Level 3 | |||||||||||||
Non-recurring Measurement: |
||||||||||||||||
Impaired real estate asset |
$ | 5,750 | $ | | $ | | $ | 5,750 | ||||||||
Recurring Measurements: |
||||||||||||||||
Derivative instrument-swap instruments |
$ | 5,660 | $ | | $ | 5,660 | $ | | ||||||||
Contingent consideration related to acquisition of: |
||||||||||||||||
Ashburn Center |
1,398 | | | 1,398 | ||||||||||||
840 First Street, NE |
745 | | | 745 |
Balance at | ||||||||||||||||
December 31, 2010 | Level 1 | Level 2 | Level 3 | |||||||||||||
Non-recurring Measurement: |
||||||||||||||||
Impaired real estate assets |
$ | 10,950 | $ | | $ | 10,950 | $ | | ||||||||
Recurring Measurements: |
||||||||||||||||
Derivative instrument-swap instrument |
396 | | 396 | | ||||||||||||
Contingent consideration related to acquisition of: |
||||||||||||||||
Ashburn Center |
1,398 | | | 1,398 |
19
20
Nine Months Ended | ||||||||
September 30, | ||||||||
2011 | 2010 | |||||||
Beginning balance at January 1, |
$ | 396 | $ | 1,741 | ||||
Deconsolidation (1) |
| (396 | ) | |||||
Unrealized loss (gain) |
5,264 | (541 | ) | |||||
Ending balance at September 30, |
$ | 5,660 | $ | 804 | ||||
(1) | On January 1, 2010, the Company deconsolidated RiversPark I and all its
assets and liabilities, including its interest rate derivative liability, were removed
from the Companys consolidated balance sheets. |
Nine Months Ended | ||||||||
September 30, | ||||||||
2011 | 2010 | |||||||
Beginning balance at January 1, |
$ | 1,398 | $ | 688 | ||||
Change in fair value |
(1,487 | ) | 710 | |||||
Additions to contingent consideration obligation |
9,356 | | ||||||
Satisfaction of contingent consideration obligation |
(7,124 | ) | | |||||
Ending balance at September 30, |
$ | 2,143 | $ | 1,398 | ||||
21
September 30, 2011 | December 31, 2010 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Value | Value | Value | Value | |||||||||||||
Financial Assets: |
||||||||||||||||
Notes receivable(1) |
$ | 54,644 | $ | 55,000 | $ | 24,750 | $ | 24,750 | ||||||||
Financial Liabilities: |
||||||||||||||||
Mortgage debt |
$ | 420,089 | $ | 431,231 | $ | 319,096 | $ | 316,169 | ||||||||
Exchangeable senior notes(2) |
30,357 | 30,564 | 29,936 | 30,412 | ||||||||||||
Series A senior notes |
37,500 | 38,596 | 37,500 | 37,850 | ||||||||||||
Series B senior notes |
37,500 | 39,582 | 37,500 | 37,251 | ||||||||||||
Secured term loan |
30,000 | 29,998 | 110,000 | 109,976 | ||||||||||||
Unsecured term loan |
175,000 | 174,667 | | | ||||||||||||
Unsecured revolving credit facility |
142,000 | 141,831 | 191,000 | 191,073 | ||||||||||||
Total |
$ | 872,446 | $ | 886,469 | $ | 725,032 | $ | 722,731 | ||||||||
(1) | The face value of the Companys notes receivable was $55.0 million at
September 30, 2011 and $25.0 million at December 31, 2010. |
|
(2) | The face value of the notes was $30.4 million at September 30, 2011 and December
31, 2010. |
22
Non- | ||||||||||||||||
First | redeemable | Redeemable | ||||||||||||||
Potomac | noncontrolling | noncontrolling | ||||||||||||||
Realty Trust | interests | Total Equity | interests | |||||||||||||
Balance, December 31, 2010 |
$ | 614,983 | $ | 3,077 | $ | 618,060 | $ | 16,122 | ||||||||
Net (loss) income |
(6,391 | ) | 7 | (6,384 | ) | (476 | ) | |||||||||
Changes in ownership, net |
115,322 | 2,153 | 117,475 | 25,096 | ||||||||||||
Distributions to owners |
(35,125 | ) | | (35,125 | ) | (1,142 | ) | |||||||||
Other comprehensive loss |
(4,860 | ) | | (4,860 | ) | (240 | ) | |||||||||
Balance, September 30, 2011 |
$ | 683,929 | $ | 5,237 | $ | 689,166 | $ | 39,360 | ||||||||
Non- | ||||||||||||||||
First | redeemable | Redeemable | ||||||||||||||
Potomac | noncontrolling | noncontrolling | ||||||||||||||
Realty Trust | interests | Total Equity | interests | |||||||||||||
Balance, December 31, 2009 |
$ | 377,759 | $ | | $ | 377,759 | $ | 9,585 | ||||||||
Net loss |
(5,006 | ) | | (5,006 | ) | (103 | ) | |||||||||
Changes in ownership, net |
107,155 | | 107,155 | 1,862 | ||||||||||||
Distributions to owners |
(21,115 | ) | | (21,115 | ) | (439 | ) | |||||||||
Other comprehensive income |
591 | | 591 | 14 | ||||||||||||
Balance, September 30, 2010 |
$ | 459,384 | $ | | $ | 459,384 | $ | 10,919 | ||||||||
23
First Potomac | ||||||||||||
Controlling | Square | |||||||||||
Property | Acquired | Reporting Segment | Interest | Footage | ||||||||
Redland Corporate Center II & III |
November 2010 | Maryland | 97 | % | 348,266 | |||||||
1005 First Street, NE |
August 2011 | Washington, D.C. | 97 | % | 30,414 | (1) | ||||||
1200 17th Street, NW |
October 2011(2) | Washington, D.C. | 95 | %(2) | 85,000 | (2) |
(1) | The site is currently occupied by the Greyhound Bus Lines, Inc., which has
announced its intention to relocate. Upon the tenant leaving, the Company intends on
re-developing the site, which can accommodate up to 712,000 square feet of office space. |
|
(2) | The Company entered into a joint venture in the first quarter of 2011, which
acquired the property in October 2011. The Company intends on demolishing the current
building and constructing a 170,000 square foot office building. When fully capitalized,
the Company anticipates owning a 95% interest in the joint venture. |
24
Three months ended September 30, 2011 | ||||||||||||||||||||
Maryland | Washington, D.C. | Northern Virginia | Southern Virginia | Consolidated | ||||||||||||||||
Number of buildings |
67 | 4 | 55 | 57 | 183 | |||||||||||||||
Square feet |
3,875,397 | 666,714 | 3,663,645 | 5,649,485 | 13,855,241 | |||||||||||||||
Total revenues |
$ | 13,045 | $ | 6,540 | $ | 12,978 | $ | 12,551 | $ | 45,114 | ||||||||||
Property operating expense |
(3,336 | ) | (1,339 | ) | (3,031 | ) | (3,505 | ) | (11,211 | ) | ||||||||||
Real estate taxes and insurance |
(1,235 | ) | (814 | ) | (1,198 | ) | (1,006 | ) | (4,253 | ) | ||||||||||
Total property operating income |
$ | 8,474 | $ | 4,387 | $ | 8,749 | $ | 8,040 | 29,650 | |||||||||||
Depreciation and amortization expense |
(16,088 | ) | ||||||||||||||||||
General and administrative |
(4,354 | ) | ||||||||||||||||||
Acquisition costs |
(1,737 | ) | ||||||||||||||||||
Change in contingent consideration
related to acquisition of property |
1,487 | |||||||||||||||||||
Impairment of real estate asset |
(3,111 | ) | ||||||||||||||||||
Benefit from income taxes |
195 | |||||||||||||||||||
Other expenses, net |
(9,754 | ) | ||||||||||||||||||
Net loss |
$ | (3,712 | ) | |||||||||||||||||
Capital expenditures(1) |
$ | 3,570 | $ | 514 | $ | 5,216 | $ | 2,090 | $ | 12,297 | ||||||||||
Three Months Ended September 30, 2010 | ||||||||||||||||||||
Maryland | Washington, D.C.(2) | Northern Virginia | Southern Virginia | Consolidated | ||||||||||||||||
Number of buildings |
68 | 1 | 51 | 54 | 174 | |||||||||||||||
Square feet |
3,414,417 | 129,035 | 3,189,198 | 5,263,025 | 11,995,675 | |||||||||||||||
Total revenues |
$ | 10,596 | $ | 1,471 | $ | 9,681 | $ | 11,951 | $ | 33,699 | ||||||||||
Property operating expense |
(2,536 | ) | (337 | ) | (2,120 | ) | (2,679 | ) | (7,672 | ) | ||||||||||
Real estate taxes and insurance |
(1,046 | ) | (191 | ) | (715 | ) | (996 | ) | (2,948 | ) | ||||||||||
Total property operating income |
$ | 7,014 | $ | 943 | $ | 6,846 | $ | 8,276 | 23,079 | |||||||||||
Depreciation and amortization expense |
(10,608 | ) | ||||||||||||||||||
General and administrative |
(3,475 | ) | ||||||||||||||||||
Acquisition costs |
(361 | ) | ||||||||||||||||||
Other expenses, net |
(8,417 | ) | ||||||||||||||||||
Loss from discontinued operations |
(3,153 | ) | ||||||||||||||||||
Net loss |
$ | (2,935 | ) | |||||||||||||||||
Capital expenditures(1) |
$ | 2,477 | $ | | $ | 2,953 | $ | 2,851 | $ | 8,336 | ||||||||||
25
Nine months ended September 30, 2011 | ||||||||||||||||||||
Maryland | Washington, D.C. | Northern Virginia | Southern Virginia | Consolidated | ||||||||||||||||
Total revenues |
$ | 38,649 | $ | 16,050 | $ | 35,774 | $ | 37,328 | $ | 127,801 | ||||||||||
Property operating expense |
(10,179 | ) | (3,206 | ) | (8,621 | ) | (9,470 | ) | (31,476 | ) | ||||||||||
Real estate taxes and insurance |
(3,629 | ) | (2,054 | ) | (3,598 | ) | (3,003 | ) | (12,284 | ) | ||||||||||
Total property operating income |
$ | 24,841 | $ | 10,790 | $ | 23,555 | $ | 24,855 | 84,041 | |||||||||||
Depreciation and amortization expense |
(45,381 | ) | ||||||||||||||||||
General and administrative |
(12,546 | ) | ||||||||||||||||||
Acquisition costs |
(4,475 | ) | ||||||||||||||||||
Change in contingent consideration
related to acquisition of property |
1,487 | |||||||||||||||||||
Impairment of real estate asset |
(3,111 | ) | ||||||||||||||||||
Benefit from income taxes |
655 | |||||||||||||||||||
Other expenses, net |
(26,650 | ) | ||||||||||||||||||
Loss from discontinued operations |
(873 | ) | ||||||||||||||||||
Net loss |
$ | (6,853 | ) | |||||||||||||||||
Total assets(3) |
$ | 467,101 | $ | 320,102 | $ | 416,347 | $ | 365,398 | $ | 1,673,783 | ||||||||||
Capital expenditures(1) |
$ | 12,371 | $ | 1,192 | $ | 16,428 | $ | 5,629 | $ | 37,728 | ||||||||||
Nine Months Ended September 30, 2010 | ||||||||||||||||||||
Maryland | Washington, D.C.(2) | Northern Virginia | Southern Virginia | Consolidated | ||||||||||||||||
Total revenues |
$ | 32,367 | $ | 1,484 | $ | 30,272 | $ | 36,333 | $ | 100,456 | ||||||||||
Property operating expense |
(8,113 | ) | (338 | ) | (7,148 | ) | (8,673 | ) | (24,272 | ) | ||||||||||
Real estate taxes and insurance |
(3,111 | ) | (193 | ) | (2,945 | ) | (3,090 | ) | (9,339 | ) | ||||||||||
Total property operating income |
$ | 21,143 | $ | 953 | $ | 20,179 | $ | 24,570 | 66,845 | |||||||||||
Depreciation and amortization expense |
(30,487 | ) | ||||||||||||||||||
General and administrative |
(10,859 | ) | ||||||||||||||||||
Acquisition costs |
(2,025 | ) | ||||||||||||||||||
Change in contingent consideration
related to acquisition of property |
(710 | ) | ||||||||||||||||||
Other expenses, net |
(25,018 | ) | ||||||||||||||||||
Loss from discontinued operations |
(2,855 | ) | ||||||||||||||||||
Net loss |
$ | (5,109 | ) | |||||||||||||||||
Total assets(3) |
$ | 376,515 | $ | 68,577 | $ | 332,877 | $ | 328,124 | $ | 1,127,561 | ||||||||||
Capital expenditures(1) |
$ | 3,400 | $ | | $ | 4,648 | $ | 6,247 | $ | 14,501 | ||||||||||
(1) | Capital expenditures for corporate assets not allocated to any of our reportable
segments totaled $907 and $55 for the three months ended September 30, 2011 and 2010,
respectively, and $2,108 and $206 for the nine months ended September 30, 2011 and 2010,
respectively. |
|
(2) | The Company acquired its first property located in Washington, D.C. on June 30,
2010. |
|
(3) | Corporate assets not allocated to any of our reportable segments totaled $104,835
and $21,468 at September 30, 2011 and 2010, respectively. |
26
ITEM 2: | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
| maintain and increase occupancy rates and/or increase rental rates at its
properties; |
| sell assets to third parties at favorable prices or contribute properties to
joint ventures; and |
| continue to grow its portfolio through acquisition of new properties, potentially
through joint ventures. |
27
| Executed 1,134,000 square feet of leases; 443,000 square feet of which were new leases
and 691,000 square feet were renewal leases, which reflected an 88% tenant retention
rate; |
| Renewal leases included a 204,000 square foot lease with CareFirst BlueCross
BlueShield at 840 First Street, NE, eliminating the Companys largest 2013 lease
expiration; |
| Entered into a $175.0 million unsecured term loan that is comprised of three-tranches
with staggered maturity dates ranging from July 2016 to July 2018; and |
| Acquired two properties through joint ventures located in Washington, D.C. for total
consideration of $78.0 million and a property in Chesapeake, Virginia for $16.7 million. |
28
Number | Annualized | |||||||||||||||||||||||
of | Sub- | Square | Cash Basis | Leased at | Occupied at | |||||||||||||||||||
Property | Buildings | Market(1) | Feet | Rent(2) | Sept 30, 2011(3) | Sept 30, 2011(3) | ||||||||||||||||||
Downtown DC-Office |
||||||||||||||||||||||||
500 First Street, NW |
1 | Capitol Hill | 129,035 | $ | 4,387 | 100.0 | % | 100.0 | % | |||||||||||||||
840 First Street, NE |
1 | NoMA | 247,146 | 6,840 | 100.0 | % | 100.0 | % | ||||||||||||||||
1005 First Street, NE |
1 | NoMA | 30,414 | 2,496 | 100.0 | % | 100.0 | % | ||||||||||||||||
1211 Connecticut Avenue, NW |
1 | CBD | 125,119 | 3,356 | 100.0 | % | 100.0 | % | ||||||||||||||||
Total Consolidated |
4 | 531,714 | 17,079 | 100.0 | % | 100.0 | % | |||||||||||||||||
Total Unconsolidated Joint
Ventures |
1 | 111,373 | 4,051 | 100.0 | % | 100.0 | % | |||||||||||||||||
Total Redevelopment |
1 | 135,000 | | |||||||||||||||||||||
Grand Total |
6 | 778,087 | $ | 21,130 | 100.0 | % | 100.0 | % | ||||||||||||||||
(1) | CBD = Central Business District; NoMA = North of Massachusetts Avenue. |
|
(2) | Annualized cash basis rent, which is calculated as the contractual rent due under
the terms of the lease, without taking into account rent abatements, is reflected on a
triple-net equivalent basis, by deducting operating expense reimbursements that are included,
along with base rent, in the contractual payments of the Companys full service leases. The
operating expense reimbursements primarily relate to real estate taxes and insurance expenses. |
|
(3) | Does not include space in development or redevelopment. |
29
Annualized | Leased at | Occupied at | ||||||||||||||||||||
Number of | Square | Cash Basis | September 30, | September 30, | ||||||||||||||||||
Property | Buildings | Location | Feet | Rent(1) | 2011(2) | 2011(2) | ||||||||||||||||
SUBURBAN MD |
||||||||||||||||||||||
Business Park |
||||||||||||||||||||||
Airpark Place |
3 | Gaithersburg | 82,414 | $ | 580 | 53.4 | % | 53.4 | % | |||||||||||||
Ammendale Business Park(3) |
7 | Beltsville | 312,736 | 4,160 | 95.1 | % | 91.8 | % | ||||||||||||||
Gateway 270 West |
6 | Clarksburg | 255,491 | 2,825 | 75.8 | % | 75.8 | % | ||||||||||||||
Girard Business Park(4) |
7 | Gaithersburg | 298,011 | 2,974 | 89.7 | % | 86.7 | % | ||||||||||||||
Rumsey Center |
4 | Columbia | 134,514 | 1,191 | 72.4 | % | 68.8 | % | ||||||||||||||
Snowden Center |
5 | Columbia | 144,847 | 2,045 | 92.1 | % | 92.1 | % | ||||||||||||||
Total Business Park |
32 | 1,228,013 | 13,775 | 84.1 | % | 82.2 | % | |||||||||||||||
Office |
||||||||||||||||||||||
15 Wormans Mill Court |
1 | Frederick | 40,051 | 357 | 87.7 | % | 87.7 | % | ||||||||||||||
20270 Goldenrod Lane |
1 | Germantown | 23,518 | 75 | 25.9 | % | 25.9 | % | ||||||||||||||
Annapolis Commerce Park |
2 | Annapolis | 101,898 | 1,582 | 98.8 | % | 98.8 | % | ||||||||||||||
Campus at Metro Park |
4 | Rockville | 190,912 | 3,419 | 85.1 | % | 85.1 | % | ||||||||||||||
Cloverleaf |
4 | Germantown | 173,655 | 2,777 | 88.6 | % | 88.6 | % | ||||||||||||||
Gateway Center |
2 | Gaithersburg | 44,150 | 623 | 88.9 | % | 88.9 | % | ||||||||||||||
Merrill Lynch Building |
1 | Columbia | 136,488 | 1,549 | 74.2 | % | 71.7 | % | ||||||||||||||
Patrick Center |
1 | Frederick | 66,420 | 1,054 | 75.4 | % | 75.4 | % | ||||||||||||||
Redland Corporate Center-Bldg 3 |
1 | Rockville | 139,120 | 3,364 | 100.0 | % | 100.0 | % | ||||||||||||||
West Park |
1 | Frederick | 28,620 | 286 | 73.4 | % | 73.4 | % | ||||||||||||||
Woodlands Business Center |
1 | Largo | 37,887 | 371 | 73.7 | % | 63.1 | % | ||||||||||||||
Total Office |
19 | 982,719 | 15,457 | 85.2 | % | 84.4 | % | |||||||||||||||
Industrial |
||||||||||||||||||||||
Frederick Industrial Park(5) |
3 | Frederick | 550,418 | 4,021 | 89.0 | % | 89.0 | % | ||||||||||||||
Glenn Dale Business Center |
1 | Glenn Dale | 315,962 | 1,657 | 92.1 | % | 92.1 | % | ||||||||||||||
Total Industrial |
4 | 866,380 | 5,678 | 90.1 | % | 90.1 | % | |||||||||||||||
Total Suburban Maryland |
55 | 3,077,112 | 34,910 | 86.1 | % | 85.1 | % | |||||||||||||||
BALTIMORE |
||||||||||||||||||||||
Business Park |
||||||||||||||||||||||
Owings Mills Business Park(6) |
6 | Owings Mills | 219,284 | 2,009 | 76.8 | % | 74.4 | % | ||||||||||||||
Triangle Business Center |
4 | Baltimore | 74,182 | 510 | 63.2 | % | 63.2 | % | ||||||||||||||
Total Business Park |
10 | 293,466 | 2,519 | 73.4 | % | 71.6 | % | |||||||||||||||
Industrial |
||||||||||||||||||||||
7458 Candlewood Road |
1 | Hanover | 295,673 | 1,321 | 72.8 | % | 39.4 | % | ||||||||||||||
Total Baltimore |
11 | 589,139 | 3,840 | 73.1 | % | 55.4 | % | |||||||||||||||
Stabilized Portfolio |
66 | 3,666,251 | 38,750 | 84.0 | % | 80.3 | % | |||||||||||||||
Lease Up Property |
||||||||||||||||||||||
Redland Corporate Center-Bldg 2 |
1 | Rockville | 209,146 | 3,131 | 64.7 | % | 6.4 | % | ||||||||||||||
Total Consolidated |
67 | 3,875,397 | 41,881 | 83.0 | % | 76.4 | % | |||||||||||||||
Total Unconsolidated Joint Ventures |
9 | 428,427 | 4,067 | 71.4 | % | 69.9 | % | |||||||||||||||
Grand Total |
76 | 4,303,824 | $ | 45,948 | 81.8 | % | 75.8 | % | ||||||||||||||
(1) | Annualized cash basis rent, which is calculated as the contractual rent due under the terms of the lease, without taking into account rent abatements, is reflected on a triple-net equivalent basis, by deducting
operating expense reimbursements that are included, along with base rent, in the contractual payments of the Companys full service leases. The operating expense reimbursements primarily relate to real estate taxes and insurance expenses.
(2) Does not include space in development or redevelopment. |
|
(3) | Ammendale Business Park consists of the following properties: Ammendale Commerce Center and Indian Creek Court. |
|
(4) | Girard Business Park consists of the following properties: Girard Business Center and Girard Place. |
|
(5) | Frederick Industrial Park consists of the following properties: 4451 Georgia Pacific Boulevard, 4612 Navistar Drive, and 6900 English Muffin Way. |
|
(6) | Owings Mills Business Park consists of the following properties: Owings Mills Business Center and Owings Mills Commerce Center. |
30
Annualized | Leased at | Occupied at | ||||||||||||||||||||||
Number of | Square | Cash Basis | September 30, | September 30, | ||||||||||||||||||||
Property | Buildings | Location | Feet | Rent(1) | 2011(2) | 2011(2) | ||||||||||||||||||
Business Park |
||||||||||||||||||||||||
Ashburn Center |
3 | Ashburn | 194,184 | $ | 2,728 | 100.0 | % | 100.0 | % | |||||||||||||||
Gateway Centre |
3 | Manassas | 101,534 | 993 | 76.0 | % | 76.0 | % | ||||||||||||||||
Linden Business Center |
3 | Manassas | 109,838 | 793 | 58.4 | % | 58.4 | % | ||||||||||||||||
Prosperity Business Center |
1 | Merrifield | 71,312 | 766 | 84.9 | % | 84.9 | % | ||||||||||||||||
Sterling Park Business Center(3) |
7 | Sterling | 412,512 | 3,616 | 81.4 | % | 81.4 | % | ||||||||||||||||
Total Business Park |
17 | 889,380 | 8,896 | 82.3 | % | 82.3 | % | |||||||||||||||||
Office |
||||||||||||||||||||||||
Cedar Hill |
2 | Tysons Corner | 102,632 | 2,301 | 100.0 | % | 100.0 | % | ||||||||||||||||
Flint Hill(4) |
1 | Oakton | 11,272 | | 100.0 | % | 100.0 | % | ||||||||||||||||
Herndon Corporate Center |
4 | Herndon | 127,918 | 1,620 | 84.0 | % | 79.7 | % | ||||||||||||||||
Lafayette Business Park(5) |
6 | Chantilly | 254,296 | 3,178 | 80.2 | % | 80.2 | % | ||||||||||||||||
One Fair Oaks |
1 | Fairfax | 214,214 | 5,020 | 100.0 | % | 100.0 | % | ||||||||||||||||
Reston Business Campus |
4 | Reston | 82,988 | 1,034 | 86.0 | % | 86.0 | % | ||||||||||||||||
Van Buren Business Park |
4 | Herndon | 92,462 | 712 | 56.1 | % | 56.1 | % | ||||||||||||||||
Windsor at Battlefield |
2 | Manassas | 154,989 | 1,995 | 100.0 | % | 100.0 | % | ||||||||||||||||
Total Office |
24 | 1,040,771 | 15,860 | 88.2 | % | 87.7 | % | |||||||||||||||||
Industrial |
||||||||||||||||||||||||
13129 Airpark Road |
1 | Culpeper | 149,888 | 622 | 75.9 | % | 75.9 | % | ||||||||||||||||
15395 John Marshall Highway |
1 | Haymarket | 236,082 | 3,369 | 100.0 | % | 100.0 | % | ||||||||||||||||
Interstate Plaza |
1 | Alexandria | 109,029 | 947 | 78.2 | % | 78.2 | % | ||||||||||||||||
Newington Business Park Center |
7 | Lorton | 254,272 | 2,459 | 88.7 | % | 87.6 | % | ||||||||||||||||
Plaza 500 |
2 | Alexandria | 505,074 | 5,976 | 84.7 | % | 84.7 | % | ||||||||||||||||
Total Industrial |
12 | 1,254,345 | 13,373 | 86.8 | % | 86.6 | % | |||||||||||||||||
Stabilized Portfolio |
53 | 3,184,496 | 38,129 | 86.0 | % | 85.7 | % | |||||||||||||||||
Lease Up Property |
||||||||||||||||||||||||
Atlantic Corporate Park |
2 | Sterling | 221,182 | 933 | 25.7 | % | 15.0 | % | ||||||||||||||||
Total Consolidated |
55 | 3,405,678 | 39,062 | 82.1 | % | 81.1 | % | |||||||||||||||||
Total Redevelopment(4) |
3 | 242,576 | | |||||||||||||||||||||
Grand Total |
58 | 3,648,254 | $ | 39,062 | 82.1 | % | 81.1 | % | ||||||||||||||||
(1) | Annualized cash basis rent, which is calculated as the contractual rent due under the terms of the lease, without taking into account rent abatements, is reflected on a triple-net equivalent basis, by deducting operating
expense reimbursements that are included, along with base rent, in the contractual payments of the Companys full service leases. The operating expense reimbursements primarily relate to real estate taxes and insurance expenses. |
|
(2) | Does not include space in development or redevelopment. |
|
(3) | Sterling Park Business Center consists of the following properties: 403/405 Glenn Drive, Davis Drive, and Sterling Park Business Center. |
|
(4) | Flint Hill redevelopment is substantially complete but only the management office has been placed in service. |
|
(5) | Lafayette Business Park consists of the following properties: Enterprise Center and Tech Court. |
31
Number | Leased at | Occupied at | ||||||||||||||||||||||
of | Square | Annualized | September 30, | September 30, | ||||||||||||||||||||
Property | Buildings | Location | Feet | Cash Basis Rent(1) | 2011(2) | 2011(2) | ||||||||||||||||||
RICHMOND |
||||||||||||||||||||||||
Business Park |
||||||||||||||||||||||||
Chesterfield Business Center(3) |
11 | Richmond | 320,412 | $ | 1,742 | 81.9 | % | 81.9 | % | |||||||||||||||
Hanover Business Center |
4 | Ashland | 183,587 | 699 | 64.2 | % | 64.2 | % | ||||||||||||||||
Park Central |
3 | Richmond | 204,762 | 2,140 | 87.7 | % | 87.7 | % | ||||||||||||||||
Virginia Center |
1 | Glen Allen | 118,145 | 1,950 | 85.2 | % | 85.2 | % | ||||||||||||||||
Total Business Park |
19 | 826,906 | 6,531 | 79.9 | % | 79.9 | % | |||||||||||||||||
Industrial |
||||||||||||||||||||||||
Northridge I, II |
2 | Ashland | 140,185 | 882 | 100.0 | % | 100.0 | % | ||||||||||||||||
Rivers Bend Center(4) |
6 | Chester | 795,080 | 4,431 | 94.2 | % | 94.2 | % | ||||||||||||||||
Total Industrial |
8 | 935,265 | 5,313 | 95.1 | % | 95.1 | % | |||||||||||||||||
Total Richmond |
27 | 1,762,171 | 11,844 | 87.9 | % | 87.9 | % | |||||||||||||||||
NORFOLK |
||||||||||||||||||||||||
Business Park |
||||||||||||||||||||||||
Crossways Commerce Center(5) |
9 | Chesapeake | 1,087,250 | 10,664 | 92.2 | % | 82.5 | % | ||||||||||||||||
Greenbrier Business Center(6) |
4 | Chesapeake | 411,657 | 4,170 | 80.9 | % | 79.3 | % | ||||||||||||||||
1000 Lucas Way |
2 | Hampton | 182,323 | 1,401 | 96.3 | % | 96.3 | % | ||||||||||||||||
Enterprise Parkway |
1 | Hampton | 363,892 | 1,804 | 60.1 | % | 60.1 | % | ||||||||||||||||
Norfolk Commerce Park(7) |
3 | Norfolk | 261,989 | 2,308 | 69.3 | % | 64.9 | % | ||||||||||||||||
Total Business Park |
19 | 2,307,111 | 20,347 | 82.8 | % | 77.5 | % | |||||||||||||||||
Office |
||||||||||||||||||||||||
Battlefield Corporate Center |
1 | Chesapeake | 96,720 | 750 | 100.0 | % | 100.0 | % | ||||||||||||||||
Greenbrier Towers |
2 | Chesapeake | 171,894 | 1,882 | 88.4 | % | 85.5 | % | ||||||||||||||||
Total Office |
3 | 268,614 | 2,632 | 92.6 | % | 90.7 | % | |||||||||||||||||
Industrial |
||||||||||||||||||||||||
1400 Cavalier Boulevard |
4 | Chesapeake | 394,308 | 1,561 | 88.6 | % | 88.6 | % | ||||||||||||||||
Diamond Hill Distribution Center |
4 | Chesapeake | 712,683 | 2,953 | 88.5 | % | 81.2 | % | ||||||||||||||||
Total Industrial |
8 | 1,106,991 | 4,514 | 88.5 | % | 83.8 | % | |||||||||||||||||
Total Norfolk |
30 | 3,682,716 | 27,493 | 85.3 | % | 80.4 | % | |||||||||||||||||
Total Consolidated |
57 | 5,444,887 | 39,337 | 86.1 | % | 82.8 | % | |||||||||||||||||
Total Redevelopment |
1 | 38,998 | | |||||||||||||||||||||
Grand Total |
58 | 5,483,885 | $ | 39,337 | 86.1 | % | 82.8 | % | ||||||||||||||||
(1) | Annualized cash basis rent, which is calculated as the contractual rent due under the terms of the lease, without taking into account rent abatements, is reflected on a triple-net equivalent basis, by deducting operating expense reimbursements that
are included, along with base rent, in the contractual payments of the Companys full service leases. The operating expense reimbursements primarily relate to real estate taxes and insurance expenses. |
|
(2) | Does not include space in development or redevelopment. |
|
(3) | Chesterfield Business Center consists of the following properties: Airpark Business Center, Chesterfield Business Center, and Pine Glen. |
|
(4) | Rivers Bend Center consists of the following properties: Rivers Bend Center and Rivers Bend Center II. |
|
(5) | Crossways Commerce Center consists of the following properties: Coast Guard Building, Crossways Commerce Center I, Crossways Commerce Center II, 1434 Crossways Boulevard, and 1408 Stephanie Way |
|
(6) | Greenbrier Business Center consists of the following properties: Greenbrier Technology Center I, Greenbrier Technology Center II, and Greenbrier Circle Corporate Center. |
|
(7) | Norfolk Commerce Park consists of the following properties: Norfolk Business Center, Norfolk Commerce Park II, and Gateway II. |
32
Square Feet | Cost to Date of | Square Feet | Cost to Date of | |||||||||||||||||
Reporting | Developable | Under | Development | Under | Redevelopment | |||||||||||||||
Segment | Square Feet | Development | Activities | Redevelopment | Activities | |||||||||||||||
Maryland |
250 | | $ | | | $ | | |||||||||||||
Northern Virginia |
568 | | | 15 | | |||||||||||||||
Southern Virginia |
841 | 166 | 477 | | | |||||||||||||||
Washington, D.C. |
742 | | | 135 | 1,225 | |||||||||||||||
2,401 | 166 | $ | 477 | 150 | $ | 1,225 | ||||||||||||||
33
Percent of | ||||||||||||||||||||||||
Percent | Total | |||||||||||||||||||||||
Number of | of Total | Annualized | Annualized | |||||||||||||||||||||
Year of Lease | Leases | Square | Annualized | Cash Basis | Base Rent | |||||||||||||||||||
Expiration | Expiring | Square Feet | Feet | Cash Basis Rent.(1) | Rent | per Sq. Ft.(2) | ||||||||||||||||||
MTM(3) |
10 | 76,156 | 0.7 | % | $ | 701 | 0.5 | % | $ | 9.21 | ||||||||||||||
2011 |
57 | 394,237 | 3.5 | % | 4,624 | 3.4 | % | 11.73 | ||||||||||||||||
2012 |
144 | 1,148,762 | 10.2 | % | 13,041 | 9.5 | % | 11.35 | ||||||||||||||||
2013 |
139 | 1,654,391 | 14.7 | % | 20,561 | 15.0 | % | 11.12 | ||||||||||||||||
2014 |
142 | 1,488,047 | 13.3 | % | 14,817 | 10.8 | % | 9.96 | ||||||||||||||||
2015 |
81 | 819,379 | 7.3 | % | 8,760 | 6.4 | % | 10.69 | ||||||||||||||||
2016 |
80 | 1,764,221 | 15.7 | % | 23,338 | 17.1 | % | 13.23 | ||||||||||||||||
Thereafter |
167 | 3,888,556 | 34.6 | % | 50,944 | 37.3 | % | 13.10 | ||||||||||||||||
Total |
820 | 11,233,749 | 100.0 | % | $ | 136,786 | 100.0 | % | $ | 11.99 | ||||||||||||||
(1) | Annualized cash basis rent, which is calculated as the contractual rent due
under the terms of the lease, without taking into account rent abatements, is reflected on
a triple-net equivalent basis, by deducting operating expense reimbursements that are
included, along with base rent, in the contractual payments of the Companys full service
leases. The operating expense reimbursements primarily relate to real estate taxes and
insurance expenses. |
|
(2) | Represents Annualized Cash Basis Rent divided by the square footage of the space. |
|
(3) | Reflects leases that are renewed on a month to month basis at September 30, 2011. |
34
Buildings
|
39 years | |
Building improvements
|
5 to 20 years | |
Furniture, fixtures and equipment
|
5 to 15 years | |
Tenant improvements
|
Shorter of the useful lives of the assets or the terms of the related leases | |
Lease related intangible assets
|
Term of related lease |
35
| the fair value of leases in-place on the date of acquisition is based on absorption
costs for the estimated lease-up period in which vacancy and foregone revenue are avoided
due to the presence of the acquired leases; |
| the fair value of above and below-market in-place leases based on the present value
(using a discount rate that reflects the risks associated with the acquired leases) of the
difference between the contractual rent amounts to be paid under the assumed lease and the
estimated market lease rates for the corresponding spaces over the remaining non-cancelable
terms of the related leases, which range from one to thirteen years; and |
| the fair value of leasing costs associated with existing tenants and the fair value of
tenant relationships. |
36
Three Months Ended | Nine Months Ended | Three Months | Nine Months | |||||||||||||||||||||||||||||
September 30, | September 30, | Percent | Percent | |||||||||||||||||||||||||||||
(amounts in thousands) | 2011 | 2010 | 2011 | 2010 | Increase | Change | Increase | Change | ||||||||||||||||||||||||
Rental |
$ | 36,121 | $ | 27,520 | $ | 103,025 | $ | 80,665 | $ | 8,601 | 31 | % | $ | 22,360 | 28 | % | ||||||||||||||||
Tenant reimbursements & other |
$ | 8,993 | $ | 6,179 | $ | 24,776 | $ | 19,791 | $ | 2,814 | 46 | % | $ | 4,985 | 25 | % |
37
Three Months Ended | Nine Months Ended | Three Months | Nine Months | |||||||||||||||||||||||||||||
September 30, | September 30, | Percent | Percent | |||||||||||||||||||||||||||||
(amounts in thousands) | 2011 | 2010 | 2011 | 2010 | Increase | Change | Increase | Change | ||||||||||||||||||||||||
Property operating |
$ | 11,211 | $ | 7,672 | $ | 31,476 | $ | 24,272 | $ | 3,539 | 46 | % | $ | 7,204 | 30 | % | ||||||||||||||||
Real estate taxes and
insurance |
$ | 4,253 | $ | 2,948 | $ | 12,284 | $ | 9,339 | $ | 1,305 | 44 | % | $ | 2,945 | 32 | % |
38
Three Months Ended | Nine Months Ended | Three Months | Nine Months | |||||||||||||||||||||||||||||
September 30, | September 30, | Percent | Percent | |||||||||||||||||||||||||||||
(amounts in thousands) | 2011 | 2010 | 2011 | 2010 | Increase | Change | Increase | Change | ||||||||||||||||||||||||
$ | 4,354 | $ | 3,475 | $ | 12,546 | $ | 10,859 | $ | 879 | 25 | % | $ | 1,687 | 16 | % |
Three Months Ended | Nine Months Ended | Three Months | Nine Months | |||||||||||||||||||||||||||||
September 30, | September 30, | Percent | Percent | |||||||||||||||||||||||||||||
(amounts in thousands) | 2011 | 2010 | 2011 | 2010 | Increase | Change | Increase | Change | ||||||||||||||||||||||||
$ | 1,737 | $ | 361 | $ | 4,475 | $ | 2,025 | $ | 1,376 | 381 | % | $ | 2,450 | 121 | % |
Three Months Ended | Nine Months Ended | Three Months | Nine Months | |||||||||||||||||||||||||||||
September 30, | September 30, | Percent | Percent | |||||||||||||||||||||||||||||
(amounts in thousands) | 2011 | 2010 | 2011 | 2010 | Increase | Change | Increase | Change | ||||||||||||||||||||||||
$ | 16,088 | $ | 10,608 | $ | 45,381 | $ | 30,487 | $ | 5,480 | 52 | % | $ | 14,894 | 49 | % |
39
Three Months Ended | Nine Months Ended | Three Months | Nine Months | |||||||||||||||||||||||||||||
September 30, | September 30, | Percent | Percent | |||||||||||||||||||||||||||||
(amounts in thousands) | 2011 | 2010 | 2011 | 2010 | Increase | Change | Increase | Change | ||||||||||||||||||||||||
$ | 3,111 | $ | | $ | 3,111 | $ | | $ | 3,111 | 100 | % | $ | 3,111 | 100 | % |
Three Months Ended | Nine Months Ended | Three Months | Nine Months | |||||||||||||||||||||||||||||
September 30, | September 30, | Percent | Percent | |||||||||||||||||||||||||||||
(amounts in thousands) | 2011 | 2010 | 2011 | 2010 | Change | Change | Change | Change | ||||||||||||||||||||||||
$ | (1,487 | ) | $ | | $ | (1,487 | ) | $ | 710 | $ | (1,487 | ) | 100 | % | $ | (2,197 | ) | 309 | % |
40
Three Months Ended | Nine Months Ended | Three Months | Nine Months | |||||||||||||||||||||||||||||
September 30, | September 30, | Percent | Percent | |||||||||||||||||||||||||||||
(amounts in thousands) | 2011 | 2010 | 2011 | 2010 | Increase | Change | Increase | Change | ||||||||||||||||||||||||
$ | 11,207 | $ | 8,431 | $ | 30,307 | $ | 25,333 | $ | 2,776 | 33 | % | $ | 4,974 | 20 | % |
41
Three Months Ended | Nine Months Ended | Three Months | Nine Months | |||||||||||||||||||||||||||||
September 30, | September 30, | Percent | Percent | |||||||||||||||||||||||||||||
(amounts in thousands) | 2011 | 2010 | 2011 | 2010 | Increase | Change | Increase | Change | ||||||||||||||||||||||||
$ | 1,534 | $ | 89 | $ | 3,769 | $ | 285 | $ | 1,445 | 1624 | % | $ | 3,484 | 1222 | % |
Three Months Ended | Nine Months Ended | Three Months | Nine Months | |||||||||||||||||||||||||||||
September 30, | September 30, | Percent | Percent | |||||||||||||||||||||||||||||
(amounts in thousands) | 2011 | 2010 | 2011 | 2010 | Increase | Change | Decrease | Change | ||||||||||||||||||||||||
$ | 81 | $ | 75 | $ | 112 | $ | 134 | $ | 6 | 8 | % | $ | 22 | 16 | % |
Three Months Ended | Nine Months Ended | Three Months | Nine Months | |||||||||||||||||||||||||||||
September 30, | September 30, | Percent | Percent | |||||||||||||||||||||||||||||
(amounts in thousands) | 2011 | 2010 | 2011 | 2010 | Change | Change | Decrease | Change | ||||||||||||||||||||||||
$ | | $ | | $ | | $ | 164 | | | $ | 164 | 100 | % |
42
Three Months Ended | Nine Months Ended | Three Months | Nine Months | |||||||||||||||||||||||||||||
September 30, | September 30, | Percent | Percent | |||||||||||||||||||||||||||||
(amounts in thousands) | 2011 | 2010 | 2011 | 2010 | Increase | Change | Increase | Change | ||||||||||||||||||||||||
$ | 195 | $ | | $ | 655 | $ | | $ | 195 | 100 | % | $ | 655 | 100 | % |
Three Months Ended | Nine Months Ended | Three Months | Nine Months | |||||||||||||||||||||||||||||
September 30, | September 30, | Percent | Percent | |||||||||||||||||||||||||||||
(amounts in thousands) | 2011 | 2010 | 2011 | 2010 | Decrease | Change | Decrease | Change | ||||||||||||||||||||||||
$ | | $ | 3,153 | $ | 873 | $ | 2,855 | $ | 3,153 | 100 | % | $ | 1,982 | 69 | % |
Three Months Ended | Nine Months Ended | Three Months | Nine Months | |||||||||||||||||||||||||||||
September 30, | September 30, | Percent | Percent | |||||||||||||||||||||||||||||
(amounts in thousands) | 2011 | 2010 | 2011 | 2010 | Increase | Change | Increase | Change | ||||||||||||||||||||||||
$ | 265 | $ | 55 | $ | 469 | $ | 103 | $ | 210 | 382 | % | $ | 366 | 355 | % |
43
44
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
September 30, | $ | % | September 30, | $ | % | |||||||||||||||||||||||||||
(dollars in thousands) | 2011 | 2010 | Change | Change | 2011 | 2010 | Change | Change | ||||||||||||||||||||||||
Number of buildings (1)(2) |
167 | 167 | | | 166 | 166 | | | ||||||||||||||||||||||||
Same property revenue |
||||||||||||||||||||||||||||||||
Rental |
$ | 27,599 | $ | 27,807 | $ | (208 | ) | (0.7 | ) | $ | 78,862 | $ | 79,611 | $ | (749 | ) | (0.9 | ) | ||||||||||||||
Tenant reimbursements |
6,120 | 5,949 | 171 | 2.9 | 17,453 | 18,105 | (652 | ) | (3.6 | ) | ||||||||||||||||||||||
Total same property revenue |
33,719 | 33,756 | (37 | ) | (0.1 | ) | 96,315 | 97,716 | (1,401 | ) | (1.4 | ) | ||||||||||||||||||||
Same property operating expenses |
||||||||||||||||||||||||||||||||
Property |
7,894 | 7,735 | 159 | 2.1 | 22,095 | 23,233 | (1,138 | ) | (4.9 | ) | ||||||||||||||||||||||
Real estate taxes and insurance |
3,048 | 2,924 | 124 | 4.2 | 8,689 | 9,083 | (394 | ) | (4.3 | ) | ||||||||||||||||||||||
Total same property operating expenses |
10,942 | 10,659 | 283 | 2.7 | 30,784 | 32,316 | (1,532 | ) | (4.7 | ) | ||||||||||||||||||||||
Same property net operating income |
$ | 22,777 | $ | 23,097 | $ | (320 | ) | (1.4 | ) | $ | 65,531 | $ | 65,400 | $ | 131 | 0.2 | ||||||||||||||||
Reconciliation to net income |
||||||||||||||||||||||||||||||||
Same property net operating income |
$ | 22,777 | $ | 23,097 | $ | 65,531 | $ | 65,400 | ||||||||||||||||||||||||
Non-comparable net operating income (3) |
6,873 | (18 | ) | 18,510 | 1,445 | |||||||||||||||||||||||||||
General and administrative expenses |
(4,354 | ) | (3,475 | ) | (12,546 | ) | (10,859 | ) | ||||||||||||||||||||||||
Acquisition costs |
(1,737 | ) | (361 | ) | (4,475 | ) | (2,025 | ) | ||||||||||||||||||||||||
Depreciation and amortization |
(16,088 | ) | (10,608 | ) | (45,381 | ) | (30,487 | ) | ||||||||||||||||||||||||
Impairment of real estate asset |
(3,111 | ) | | (3,111 | ) | | ||||||||||||||||||||||||||
Contingent consideration related to acquisition of
property |
1,487 | | 1,487 | (710 | ) | |||||||||||||||||||||||||||
Other expenses, net |
(9,754 | ) | (8,417 | ) | (26,650 | ) | (25,018 | ) | ||||||||||||||||||||||||
Benefit from income taxes |
195 | | 655 | | ||||||||||||||||||||||||||||
Discontinued operations (4) |
| (3,153 | ) | (873 | ) | (2,855 | ) | |||||||||||||||||||||||||
Net loss |
$ | (3,712 | ) | $ | (2,935 | ) | $ | (6,853 | ) | $ | (5,109 | ) | ||||||||||||||||||||
Weighted Average | Weighted Average | |||||||||||||||||||||||||||||||
Occupancy | Occupancy | |||||||||||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||||||||||
Same Properties |
83.1 | % | 85.1 | % | 83.6 | % | 85.1 | % |
(1) | Same property results reflect properties whose results can be viewed on a comparative basis for the periods presented. Same property results exclude the results of the following non
same-properties: RiversPark I and II, Three Flint Hill, Battlefield Corporate Center, Redland Corporate Center, Atlantic Corporate Park, 1211 Connecticut Ave, NW, 440 First Street, NW, 7458 Candlewood Road,
1750 H Street, NW, Aviation Business Park, Cedar Hill I & III, Merrill Lynch, 840 First Street, NE, One Fair Oaks, Greenbrier Towers I & II, 1005 First Street, NE, Davis Drive and Sterling Park Building
7. |
|
(2) | The Company acquired 500 First Street, NW on June 30, 2010. The property was the Companys first acquisition in its Washington, D.C. region and is only included above in the quarter over quarter
comparison as it was not owned by the Company for the entirety of the nine months ended September 30, 2010. |
|
(3) | Non-comparable net operating income has been adjusted to reflect a normalized management fee percentage in lieu of an
administrative overhead allocation for comparative purposes. |
|
(4) | Discontinued operations represent the results of operations and subsequent dispositions of Aquia Commerce Center I&II, Gateway West, Old Courthouse Square, Deer Park and 7561
Lindbergh Drive. |
45
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
September 30, | $ | % | September 30, | $ | % | |||||||||||||||||||||||||||
(dollars in thousands) | 2011 | 2010 | Change | Change | 2011 | 2010 | Change | Change | ||||||||||||||||||||||||
Number of buildings (1) |
63 | 63 | | | 63 | 63 | | | ||||||||||||||||||||||||
Same property revenue |
||||||||||||||||||||||||||||||||
Rental |
$ | 8,601 | $ | 8,715 | $ | (114 | ) | (1.3 | ) | $ | 25,669 | 25,962 | $ | (293 | ) | (1.1 | ) | |||||||||||||||
Tenant reimbursements |
1,907 | 1,723 | 184 | 10.7 | 5,562 | 5,652 | (90 | ) | (1.6 | ) | ||||||||||||||||||||||
Total same property revenue |
10,508 | 10,438 | 70 | 0.7 | 31,231 | 31,614 | (383 | ) | (1.2 | ) | ||||||||||||||||||||||
Same property operating expenses |
||||||||||||||||||||||||||||||||
Property |
2,243 | 2,420 | (177 | ) | (7.3 | ) | 6,992 | 7,804 | (812 | ) | (10.4 | ) | ||||||||||||||||||||
Real estate taxes and insurance |
993 | 1,042 | (49 | ) | (4.7 | ) | 2,943 | 3,108 | (165 | ) | (5.3 | ) | ||||||||||||||||||||
Total same property operating expenses |
3,236 | 3,462 | (226 | ) | (6.5 | ) | 9,935 | 10,912 | (977 | ) | (9.0 | ) | ||||||||||||||||||||
Same property net operating income |
$ | 7,272 | $ | 6,976 | $ | 296 | 4.2 | $ | 21,296 | $ | 20,702 | $ | 594 | 2.9 | ||||||||||||||||||
Reconciliation to total property operating income: |
||||||||||||||||||||||||||||||||
Same property net operating income |
$ | 7,272 | $ | 6,976 | $ | 21,296 | $ | 20,702 | ||||||||||||||||||||||||
Non-comparable net operating income(2) |
1,202 | 38 | 3,545 | 441 | ||||||||||||||||||||||||||||
Total property operating income |
$ | 8,474 | $ | 7,014 | $ | 24,841 | $ | 21,143 | ||||||||||||||||||||||||
Weighted Average | Weighted Average | |||||||||||||||||||||||||||||||
Occupancy | Occupancy | |||||||||||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||||||||||
Same Properties |
82.1 | % | 83.8 | % | 82.3 | % | 83.8 | % |
(1) | Same property results reflect properties whose results can be viewed on a comparative basis for the periods presented. Same property results exclude RiversPark I & II, Aviation Business Park, Redland Corporate Center II
& III, 7458 Candlewood Road and Merrill Lynch. |
|
(3) | Non-comparable net operating income has been adjusted to reflect a normalized management fee percentage in lieu of an administrative
overhead allocation for comparative purposes. |
46
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
September 30, | $ | % | September 30, | $ | % | |||||||||||||||||||||||||||
(dollars in thousands) | 2011 | 2010 | Change | Change | 2011 | 2010 | Change | Change | ||||||||||||||||||||||||
Number of buildings (1) |
49 | 49 | | | 49 | 49 | | | ||||||||||||||||||||||||
Same property revenue |
||||||||||||||||||||||||||||||||
Rental |
$ | 8,224 | $ | 8,070 | $ | 154 | 1.9 | $ | 24,451 | $ | 24,207 | $ | 244 | 1.0 | ||||||||||||||||||
Tenant reimbursements |
1,695 | 1,508 | 187 | 12.4 | 5,336 | 5,616 | (280 | ) | (5.0 | ) | ||||||||||||||||||||||
Total same property revenue |
9,919 | 9,578 | 341 | 3.6 | 29,787 | 29,823 | (36 | ) | (0.1 | ) | ||||||||||||||||||||||
Same property operating expenses |
||||||||||||||||||||||||||||||||
Property |
2,111 | 1,960 | 151 | 7.7 | 6,495 | 6,714 | (219 | ) | (3.3 | ) | ||||||||||||||||||||||
Real estate taxes and insurance |
891 | 699 | 192 | 27.5 | 2,879 | 2,896 | (17 | ) | (0.6 | ) | ||||||||||||||||||||||
Total same property operating
expenses |
3,002 | 2,659 | 343 | 12.9 | 9,374 | 9,610 | (236 | ) | (2.5 | ) | ||||||||||||||||||||||
Same property net operating income |
$ | 6,917 | $ | 6,919 | $ | (2 | ) | 0.0 | $ | 20,413 | $ | 20,213 | $ | 200 | 1.0 | |||||||||||||||||
Reconciliation to total
property operating income |
||||||||||||||||||||||||||||||||
Same property net operating income |
$ | 6.917 | $ | 6,919 | $ | 20,413 | $ | 20,213 | ||||||||||||||||||||||||
Non-comparable net operating
income (loss)(2) |
1,832 | (73 | ) | 3,142 | (34 | ) | ||||||||||||||||||||||||||
Total property operating income |
$ | 8,749 | $ | 6,846 | $ | 23,555 | $ | 20,179 | ||||||||||||||||||||||||
Weighted Average | Weighted Average | |||||||||||||||||||||||||||||||
Occupancy | Occupancy | |||||||||||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||||||||||
Same Properties |
84.1 | % | 84.4 | % | 84.0 | % | 84.3 | % |
(1) | Same property results reflect properties whose results can be viewed on a
comparative basis for the periods presented. Same property results exclude the results of
Three Flint Hill, Atlantic Corporate Park, Cedar Hill I & III, One Fair Oaks, Davis Drive and
Sterling Park-Building 7. |
|
(3) | Non-comparable net operating income has been adjusted to reflect
a normalized management fee percentage in lieu of an administrative
overhead allocation for comparative purposes. |
47
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
September 30, | $ | % | September 30, | $ | % | |||||||||||||||||||||||||||
(dollars in thousands) | 2011 | 2010 | Change | Change | 2011 | 2010 | Change | Change | ||||||||||||||||||||||||
Number of buildings (1) |
54 | 54 | | | 54 | 54 | | | ||||||||||||||||||||||||
Same property revenue |
||||||||||||||||||||||||||||||||
Rental |
$ | 9,390 | $ | 9,933 | $ | (543 | ) | (5.5 | ) | $ | 28,742 | $ | 29,442 | $ | (700 | ) | (2.4 | ) | ||||||||||||||
Tenant reimbursements |
2,008 | 2,336 | (328 | ) | (14.0 | ) | 6,555 | 6,837 | (282 | ) | (4.1 | ) | ||||||||||||||||||||
Total same property revenue |
11,398 | 12,269 | (871 | ) | (7.1 | ) | 35,297 | 36,279 | (982 | ) | (2.7 | ) | ||||||||||||||||||||
Same property operating expenses |
||||||||||||||||||||||||||||||||
Property |
3,117 | 3,027 | 90 | 3.0 | 8,608 | 8,715 | (107 | ) | (1.2 | ) | ||||||||||||||||||||||
Real estate taxes and insurance |
939 | 992 | (53 | ) | (5.3 | ) | 2,867 | 3,079 | (212 | ) | (6.9 | ) | ||||||||||||||||||||
Total same property operating
expenses |
4,056 | 4,019 | 37 | 0.9 | 11,475 | 11,794 | (319 | ) | (2.7 | ) | ||||||||||||||||||||||
Same property net operating income |
$ | 7,342 | $ | 8,250 | $ | (908 | ) | (11.0 | ) | $ | 23,822 | $ | 24,485 | $ | (663 | ) | (2.7 | ) | ||||||||||||||
Reconciliation to total
property operating income |
||||||||||||||||||||||||||||||||
Same property net operating income |
$ | 7,342 | $ | 8,250 | $ | 23,822 | $ | 24,485 | ||||||||||||||||||||||||
Non-comparable net operating
income (loss) (2) |
698 | 26 | 1,033 | 85 | ||||||||||||||||||||||||||||
Total property operating income |
$ | 8,040 | $ | 8,276 | $ | 24,855 | $ | 24,570 | ||||||||||||||||||||||||
Weighted Average | Weighted Average | |||||||||||||||||||||||||||||||
Occupancy | Occupancy | |||||||||||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||||||||||
Same Properties |
82.7 | % | 86.0 | % | 84.1 | % | 86.4 | % |
(1) | Same property results reflect properties whose results can be viewed on a
comparative basis for the periods presented. Same property results exclude the results of
Battlefield Corporate Center and Greenbrier Towers I & II. |
|
(3) | Non-comparable net operating income has been adjusted to reflect a
normalized management fee percentage in lieu of an administrative
overhead allocation for comparative purposes. |
48
Three Months Ended | ||||||||||||||||
September 30, | $ | % | ||||||||||||||
(dollars in thousands) | 2011 | 2010 | Change | Change | ||||||||||||
Number of buildings (1)(2) |
1 | 1 | | | ||||||||||||
Same property revenue |
||||||||||||||||
Rental |
$ | 1,384 | $ | 1,089 | $ | 295 | 27.1 | |||||||||
Tenant reimbursements |
510 | 382 | 128 | 33.5 | ||||||||||||
Total same property revenue |
1,894 | 1,471 | 423 | 28.8 | ||||||||||||
Same property operating expenses |
||||||||||||||||
Property |
423 | 328 | 95 | 29.0 | ||||||||||||
Real estate taxes and insurance |
225 | 191 | 34 | 17.8 | ||||||||||||
Total same property operating
expenses |
648 | 519 | 129 | 24.9 | ||||||||||||
Same property net operating income |
$ | 1,246 | $ | 952 | $ | 294 | 30.9 | |||||||||
Reconciliation to total
property operating income |
||||||||||||||||
Same property net operating income |
$ | 1,246 | $ | 952 | ||||||||||||
Non-comparable net operating income
(loss) (3) |
3,141 | (9 | ) | |||||||||||||
Total property operating income |
$ | 4,387 | $ | 943 | ||||||||||||
Weighted Average | ||||||||||||||||
Occupancy | ||||||||||||||||
2011 | 2010 | |||||||||||||||
Same Properties |
100.0 | % | 100.0 | % |
(1) | Same property results reflect properties whose results can be viewed on a
comparative basis for the periods presented. Same property results exclude the results of 1211
Connecticut Ave, NW, 440 First Street, NW, 1750 H Street, NW, 840 First Street, NE and 1005
First Street, NE. |
|
(2) | The Company acquired 500 First Street, NW on June 30, 2010. The property was the
Companys first acquisition in its Washington, D.C. region and is only included above in
the quarter over quarter comparison as it was not owned by the Company for the entirety of the
nine months ended September 30, 2010. |
|
(3) | Non-comparable net operating income has been adjusted to reflect a
normalized management fee percentage in lieu of an administrative
overhead allocation for comparative purposes. |
49
| In January 2011, the Company raised net proceeds of approximately $111 million
through the issuance of 4.6 million 7.75% Series A Preferred Shares. The Company used
$105.0 million of the proceeds to pay down a portion of its unsecured revolving credit
facility; |
| On June 16, 2011, the Company amended and restated its unsecured revolving credit
facility. Under the new agreement, the capacity on the Companys unsecured revolving
credit facility was expanded from $225 million to $255 million and the maturity date
was extended to January 2014 with a one-year extension at the Companys option, which
it intends to exercise. The interest rate on the unsecured revolving credit facility
decreased from a range of LIBOR plus 275 to 375 basis points to a range of LIBOR plus
200 to 300 basis points, depending on the Companys overall leverage; and |
| On July 18, 2011, the Company entered into a three-tranche $175.0 million unsecured
term loan. The unsecured term loans three tranches have maturity dates staggered in
one-year intervals. Tranche A has an outstanding balance of $60.0 million at an
interest rate of LIBOR plus 215 basis points and matures on July 18, 2016. Tranche B
has an outstanding balance of $60.0 million at an interest rate of LIBOR plus 225 basis
points and matures on July 18, 2017. Tranche C has an outstanding balance of $55.0
million at an interest rate of LIBOR plus 230 basis points and matures on July 18,
2018. The Company used the funds to pay down $117.0 million of the outstanding balance
on its unsecured revolving credit facility, to repay its $50.0 million senior secured
term loan and for other general corporate purposes. |
50
Credit Facility / | ||||||||
Unsecured and | ||||||||
Secured Term | ||||||||
Loans | Covenant | |||||||
Unencumbered Pool Leverage(1) |
49.0 | % | < 62.5 | % | ||||
Unencumbered Pool Debt Service Coverage
Ratio(1) |
4.58 | x | > 1.75 | x | ||||
Maximum Consolidated Total Indebtedness |
52.5 | % | < 62.5 | % | ||||
Minimum Tangible Net Worth |
$ | 823,878 | $>697,179 | |||||
Fixed Charge Coverage Ratio |
1.89 | x | > 1.50 | x | ||||
Maximum Secured Debt |
27.2 | % | < 40 | % |
(1) | Only applies to the Companys unsecured revolving credit facility. |
Senior Notes | Covenant | |||||||
Unencumbered Pool Leverage |
1.81 | x | > 1.50 | x | ||||
Unencumbered Pool Debt Service Coverage Ratio |
4.35 | x | > 1.75 | x | ||||
Maximum Consolidated Total Indebtedness |
56.6 | % | < 65 | % | ||||
Minimum Tangible Net Worth |
$ | 730,394 | $>697,179 | |||||
Fixed Charge Coverage Ratio |
1.71 | x | > 1.50 | x | ||||
Maximum Secured Debt |
28.1 | % | < 40 | % |
51
Nine Months Ended | ||||||||||||
September 30, | ||||||||||||
(amounts in thousands) | 2011 | 2010 | Change | |||||||||
Cash provided by operating activities |
$ | 26,801 | $ | 29,636 | $ | (2,835 | ) | |||||
Cash used in investing activities |
(126,866 | ) | (96,463 | ) | (30,403 | ) | ||||||
Cash provided by financing activities |
81,431 | 66,617 | 14,814 |
52
53
54
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||||||
Net loss attributable to common shareholders |
$ | (5,675 | ) | $ | (2,880 | ) | $ | (12,623 | ) | $ | (5,006 | ) | |||||||
Add: Depreciation and amortization: |
|||||||||||||||||||
Real estate assets |
16,088 | 10,608 | 45,381 | 30,487 | |||||||||||||||
Discontinued operations |
| 284 | 520 | 1,099 | |||||||||||||||
Unconsolidated joint ventures |
520 | 188 | 1,556 | 426 | |||||||||||||||
Consolidated joint venture |
(21 | ) | | (61 | ) | | |||||||||||||
Gain on sale of real estate properties |
| | (1,954 | ) | (557 | ) | |||||||||||||
Net loss attributable to noncontrolling
interests in the Operating Partnership |
(272 | ) | (55 | ) | (476 | ) | (103 | ) | |||||||||||
FFO available to common shareholders and
unitholders |
$ | 10,640 | $ | 8,145 | $ | 32,343 | $ | 26,346 | |||||||||||
Weighted average common shares and Operating
Partnership units outstanding diluted |
51,830 | 38,165 | 51,380 | 35,718 |
ITEM 3: | QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK |
55
Interest Rate | ||||||||||||||||
Contractual | Fixed LIBOR | |||||||||||||||
Effective Date | Maturity Date | Amount | Component | Interest Rate | ||||||||||||
January 2011 |
July 2014 | $ | 50,000 | LIBOR | 1.474 | % | ||||||||||
July 2011 |
July 2016 | 35,000 | LIBOR | 1.754 | % | |||||||||||
July 2011 |
July 2016 | 25,000 | LIBOR | 1.7625 | % | |||||||||||
July 2011 |
July 2017 | 30,000 | LIBOR | 2.093 | % | |||||||||||
July 2011 |
July 2017 | 30,000 | LIBOR | 2.093 | % | |||||||||||
September 2011 |
July 2018 | 30,000 | LIBOR | 1.660 | % | |||||||||||
$ | 200,000 | |||||||||||||||
ITEM 4: | CONTROLS AND PROCEDURES |
56
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Item 3. | Defaults Upon Senior Securities |
Item 4. | Removed and Reserved |
Item 5. | Other Information |
Item 6. | Exhibits |
No. | Description | |||
3.1 | Amended and Restated Declaration of Trust of the Registrant (incorporated by reference to Exhibit
3.1 to the Registrants Registration Statement on Form S-11 (Registration No. 333-107172), as filed
with the SEC on October 1, 2003). |
|||
3.2 | Articles Supplementary designating First Potomac Realty Trusts 7.750% Series A Cumulative
Redeemable Perpetual Preferred Shares, liquidation preference $25.00 per share, par value $0.001 per
share (incorporated by reference to Exhibit 3.2 to the Companys Form 8-A filed on January 18, 2011) |
|||
3.3 | Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the
Registrants Registration Statement on Form S-11 (Registration No. 333-107172), as filed with the
SEC on October 1, 2003). |
|||
4.1 | Amended and Restated Agreement of Limited Partnership of First Potomac Realty Investment, L.P. dated
September 15, 2003 (incorporated by reference to Exhibit 3.3 to the Registrants Registration
Statement on Form S-11 (Registration No. 333-107172), as filed with the SEC on October 1, 2003). |
|||
4.2 | Amendment No. 13 to Amended and Restated Limited Partnership Agreement of First Potomac Realty
Investment Limited Partnership (incorporated by reference to Exhibit 10.1 to the Companys Current
Report on Form 8-K filed on January 19, 2011). |
|||
4.3 | Amendment No. 14 to Amended and Restated Limited Partnership Agreement of First Potomac Realty
Investment Limited Partnership (incorporated by reference to Exhibit 4.3 to the Registrants
Quarterly Report on Form 10-Q for the quarter ended March 31, 2011). |
|||
4.4 | Form of First Potomac Realty Investment Limited Partnership 6.41% Senior Notes, Series A, due 2013
(incorporated by reference to Exhibit 4.1 to the Registrants Current Report on Form 8-K as filed
with the SEC
on June 23, 2006). |
|||
4.5 | Form of First Potomac Realty Investment Limited Partnership 6.55% Senior Notes, Series B, due 2016
(incorporated by reference to Exhibit 4.2 to the Registrants Current Report on Form 8-K as filed
with the SEC
on June 23, 2006). |
|||
4.6 | Note Purchase Agreement by and among the Registrant, First Potomac Realty Investment Limited
Partnership and the several Purchasers listed on the signature pages thereto, dated as of June 22,
2006 (incorporated by reference to Exhibit 4.3 to the Registrants Current Report on Form 8-K filed
on June 23, 2006). |
57
No. | Description | |||
4.7 | First Amendment, Consent and Waiver dated as of November 5, 2010 to the Note Purchase Agreement
dated as of June 22, 2006, by and among the Registrant, First Potomac Realty Investment Limited
Partnership and the several Purchasers listed on the signature pages thereto (incorporated by
reference to Exhibit 4.6 to the Registrants Annual Report on Form 10-K for the year ended December
31, 2010). |
|||
4.8 | Trust Guaranty, entered into by the Registrant, dated as of June 22, 2006 (incorporated by reference
to Exhibit 4.4 to the Registrants Current Report on Form 8-K filed on June 23, 2006). |
|||
4.9 | Subsidiary Guaranty, dated as of June 22, 2006 (incorporated by reference to Exhibit 4.5 to the
Registrants Current Report on Form 8-K filed on June 23, 2006). |
|||
4.10 | Indenture, dated as of December 11, 2006, by and among First Potomac Realty Investment Limited
Partnership, the Registrant, as Guarantor, and Wells Fargo Bank, National Association, as Trustee
(incorporated by reference to Exhibit 4.1 to the Registrants Current Report on Form 8-K filed on
December 12, 2006). |
|||
4.11 | Form of First Potomac Realty Investment Limited Partnership 4.0% Exchangeable Senior Note due 2011 (incorporated by reference to Exhibit 4.2 to the
Registrants Current Report on Form 8-K filed on December 12, 2006). |
|||
10.1 | Term Loan Agreement, dated as of
July 18, 2011, by and among First
Potomac Realty Investment Limited
Partnership and its subsidiaries
listed on Schedule 1 thereto,
KeyBank National Association, as a
lender and administrative agent, and
the other lenders and agents party
thereto (incorporated by reference
to Exhibit 10.1 to the Registrants
Current Report on Form 8-K, filed
with the SEC on July 22, 2011). |
|||
10.2 | Guaranty, dated July 18, 2011, by
First Potomac Realty Trust in favor
of the agent and lenders party to
the Term Loan Agreement, dated as of
July 18, 2011 (incorporated by
reference to Exhibit 10.2 to the
Registrants Current Report on Form
8-K, filed with the SEC on July 22,
2011). |
|||
10.3 | Amendment No. 5, dated September 30,
2011, by and among First Potomac
Realty Investment Limited
Partnership and KeyBank National
Association, to the Secured Term
Loan Agreement, dated August 7,
2007, as amended to date, by and
among First Potomac Realty
Investment Limited Partnership,
KeyBank National Association and the
other lending institutions which are
a party thereto (incorporated by
reference to Exhibit 10.1 to the
Registrants Current Report on Form
8-K, filed with the SEC on October
6, 2011). |
|||
31.1* | Certification of Chief Executive
Officer pursuant to Rule
13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002. |
|||
31.2* | Certification of Chief Financial
Officer pursuant to Rule
13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002. |
|||
32.1* | Certification of Chief Executive
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley
Act of 2002 (This exhibit shall not
be deemed filed for purposes of
Section 18 of the Securities
Exchange Act of 1934, as amended, or
otherwise subject to the liability
of that section. Further, this
exhibit shall not be deemed to be
incorporated by reference into any
filing under the Securities Act of
1933, as amended, or the Securities
Exchange Act of 1934, as amended.) |
|||
32.2* | Certification of Chief Financial
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley
Act of 2002 (This exhibit shall not
be deemed filed for purposes of
Section 18 of the Securities
Exchange Act of 1934, as amended, or
otherwise subject to the liability
of that section. Further, this
exhibit shall not be deemed to be
incorporated by reference into any
filing under the Securities Act of
1933, as amended, or the Securities
Exchange Act of 1934, as amended.) |
|||
101 | XBRL |
* | Filed herewith. |
58
FIRST POTOMAC REALTY TRUST | ||||
Date: November 8, 2011
|
/s/ Douglas J. Donatelli
|
|||
Chairman of the Board and Chief Executive Officer | ||||
Date: November 8, 2011
|
/s/ Barry H. Bass
Executive Vice President and Chief Financial Officer |
59
No. | Description | |||
3.1 | Amended and Restated Declaration of Trust of the Registrant (incorporated by reference to Exhibit
3.1 to the Registrants Registration Statement on Form S-11 (Registration No. 333-107172), as filed
with the SEC on October 1, 2003). |
|||
3.2 | Articles Supplementary designating First Potomac Realty Trusts 7.750% Series A Cumulative
Redeemable Perpetual Preferred Shares, liquidation preference $25.00 per share, par value $0.001 per
share (incorporated by reference to Exhibit 3.2 to the Companys Form 8-A filed on January 18, 2011) |
|||
3.3 | Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the
Registrants Registration Statement on Form S-11 (Registration No. 333-107172), as filed with the
SEC on October 1, 2003). |
|||
4.1 | Amended and Restated Agreement of Limited Partnership of First Potomac Realty Investment, L.P. dated
September 15, 2003 (incorporated by reference to Exhibit 3.3 to the Registrants Registration
Statement on Form S-11 (Registration No. 333-107172), as filed with the SEC on October 1, 2003). |
|||
4.2 | Amendment No. 13 to Amended and Restated Limited Partnership Agreement of First Potomac Realty
Investment Limited Partnership (incorporated by reference to Exhibit 10.1 to the Companys Current
Report on Form 8-K filed on January 19, 2011). |
|||
4.3 | Amendment No. 14 to Amended and Restated Limited Partnership Agreement of First Potomac Realty
Investment Limited Partnership (incorporated by reference to Exhibit 4.3 to the Registrants
Quarterly Report on Form 10-Q for the quarter ended March 31, 2011). |
|||
4.4 | Form of First Potomac Realty Investment Limited Partnership 6.41% Senior Notes, Series A, due 2013
(incorporated by reference to Exhibit 4.1 to the Registrants Current Report on Form 8-K as filed
with the SEC
on June 23, 2006). |
|||
4.5 | Form of First Potomac Realty Investment Limited Partnership 6.55% Senior Notes, Series B, due 2016
(incorporated by reference to Exhibit 4.2 to the Registrants Current Report on Form 8-K as filed
with the SEC
on June 23, 2006). |
|||
4.6 | Note Purchase Agreement by and among the Registrant, First Potomac Realty Investment Limited
Partnership and the several Purchasers listed on the signature pages thereto, dated as of June 22,
2006 (incorporated by reference to Exhibit 4.3 to the Registrants Current Report on Form 8-K filed
on June 23, 2006). |
|||
4.7 | First Amendment, Consent and Waiver dated as of November 5, 2010 to the Note Purchase Agreement
dated as of June 22, 2006, by and among the Registrant, First Potomac Realty Investment Limited
Partnership and the several Purchasers listed on the signature pages thereto (incorporated by
reference to Exhibit 4.6 to the Registrants Annual Report on Form 10-K for the year ended December
31, 2010). |
|||
4.8 | Trust Guaranty, entered into by the Registrant, dated as of June 22, 2006 (incorporated by reference
to Exhibit 4.4 to the Registrants Current Report on Form 8-K filed on June 23, 2006). |
|||
4.9 | Subsidiary Guaranty, dated as of June 22, 2006 (incorporated by reference to Exhibit 4.5 to the
Registrants Current Report on Form 8-K filed on June 23, 2006). |
|||
4.10 | Indenture, dated as of December 11, 2006, by and among First Potomac Realty Investment Limited
Partnership, the Registrant, as Guarantor, and Wells Fargo Bank, National Association, as Trustee
(incorporated by reference to Exhibit 4.1 to the Registrants Current Report on Form 8-K filed on
December 12, 2006). |
|||
4.11 | Form of First Potomac Realty Investment Limited Partnership 4.0% Exchangeable Senior Note due 2011 (incorporated by reference
to Exhibit 4.2 to the Registrants Current Report on Form 8-K filed on December 12, 2006). |
|||
10.1 | Term Loan Agreement, dated as of
July 18, 2011, by and among First
Potomac Realty Investment Limited
Partnership and its subsidiaries
listed on Schedule 1 thereto,
KeyBank National Association, as a
lender and administrative agent, and
the other lenders and agents party
thereto (incorporated by reference
to Exhibit 10.1 to the Registrants
Current Report on Form 8-K, filed
with the SEC on July 22, 2011). |
|||
10.2 | Guaranty, dated July 18, 2011, by
First Potomac Realty Trust in favor
of the agent and lenders party to
the Term Loan Agreement, dated as of
July 18, 2011 (incorporated by
reference to Exhibit 10.2 to the
Registrants Current Report on Form
8-K, filed with the SEC on July 22,
2011). |
No. | Description | |||
10.3 | Amendment No. 5, dated September 30,
2011, by and among First Potomac
Realty Investment Limited
Partnership and KeyBank National
Association, to the Secured Term
Loan Agreement, dated August 7,
2007, as amended to date, by and
among First Potomac Realty
Investment Limited Partnership,
KeyBank National Association and the
other lending institutions which are
a party thereto (incorporated by
reference to Exhibit 10.1 to the
Registrants Current Report on Form
8-K, filed with the SEC on October
6, 2011). |
|||
31.1* | Certification of Chief Executive
Officer pursuant to Rule
13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002. |
|||
31.2* | Certification of Chief Financial
Officer pursuant to Rule
13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002. |
|||
32.1* | Certification of Chief Executive
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley
Act of 2002 (This exhibit shall not
be deemed filed for purposes of
Section 18 of the Securities
Exchange Act of 1934, as amended, or
otherwise subject to the liability
of that section. Further, this
exhibit shall not be deemed to be
incorporated by reference into any
filing under the Securities Act of
1933, as amended, or the Securities
Exchange Act of 1934, as amended.) |
|||
32.2* | Certification of Chief Financial
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley
Act of 2002 (This exhibit shall not
be deemed filed for purposes of
Section 18 of the Securities
Exchange Act of 1934, as amended, or
otherwise subject to the liability
of that section. Further, this
exhibit shall not be deemed to be
incorporated by reference into any
filing under the Securities Act of
1933, as amended, or the Securities
Exchange Act of 1934, as amended.) |
|||
101 | XBRL |
* | Filed herewith. |
1. | I have reviewed this quarterly report on Form 10-Q of First Potomac Realty Trust; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
4. | The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting. |
5. | The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of trustees (or persons performing the equivalent
functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely
affect the registrants ability to record, process, summarize and report financial
information; and |
(b) | Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal control over financial
reporting. |
Date: November 8, 2011
|
/s/ Douglas J. Donatelli
|
|||
Chairman of the Board and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of First Potomac Realty Trust; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
4. | The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting. |
5. | The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of trustees (or persons performing the equivalent
functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely
affect the registrants ability to record, process, summarize and report financial
information; and |
(b) | Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal control over financial
reporting. |
Date: November 8, 2011
|
/s/ Barry H. Bass
|
|||
Executive Vice President, Chief Financial Officer |
Date: November 8, 2011
|
/s/ Douglas J. Donatelli
|
|||
Chairman of the Board and Chief Executive Officer |
Date: November 8, 2011
|
/s/ Barry H. Bass
|
|||
Executive Vice President, Chief Financial Officer |
Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Per Share data | Sep. 30, 2011 | Dec. 31, 2010 |
---|---|---|
Assets: | ||
Allowance for doubtful accounts receivable | $ 3,138 | $ 3,246 |
Accrued straight line rents allowance for doubtful accounts | 360 | 849 |
Liabilities: | ||
Noncontrolling interests, redemption value | $ 36,419 | $ 16,122 |
Equity: | ||
Series A Preferred stock, par value | $ 25 | $ 25 |
Series A Preferred stock, shares authorized | 50,000 | 50,000 |
Series A Preferred stock, shares issued | 4,600 | 0 |
Series A Preferred stock, shares outstanding | 4,600 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 150,000 | 150,000 |
Common stock, shares issued | 50,061 | 50,061 |
Common stock, shares outstanding | 49,922 | 49,922 |
Document and Entity Information (USD $) | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | Nov. 04, 2011 | Jun. 30, 2010 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | FIRST POTOMAC REALTY TRUST | ||
Entity Central Index Key | 0001254595 | ||
Document Type | 10-Q | ||
Document Period End Date | Sep. 30, 2011 | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2011 | ||
Document Fiscal Period Focus | Q3 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Public Float | $ 518,050,499 | ||
Entity Common Stock, Shares Outstanding | 50,291,606 |
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Discontinued Operations | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations |
(7) Discontinued Operations
The following table is a summary of property dispositions whose operating results are
reflected as discontinued operations in the Company’s condensed consolidated statements of
operations:
The Company has had, and will have, no continuing involvement with any of its disposed
properties subsequent to their disposal. The operations of the disposed properties were not subject
to any income taxes. The Company did not dispose of or enter into any binding agreements to sell
any other properties during the nine months ended September 30, 2011 and 2010.
The following table summarizes the components of net loss from discontinued operations
(amounts in thousands):
|
Equity | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity |
(12) Equity
On August 12, 2011, the Company paid a dividend of $0.20 per share to common shareholders of
record as of August 5, 2011 and paid a dividend of $0.484375 per share to preferred shareholders of
record as of August 5, 2011. On October 25, 2011, the Company declared a dividend of $0.20 per
common share, which is payable on November 11, 2011 to common shareholders of record as of November
4, 2011 and a dividend of $0.484375 per share on its Series A Preferred Shares, which is payable on
November 15, 2011 to preferred shareholders of record as of November 4, 2011. Dividends on all
non-vested share awards are recorded as a reduction of shareholders’ equity. For each dividend
paid by the Company on its common stock, the Operating Partnership distributes an equivalent
distribution on its Operating Partnership units.
On November 1, 2011, the Company began issuing shares of its common
stock under its control equity offering program. During 2010, the
Company issued 0.5 million common shares through its controlled
equity program, which generated net proceeds of approximately
$7.3 million.
As a result of the redemption feature of the Operating Partnership units requiring delivery of
registered shares of the Company, the noncontrolling interests associated with the Operating
Partnerhsip are recorded outside of permanent equity. The Company’s equity and redeemable
noncontrolling interests are as follows (amounts in thousands):
|
Earnings Per Share | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share |
(3) Earnings Per Share
Basic earnings or loss per share (“EPS”) is calculated by dividing net income or loss
attributable to common shareholders by the weighted average common shares outstanding for the
period. Diluted EPS is computed after adjusting the basic EPS computation for the effect of
dilutive common equivalent shares outstanding during the period, which include stock options,
non-vested shares, preferred shares and Exchangeable Senior Notes. The Company applies the
two-class method for determining EPS as its outstanding unvested shares with non-forfeitable
dividend rights are considered participating securities. The Company’s excess of distributions over
earnings related to participating securities are shown as a reduction in total earnings
attributable to common shareholders in the Company’s computation of EPS.
The following table sets forth the computation of the Company’s basic and diluted earnings per
share (amounts in thousands, except per share amounts):
In accordance with accounting requirements regarding earnings per share, the Company did
not include the following potential common shares in its calculation of diluted earnings per share
as they are anti-dilutive (amounts in thousands):
|
Income Taxes | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Income Taxes [Abstract] | |
Income Taxes |
(9) Income Taxes
The Company owns properties located in Washington, D.C. that are subject to local income based
franchise taxes. During the three and nine months ended September 30, 2011, the Company recognized
a benefit for income taxes of $0.2 million and $0.7 million, respectively, related to franchise
taxes levied by the city of Washington, D.C. at an effective rate of 9.975%. The Company acquired
its first property in Washington, D.C. that was subject to local franchise taxes in the fourth
quarter of 2010 and was not subject to any franchise taxes during the three and nine months ended
September 30, 2010.
The Company recognizes deferred tax assets only to the extent that it is more likely than not
that deferred tax assets will be realized based on consideration of available evidence, including
future reversals of existing taxable temporary differences, future projected taxable income and tax
planning strategies. The Company’s deferred tax assets and liabilities are primarily associated
with differences in the GAAP and tax basis of its real estate assets arising from acquisition
costs, intangible assets and deferred market rent assets and liabilities that are associated with
properties located in Washington, D.C. and recorded in its consolidated balance sheets. As of
September 30, 2011 and December 31, 2010, the Company recorded its deferred tax assets within
“Prepaid expenses and other assets” and recorded its deferred tax liabilities within “Accounts
payable and other liabilities” in the Company’s consolidated balance sheets.
The Company has not recorded a valuation allowance against its deferred tax assets as it
determined that is more likely than not that future operations will generate sufficient taxable
income to realize the deferred tax assets. The Company has not recognized any deferred tax assets
or liabilities as a result of uncertain tax positions and has no material net operating loss,
capital loss or alternative minimum tax carryovers. There was no (benefit) provision for income
taxes associated with the Company’s discontinued operations for any period presented. At September 30, 2011, the Company had deferred tax assets totaling $1.3 million and deferred tax liabilities totaling $5.0 million.
|
Segment Information | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information |
(14) Segment Information
The Company’s reportable segments consist of four distinct reporting and operational segments
within the greater Washington D.C, region in which it operates: Maryland, Washington, D.C.,
Northern Virginia and Southern Virginia. Prior to 2011, the Company had reported its properties
located in Washington, D.C. within its Northern Virginia reporting segment. However, due to the
Company’s growth within the Washington, D.C. region, it has altered its internal structure, which
includes changing the Company’s internal decision making process regarding its Washington, D.C.
properties. Therefore, the Company feels it is appropriate to separate the properties owned in
Washington, D.C. into its own reporting segment.
The Company evaluates the performance of its segments based on the operating results of the
properties located within each segment, which excludes large non-recurring gains and losses, gains
from sale of real estate assets, interest expense, general and administrative costs, acquisition
costs or any other indirect corporate expense to the segments. In addition, the segments do not
have significant non-cash items other than straight-line and deferred market rent amortization
reported in their operating results. There are no inter-segment sales or transfers recorded between
segments.
The results of operations for the Company’s four reportable segments are as follows (dollars
in thousands):
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Derivative Instruments and Comprehensive Loss | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Derivative Instruments and Comprehensive Loss [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Comprehensive Loss |
(10) Derivative Instruments and Comprehensive Loss
The Company is exposed to certain risks arising from business operations and economic factors.
The Company uses derivative financial instruments to manage exposures that arise from business
activities in which its future exposure to interest rate fluctuations is unknown. The objective in
the use of an interest rate derivative is to add stability to interest expenses and manage exposure
to interest rate changes. No hedging activity can completely insulate the Company from the risks
associated
with changes in interest rates. Moreover, interest rate hedging could fail to protect the
Company or adversely affect it because, among other things:
The Company enters into interest rate swap agreements to hedge its exposure on its variable
rate debt against fluctuations in prevailing interest rates. The interest rate swap agreements fix
LIBOR to a specified interest rate; however, the swap agreements do not affect the contractual
spreads associated with each variable debt instrument’s applicable interest rate. During the third
quarter of 2011, the Company entered into five interest rate swap agreements that fixed LIBOR on
$150.0 million of its variable rate debt. At September 30, 2011, the Company has hedged $200.0
million of its variable rate debt through six interest rate swap agreements.
The table below summarizes the Company’s interest rate swap agreements as of September 30,
2011 (dollars in thousands):
The Company’s interest rate swap agreements are designated as effective cash flow hedges
and the Company records any unrealized gains associated with the change in fair value of the swap
agreements within equity and “Prepaid expenses and other assets” and any unrealized losses within
equity and “Accounts payable and other liabilities.” The Company records its proportionate share of
unrealized gains or losses on its cash flow hedges associated with its unconsolidated joint
ventures within equity and “Investment in affiliates.”
In September 2008, the Company entered into an interest rate swap agreement that fixed the
$28.0 million variable rate mortgage encumbering RiversPark I and II at 5.97%. The mortgage has a
contractual interest rate of LIBOR plus 2.50%. On March 17, 2009 and January 1, 2010, the Company
deconsolidated the joint ventures that own RiversPark II and RiversPark I, respectively. As a
result, the $28.0 million mortgage loan and related interest rate swap for RiversPark I and II are
not consolidated in the Company’s consolidated financial statements. The interest rate swap
agreement matured in September 2011.
Total comprehensive loss is summarized as follows (amounts in thousands):
|
Debt | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Debt [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt |
(8) Debt
The Company’s borrowings consisted of the following (dollars in thousands):
(a) Mortgage Loans
The following table provides a summary of the Company’s mortgage debt at September 30, 2011
and December 31, 2010 (dollars in thousands):
(b) Unsecured Term Loan
On July 18, 2011, the Company entered into a three-tranche $175.0 million unsecured term loan.
The unsecured term loan’s three tranches have maturity dates staggered in one-year intervals.
Tranche A has an outstanding balance of $60.0 million at an interest rate of LIBOR plus 215 basis
points and matures on July 18, 2016. Tranche B has an outstanding balance of $60.0 million at an
interest rate of LIBOR plus 225 basis points and matures on July 18, 2017. Tranche C has an
outstanding balance of $55.0 million at an interest rate of LIBOR plus 230 basis points and matures
on July 18, 2018. The term loan agreement contains various restrictive covenants substantially
similar to those contained in the Company’s revolving credit facility, including with respect to
liens, indebtedness, investments, distributions, mergers and asset sales. In addition, the
agreement requires that the Company satisfy certain financial covenants that are also substantially
similar to those contained in the Company’s revolving credit facility. The agreement also includes
customary events of default, the occurrence of which, following any applicable cure period, would
permit the lenders to, among other things, declare the principal, accrued interest and other
obligations of the Company under the agreement to be immediately due and payable. The Company used
the funds to pay down $117.0 million of the outstanding balance on its unsecured revolving credit
facility, to repay its $50.0 million senior secured term loan and for other general corporate
purposes.
(c) Unsecured Revolving Credit Facility
During the third quarter of 2011, the Company repaid $117.0 million of the outstanding balance
of its unsecured revolving credit facility with proceeds from the issuance of a $175.0 million
unsecured term loan. During the third quarter of 2011, the Company borrowed $95.0 million on its
unsecured revolving credit facility to fund the acquisition of 1005 First Street, NE, to repay the
outstanding balance on two mortgage loans, to repay its $20.0 million secured term loan and for
general corporate purposes. For the three and nine months ended September 30, 2011, the Company’s
weighted average borrowings outstanding on its unsecured revolving credit facility were $133.9
million and $133.3 million, respectively, with a weighted average interest rate of 2.7% and 3.0%,
respectively, compared with weighted average borrowings of $125.7 million and $120.5 million with a
weighted average interest rate of 3.3% and 3.6% for the three and nine months ended September 30,
2010, respectively. At September 30, 2011, outstanding borrowings under the unsecured revolving
credit facility were $142.0 million. The Company is required to pay an annual commitment fee of
0.25% based on the amount of unused capacity under the unsecured revolving credit facility, which
was $113.0 million at September 30, 2011.
(d) Interest Rate Swap Agreements
During the third quarter of 2011, the Company entered into five interest rate swap agreements
that fixed LIBOR on $150.0 million of its variable rate debt. As of September 30, 2011, the Company
has hedged $200.0 million of its variable rate debt through six interest rate swap agreements. See
footnote 9, Derivative Instruments and Comprehensive Loss for more information about the Company’s
interest rate swap agreements.
(e) Debt Covenants
Certain of the Company’s subsidiaries are borrowers on mortgage loans, the terms of which
prohibit certain direct or indirect transfers of ownership interests in the borrower subsidiary (a
“Prohibited Transfer”). Under the terms of the mortgage loan documents, a lender could assert that
a Prohibited Transfer includes the trading of the Company’s common shares on the NYSE, the issuance
of common shares by the Company, or the issuance of units of limited partnership interest in the
Operating Partnership. As of September 30, 2011, the Company believes that there were six mortgage
loans with such Prohibited Transfer provisions, representing an aggregate principal amount
outstanding of approximately $57.2 million, of which two mortgages totaling $38.9 million are
scheduled to mature in 2012. Two of these mortgage loans were entered into prior to the Company’s
initial public offering (“IPO”) in 2003 and four were assumed subsequent to its IPO. In each
instance, the Company received the consent of the mortgage lender to consummate its IPO (for the
two pre-IPO loans) or to acquire the property or the ownership interests of the borrower (for the
post-IPO loans), including the assumption by its subsidiary of the mortgage loan. Generally, the
underlying mortgage documents, previously applicable to a privately held owner, were not changed at
the time of the IPO or the later loan assumptions, although the Company believes that each of the
lenders or servicers was aware that the borrower’s ultimate parent was or would become a publicly
traded company. Subsequent to the IPO and the assumption of these additional mortgage loans, the
Company has issued new common shares and shares of the Company have been transferred on the New
York Stock Exchange. Similarly, the Operating Partnership has issued units of limited partnership
interest. To date, no lender or servicer has asserted that a Prohibited Transfer has occurred as a
result of any such transfer of shares or units of limited partnership interest. If a lender were to
be successful in any such action, the Company could be required to immediately repay or refinance
the amounts outstanding, or the lender may be able to foreclose on the property securing the loan
or take other adverse actions. In addition, in certain cases a Prohibited Transfer could result in
the loan becoming fully recourse to the Company or its Operating Partnership. In addition, if a
violation of a Prohibited Transfer provision were to occur that would permit the Company’s mortgage
lenders to accelerate the indebtedness owed to them, it could result in an event of default under
the Company’s Series A and Series B Senior Notes, its unsecured revolving credit facility, its
unsecured term loan, its secured term loan and its Exchangeable Senior Notes.
At September 30, 2011, the Company was in compliance with all of the financial covenants
associated with its debt instruments.
|
Description of Business | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Description of Business [Abstract] | |
Description of Business |
(1) Description of Business
First Potomac Realty Trust (the “Company”) is a leader in the ownership, management,
development and redevelopment of office and industrial properties in the greater Washington, D.C.
region. The Company separates its properties into four distinct segments, which it refers to as the
Maryland, Washington, D.C., Northern Virginia and Southern Virginia reporting segments. The Company
strategically focuses on acquiring and redeveloping properties that it believes can benefit from
its intensive property management and seeks to reposition these properties to increase their
profitability and value. The Company’s portfolio contains a mix of single-tenant and multi-tenant
office and industrial properties as well as business parks. Office properties are single-story and
multi-story buildings that are used primarily for office use; business parks contain buildings with
office features combined with some industrial property space; and industrial properties generally
are used as warehouse, distribution or manufacturing facilities.
References in these unaudited condensed consolidated financial statements to “we,” “our” or
“First Potomac,” refer to the Company and its subsidiaries, on a consolidated basis, unless the
context indicates otherwise.
The Company conducts its business through First Potomac Realty Investment Limited Partnership,
the Company’s operating partnership (the “Operating Partnership”). The Company is the sole general
partner of, and, as of September 30, 2011, owned a 94.5% interest in, the Operating Partnership.
The remaining interests in the Operating Partnership, which are presented as noncontrolling
interests in the Operating Partnership in the accompanying unaudited condensed consolidated
financial statements, are limited partnership interests, some of which are owned by several of the
Company’s executive officers and trustees who contributed properties and other assets to the
Company upon its formation, and other unrelated parties.
At September 30, 2011, the Company wholly-owned or had a controlling interest in properties
totaling 13.9 million square feet and had a noncontrolling ownership interest in properties
totaling an additional 0.5 million square feet through four unconsolidated joint ventures. The
Company also owned land that can accommodate approximately 2.4 million square feet of additional
development. The Company derives substantially all of its revenue from leases of space within its
properties. As of September 30, 2011, the Company’s largest tenant was the U.S. Government, which
along with government contractors, accounted for over 20% of the Company’s total annualized rental
revenue. The U.S Government also accounted for approximately 30% of the Company’s outstanding
accounts receivables at September 30, 2011. The Company operates so as to qualify as a real estate
investment trust (“REIT”) for federal income tax purposes.
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rental Property [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rental Property |
(4) Rental Property
Rental property represents property, net of accumulated depreciation, and developable land
that are wholly owned or owned by an entity in which the Company has a controlling interest. All of
the Company’s rental properties are located within the greater Washington, D.C. region. Rental
property consists of the following (amounts in thousands):
(a) Development and Redevelopment Activity
The Company constructs office buildings, business parks and/or industrial buildings on a
build-to-suit basis or with the intent to lease upon completion of construction. Also, the Company
owns developable land that can accommodate 2.4 million square feet of additional building space.
Below is a summary of the approximate building square footage that can be developed on the
Company’s developable land and the Company’s current development and redevelopment activity
(amounts in thousands):
The Company anticipates the majority of the development and redevelopment efforts on
these projects will continue throughout the remainder of 2011 and into 2012.
At September 30, 2011, the Company had completed development and redevelopment activities that
have yet to be placed in service on 243 thousand square feet, at a cost of $16.1 million, in its
Northern Virginia reporting segment and 39 thousand square feet, at a cost of $1.2 million, in its
Southern Virginia reporting segment. The majority of the costs on the construction projects to be
placed in service relate to redevelopment activities at Three Flint Hill in the Company’s Northern
Virginia reporting segment, which were completed in the third quarter of 2011 at a cost of $11.0
million. The Company will place completed construction activities in service upon the shorter of a
tenant taking occupancy or twelve months from substantial completion.
(b) Acquisitions
During the third quarter of 2011, the Company acquired the following properties, which are
included in its condensed consolidated financial statements from the date of acquisition (dollars
in thousands):
On August 4, 2011, the Company formed a joint venture with an affiliate of Perseus
Realty, LLC to acquire 1005 First Street, NE in Washington, D.C. for $46.8 million, of which, $38.4
million was paid at closing and the remaining $8.4 million will be paid in August 2013. The Company
recorded the $8.4 million deferred purchase price obligation at its fair value at the time of
acquisition within “Accounts payable and other liabilities” in its consolidated balance sheets. The
Company determined the fair value of the deferred purchase price by calculating the present value
of the obligation that is due in 2013 using a discount rate for comparable transactions. The site
is currently occupied by the Greyhound Lines, Inc., “Greyhound”, which leased back the site under a
ten-year lease agreement with a termination option, at no penalty, after the second year.
Greyhound has announced that it intends to relocate its operations to nearby Union Station, at
which point the joint venture anticipates developing the 1.6 acre site, which can accommodate
development of up to approximately 712,000 square feet of office space. The development of the site will be managed by an affiliate of Perseus Realty, LLC. The property is located in
a former industrial area of Washington, D.C. where contaminated soil and/or groundwater are
commonly encountered due to past usage. The Company solicited a third party to quantify the
remediation needed at the property to remove any contaminates. The third party determined the
approximate cost of the site remediation to be $2.4 million, which the Company recorded as an
addition to “Accounts payable and other liabilities” on its consolidated balance sheets. The
Company anticipates owning 97% of the joint venture when the joint venture is fully capitalized. At acquisition, the fair value of the noncontrolling interest in the Greyhound property was approximately $1.2 million,
which equates to the Company’s joint venture partner’s proportionate share of the purchase price.
The fair values for the assets and liabilities acquired in 2011 are preliminary as the Company
continues to finalize their acquisition date fair value determination.
At September 30, 2011, the weighted average amortization period of the Company’s consolidated
intangible assets acquired in the third quarter of 2011 was 3.3 years. At September 30, 2011, the
intangible assets acquired during the third quarter are comprised of the following categories with
their respective weighted average amortization periods: acquired tenant
improvements 3.6 years; in-place leases 3.1 years; acquired leasing commissions 3.6 years;
marketing and legal expenses 3.4 years; above market leases 3.4 years; and below-market leases 4.4
years.
In March 2011, the Company acquired 840 First Street, NE, and, upon completion of the final
tax return by the prior ownership entity during the third quarter, the Company recognized a
deferred tax liability associated with the carryover basis of the property. As a result, the
Company recognized goodwill of approximately $4.8 million on its consolidated balance sheet
representing the residual difference between the consideration transferred and the acquisition date
fair value of the identifiable assets acquired and liabilities assumed, including deferred taxes
representing the difference between the fair value at acquisition and the carryover basis used for
income tax purposes.
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Notes Receivable | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Notes Receivable [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Receivable |
(5) Notes Receivable
Below is a summary of the Company’s notes receivable as of September 30, 2011 (dollars in
thousands):
During the three and nine months ended September 30, 2011, the Company recorded interest
income of $1.5 million and $3.6 million, respectively, related to its notes receivable.
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Noncontrolling Interests in Partnerships | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Noncontrolling Interests in Partnerships [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interests in Partnerships |
(13) Noncontrolling Interests in Partnerships
(a) Noncontrolling Interests in Operating Partnership
Noncontrolling interests relate to the interests in the Operating Partnership not owned by the
Company. Interests in the Operating Partnership are owned by limited partners who contributed
buildings and other assets to the Operating Partnership in exchange for Operating Partnership
units. Limited partners have the right to tender their units for redemption in exchange for, at the
Company’s option, common shares of the Company on a one-for-one basis or cash based on the fair
value of the Company’s common shares at the date of redemption. Unitholders receive a distribution
per unit equivalent to the dividend per common share.
Differences between amounts paid to redeem noncontrolling interests and their carrying values
are charged or credited to equity. As a result of the redemption feature of the Operating
Partnership units, the noncontrolling interests are recorded outside of permanent equity.
Noncontrolling interests are presented at the greater of their fair value or their cost basis,
which is comprised of their fair value at issuance, subsequently adjusted for the noncontrolling
interests’ share of net income, losses, distributions received, preferred dividends paid or
additional contributions. Based on the closing share price of the Company’s common stock at
September 30, 2011, the cost to acquire, through cash purchase or issuance of the Company’s common
shares, all of the outstanding Operating Partnership units not owned by the Company would be
approximately $36.4 million.
At December 31, 2010, 958,473 Operating Partnership units, or 1.9%, were not owned by the
Company. During the nine months ended September 30, 2011, the Company issued 1,963,388 Operating
Partnership units valued at $28.8 million to partially fund the acquisition of 840 First Street,
NE, which included the partial retirement of a contingent consideration obligation entered into
with the seller at acquisition. Also during the nine months ended September 30, 2011, 1,300
Operating Partnership units were redeemed for 1,300 common shares fair valued at $19 thousand. As a
result, 2,920,561 of the total outstanding Operating Partnership units, or 5.5%, were not owned by
the Company at September 30, 2011. There were no Operating Partnership units redeemed with
available cash during the nine months ended September 30, 2011.
(b) Noncontrolling Interests in Consolidated Partnerships
When the Company is deemed to have a controlling interest in a partially-owned entity, it will
consolidate all of the entity’s assets, liabilities and operating results within its condensed
consolidated financial statements. The cash contributed to the consolidated entity by the third
party, if any, will be reflected in the permanent equity section of the Company’s consolidated
balance sheets to the extent they are not mandatorily redeemable. The amount will be recorded based
on the third party’s initial investment in the consolidated entity and will be adjusted to reflect
the third party’s share of earnings or losses in the consolidated entity and any distributions
received or additional contributions made by the third party. The earnings or losses from the
entity attributable to the third party are recorded as a component of net loss attributable to
noncontrolling interests.
At September 30, 2011, the Company’s consolidated joint ventures owned the following
properties:
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Investment in Affiliates | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment in Affiliates [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment in Affiliates |
(6) Investment in Affiliates
The Company owns an interest in several properties for which it does not control the
activities that are most significant to the operations of the properties. As a result, the assets,
liabilities and operating results of these noncontrolled properties are not consolidated within the
Company’s condensed consolidated financial statements. The Company’s investment in these properties
is recorded as “Investment in affiliates” in its consolidated balance sheets.
Since January 1, 2010, the Company has had a 25% noncontrolling interest in the two separate
unconsolidated joint ventures that own RiversPark I and II. During the fourth quarter of 2010, the
Company entered into two separate joint ventures, in which it had a 50% noncontrolling interest, to
own 1750 H Street, NW and Aviation Business Park.
The net assets of the Company’s unconsolidated joint ventures consisted of the following
(amounts in thousands):
The following table summarizes the results of operations of the Company’s unconsolidated
joint ventures. The Company’s share of earnings or losses related to its unconsolidated joint
ventures is recorded in its consolidated statements of operations as “Equity in losses of
affiliates” (amounts in thousands):
|
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Summary of Significant Accounting Policies | 9 Months Ended | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | |||||||||||||||||||
Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||
Summary of Significant Accounting Policies |
(2) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The unaudited condensed consolidated financial statements of the Company include the accounts
of the Company, the Operating Partnership, the subsidiaries of the Operating Partnership in which
it has a controlling interest and First Potomac Management LLC, a wholly-owned subsidiary that
manages the majority of the Company’s properties. All intercompany balances and transactions have
been eliminated in consolidation.
The Company has condensed or omitted certain information and footnote disclosures normally
included in financial statements presented in accordance with U.S. generally accepted accounting
principles (“GAAP”) in the accompanying unaudited condensed consolidated financial statements. The
Company believes the disclosures made are adequate to prevent the information presented from being
misleading. However, the unaudited condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2010, included in the Company’s
current report on Form 8-K dated September 29, 2011 and as
updated from time to time in other filings with the Securities and Exchange Commission.
In the Company’s opinion, the accompanying unaudited condensed consolidated financial
statements reflect all adjustments, consisting of normal recurring adjustments and accruals
necessary to present fairly the Company’s financial position as of September 30, 2011, the results
of its operations for the three and nine months ended September 30, 2011 and 2010 and its cash
flows for the nine months ended September 30, 2011 and 2010. Interim results are not necessarily
indicative of full-year performance due, in part, to the timing of transactions and the impact of
acquisitions and dispositions throughout the year.
(b) Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP
requires management of the Company to make a number of estimates and assumptions relating to the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of revenues and
expenses during the period. Estimates include the amount of accounts receivable that may be
uncollectible; recoverability of notes receivable, future cash flows, discount and capitalization
rate assumptions used to fair value acquired properties and to test impairment of certain
long-lived assets and goodwill; derivative valuations; market lease rates, lease-up periods,
leasing and tenant improvement costs used to fair value intangible assets acquired and probability
weighted cash flow analysis used to fair value contingent liabilities. Actual results could differ
from those estimates.
(c) Rental Property
Rental property is carried at initial cost less accumulated depreciation and, when
appropriate, impairment losses. Improvements and replacements are capitalized at cost when they
extend the useful life, increase capacity or improve the efficiency of the asset. Repairs and
maintenance are charged to expense when incurred. Depreciation and amortization are recorded on a
straight-line basis over the estimated useful lives of the assets. The estimated useful lives of
the Company’s assets, by class, are as follows:
The Company regularly reviews market conditions for possible impairment of a property’s
carrying value. When circumstances such as adverse market conditions, changes in management’s
intended holding period or potential sale to a third party indicate a possible impairment of the
fair value of a property, an impairment analysis is performed. The Company assesses potential
impairments based on an estimate of the future undiscounted cash flows (excluding interest charges)
expected to result from the property’s use and eventual disposition. This estimate is based on
projections of future revenues, expenses, capital improvement costs, expected holding periods and
capitalization rates. These cash flows consider factors such as expected market trends and leasing
prospects, as well as the effects of leasing demand, competition and other factors. If impairment
exists due to the inability to recover the carrying value of a real estate investment based on
forecasted undiscounted cash flows, an impairment loss is recorded to the extent that the carrying
value exceeds the estimated fair value of the property. The Company is required to make estimates
as to whether there are impairments in the carrying values of its investments in real estate.
Further, the Company will record an impairment loss if it expects to dispose of a property, in the
near term, at a price below carrying value. In such an event, the Company will record an impairment
loss based on the difference between a property’s carrying value and its projected sales price less
any estimated costs to sell.
The Company will classify a building as held-for-sale in the period in which it has made the
decision to dispose of the building, the Company’s Board of Trustees or a designated delegate has
approved the sale, a binding agreement to purchase the property has been signed under which the
buyer has committed a significant amount of nonrefundable cash and no significant financing
contingencies exist that could cause the transaction not to be completed in a timely manner. The
Company will classify any impairment loss, together with the building’s operating results, as
discontinued operations in its consolidated statements of operations for all periods presented and
classify the assets and related liabilities as held-for-sale in its consolidated balance sheets in
the period the sale criteria are met. Interest expense is reclassified to discontinued operations
only to the extent the held-for-sale property is secured by specific mortgage debt and the mortgage
debt will not be assigned to another property owned by the Company after the disposition.
The Company recognizes the fair value, if sufficient information exists to reasonably estimate
the fair value, of any liability for conditional asset retirement obligations when incurred, which
is generally upon acquisition, construction, development or redevelopment and/or through the normal
operation of the asset.
The Company capitalizes interest costs incurred on qualifying expenditures for real estate
assets under development or redevelopment while being readied for their intended use in accordance
with accounting requirements regarding capitalization of interest. The Company will capitalize
interest when qualifying expenditures for the asset have been made, activities
necessary to get the asset ready for its intended use are in progress and interest costs are
being incurred. Capitalized interest also includes interest associated with expenditures incurred
to acquire developable land while development activities are in progress and the direct
compensation costs of the Company’s construction personnel who manage the development and
redevelopment projects, but only to the extent the employee’s time can be allocated to a project.
For the three and nine months ended September 30, 2011 and 2010, capitalized compensation costs
were immaterial. Capitalization of interest will end when the asset is substantially complete and
ready for its intended use, but no later than one year from completion of major construction
activity, if the property is not occupied. Capitalized interest is depreciated over the useful life
of the underlying assets, commencing when those assets are placed into service.
(d) Notes Receivable
The Company lends money to the owners of real estate properties, which are collateralized by a
direct or indirect interest in the real estate property. The Company records these investments as
“Notes receivable, net” in its consolidated balance sheets. The investments are recorded net of any
discount or issuance costs, which are amortized over the life of the respective note receivable
using the effective interest method. The Company records interest earned from notes receivable and
amortization of any discount or issuance costs within “Interest and other income” in its
consolidated statements of operations.
The Company will establish a provision for anticipated credit losses associated with its notes
receivables and debt investments when it anticipates that it may be unable to collect any
contractually due amounts. This determination is based on upon such factors as delinquencies, loss
experience, collateral quality and current economic or borrower conditions. Estimated losses are
recorded as a charge to earnings to establish an allowance for credit losses that the Company
estimates to be adequate based on these factors. The Company has not recorded any losses associated
with its notes receivable during 2011 and 2010.
(e) Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
(f) Application of New Accounting Standards
New guidance was issued that allows only two options for presenting the components of net
income and other comprehensive income: (1) in a single continuous financial statement, statement of
comprehensive income or (2) in two separate but consecutive financial statements, consisting of an
income statement followed by a separate statement of other comprehensive income. Also, items that
are reclassified from other comprehensive income to net income must be presented on the face of the
consolidated financial statements. The guidance requires retrospective application, and it is effective for
fiscal years, and interim periods within those years, beginning after December 15, 2011, with early
adoption permitted. The Company believes the adoption of this update will change the order in which
certain consolidated financial statements are presented and provide additional detail on those consolidated financial
statements when applicable, but will not have any other impact on its consolidated financial statements.
In September 2011, new accounting guidance was issued regarding the testing of potential
goodwill impairment, which permits a company to make a qualitative assessment of whether it is more
likely than not that a reporting unit’s fair value is less than its carrying amount before applying
the two-step goodwill impairment test. If a company can support the conclusion that it is not more
likely than not that the fair value of a reporting unit is less than its carrying amount, it would
not need to perform the two-step impairment test for that reporting unit. Goodwill must be tested
for impairment at least annually, and prior to the new guidance, a two-step test was required to
assess goodwill for impairment. The required disclosure is effective for annual and interim
goodwill impairment tests performed in fiscal years beginning after December 15, 2011. Early
adoption is permitted. The Company does not believe the implementation of this standard will have
a material impact on its condensed consolidated financial statements.
|
Fair Value Measurements | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Measurements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements |
(11) Fair Value Measurements
The Company adopted accounting provisions that outline a valuation framework and create a fair
value hierarchy, which distinguishes between assumptions based on market data (observable inputs)
and a reporting entity’s own assumptions about market data (unobservable inputs). The new
disclosures increase the consistency and comparability of fair value measurements and the related
disclosures. Fair value is identified, under the standard, as the price that would be received to
sell an asset or paid to transfer a liability between willing third parties at the measurement date
(an exit price). In accordance with GAAP, certain assets and liabilities must be measured at fair
value, and the Company provides the necessary disclosures that are required for items measured at
fair value as outlined in the accounting requirements regarding fair value.
Financial assets and liabilities, as well as those non-financial assets and liabilities
requiring fair value measurement, are measured using inputs from three levels of the fair value
hierarchy.
The three levels are as follows:
Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the Company has the ability to access at the measurement date. An active market is
defined as a market in which transactions for the assets or liabilities occur with sufficient
frequency and volume to provide pricing information on an ongoing basis.
Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets,
quoted prices for identical or similar assets or liabilities in markets that are not active
(markets with few transactions), inputs other than quoted prices that are observable for the asset
or liability (i.e., interest rates, yield curves, etc.), and inputs derived principally from or
corroborated by observable market data correlation or other means (market corroborated inputs).
Level 3 — Unobservable inputs, only used to the extent that observable inputs are not
available, reflect the Company’s assumptions about the pricing of an asset or liability.
In accordance with accounting provisions and the fair value hierarchy described above, the
following table shows the fair value of the Company’s consolidated assets and liabilities that are
measured on a non-recurring and recurring basis as of September 30, 2011 and December 31, 2010
(amounts in thousands):
Impairment of Real Estate Assets
The Company regularly reviews market conditions for possible impairment of a property’s
carrying value. When circumstances such as adverse market conditions, changes in management’s
intended holding period or potential sale to a third party indicate a possible impairment of a
property, an impairment analysis is performed.
During the third quarter of 2011, the Company incurred a $3.1 million impairment charge on its
Airpark Place property located in its Maryland reporting segment. Due to the shortening of the
anticipated holding period for this property, management has identified a triggering event for the
evaluation of a possible impairment. The Company determined the fair value of the property through
an assessment of market data and through an income approach based on discounted cash flows
anticipated over a reduced holding period.
On December 29, 2010, the Company acquired 7458 Candlewood Road, which is located in the
Company’s Maryland reporting segment. Due to the bankruptcy of an acquired tenant, the Company
realized an impairment charge of $2.4 million to reflect the fair value of the intangible asset
associated with the tenant’s lease, which was determined to have no value. The non-recoverable
value of the intangible assets was based on, among other items, an analysis of current market
rates, the present value of future cash flows that were discounted using capitalization rates,
lease renewal probabilities, hypothetical leasing timeframes, historical leasing commissions,
expected value of tenant improvements and recently executed leases.
In September 2010, the Company adjusted its anticipated holding period for its Old Courthouse
Square property, which is located in the Company’s Maryland reporting segment. The Company entered
into a non-binding contract to sell the asset in October 2010. As a result, the Company realized a
$3.4 million impairment charge to reduce the property’s carrying value to reflect its fair value,
less any potential selling costs. The property was sold on February 18, 2011 for net proceeds of
$10.8 million. The Company determined the fair value of the property through an assessment of
market data in working with a real estate broker on the transaction and based on the execution of a
non-binding letter of intent. The fair value was further validated through an income approach based
on discounted cash flows that reflected a reduced holding period.
The Company incurred impairment charges of $3.1 million and $5.8 million for the three and
nine months ended September 30, 2011, respectively, compared with $3.4 million and $4.0 million for
the three and nine months ended September 30, 2010, respectively. The Company recorded the $3.1
million Airpark Place impairment charge described above within continuing operations on its
consolidated statements of operations, the remaining impairment charges incurred during the three
and nine months ended September 30, 2011 and 2010 relate to properties that were subsequently
disposed of and are recorded within discontinued operations on the Company’s consolidated
statements of operations.
Interest Rate Derivatives
On January 18, 2011, the Company fixed LIBOR at 1.474% on $50.0 million of its variable rate
debt through an interest rate swap agreement that matures on January 15, 2014. During the third
quarter of 2011, the Company entered into five interest rate swap agreements that fixed LIBOR on
$150.0 million of its variable rate debt with staggered maturities between July 2016 and 2018. The
derivatives are fair valued based on prevailing market yield curves on the measurement date. Also,
the Company evaluates counter-party risk in calculating the fair value of the interest rate swap
derivative instruments. The Company’s interest rate swap derivatives are an effective cash flow
hedge and any change in fair value is recorded in the Company’s equity section as “Accumulated
Other Comprehensive Loss.”
The Company uses a third party to assist with the valuation of its interest rate swap
agreements. The third party takes a daily “snapshot” of the market to obtain close of business
rates. The snapshot includes over 7,500 rates including LIBOR fixings, Eurodollar futures, swap
rates, exchange rates, treasuries, etc. This market data is obtained via direct feeds from
Bloomberg and Reuters and from Inter-Dealer Brokers. The selected rates are compared to their
historical values. Any rate that has changed by more than normal mean and related standard
deviation would be considered an outlier and flagged for further investigation. The rates are then
compiled through a valuation process that generates daily valuations, which are used to value the
Company’s interest rate swap agreements.
A summary of the Company’s interest rate derivative liabilities which are included in
“Accounts payable and other liabilities” in the Company’s consolidated balance sheets, is as
follows (amounts in thousands):
Contingent Consideration
On March 25, 2011, the Company acquired 840 First Street, NE, in Washington, D.C. for an
aggregate purchase price of $90.0 million, with up to $10.0 million of additional consideration
payable in Operating Partnership units upon the terms of a lease renewal by the building’s sole
tenant or the re-tenanting of the property through November 2013. Based on assessment of the
probability of renewal and anticipated lease rates, the Company recorded a contingent consideration
obligation of $9.4 million at acquisition. In July 2011, the building’s sole tenant renewed its
lease through August 2023 on the entire building with the exception of two floors. As a result, the
Company issued 544,673 Operating Partnership units to satisfy $7.1 million of its contingent
consideration obligation. The Company recognized a $1.5 million gain associated with the issuance
of the additional units, which represented the difference between the contractual value of the
units and the fair value of the units at the date of issuance. At September 30, 2011, the remaining
contingent consideration obligation was $0.7 million, which may result in the issuance of
additional units dependent upon the leasing of any of the vacant space. The fair value of the
contingent consideration obligation was determined based on several probability weighted discounted
cash flow scenarios that projected stabilization being achieved at certain timeframes. The fair
value was based, in part, on significant inputs, which are not observable in the market, thus
representing a Level 3 measurement in accordance with the fair value hierarchy.
The Company has a contingent consideration obligation associated with the 2009 acquisition of
Ashburn Center. As part of the acquisition price of Ashburn Center, the Company entered into a fee
agreement with the seller under which the Company will be obligated to pay additional consideration
upon the property achieving stabilization per specified terms of the agreement. The Company
determines the fair value of the obligation through an income approach based on discounted cash
flows that project stabilization being achieved within a certain timeframe. The more significant
inputs associated with the fair value determination of the contingent consideration include
estimates of capitalization rates, discount rates and various assumptions regarding the property’s
operating performance and profitability.
The Company did not recognize any additional gains or losses associated with its contingent
consideration for the three and nine months ended September 30, 2011 or the three months ended
September 30, 2010. During the first quarter of 2010, the Company fully leased the Ashburn Center,
which resulted in an increase in its potential obligation, and recorded a $0.7 million increase in
its contingent consideration to reflect the increase in the Company’s potential obligation with a
corresponding entry to “Contingent Consideration Related to Acquisition of Property” in its
consolidated statements of operations. The Company has classified its contingent consideration
liabilities within “Accounts payable and other liabilities” and any changes in its fair value
subsequent to their acquisition date valuation are charged to earnings. There was no significant
change in the fair value of the contingent consideration during the quarter ended September 30,
2010.
A summary of the Company’s consolidated contingent consideration obligations is as follows
(amounts in thousands):
With the exception of its contingent consideration obligation, the Company did not re-measure
or complete any transactions involving non-financial assets or non-financial liabilities that are
measured on a recurring basis during the nine months ended
September 30, 2011 and 2010. Also, no transfers
into and out of fair value measurements levels occurred during the nine months ended September 30,
2011 or 2010.
Financial Instruments
The carrying amounts of cash equivalents, accounts and other receivables, accounts
payable and other liabilities, with the exception of any items listed above, approximate their fair
values due to their short-term maturities. The Company uses third parties with mezzanine lending
expertise to value its notes receivable based on comparable deals, market analysis and underlying
asset operating results. The Company calculates the fair value of its debt instruments by
discounting future contractual principal and interest payments using prevailing market rates for
securities with similar terms and characteristics at the balance sheet date. The carrying amount
and estimated fair value of the Company’s note receivables and debt instruments at September 30,
2011 and December 31, 2010 are as follows (amounts in thousands):
|
Subsequent Events | 9 Months Ended |
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Sep. 30, 2011 | |
Subsequent Events [Abstract] | |
Subsequent Events |
(15) Subsequent Events
During the first quarter of 2011, the Company entered into a joint venture with an affiliate
of the Akridge Company. On October 12, 2011, the joint venture acquired a property located in
Washington, D.C. at 1200 17th Street, NW for $39.6 million. The property currently consists of a
land parcel that contains an 85,000 square foot office building. The joint venture intends to
demolish the existing building and develop a new Class A 170,000 square foot office building.
Construction is currently expected to commence in 2012 and is expected to be completed in late
2014. The Company funded its share of the purchase price through a $20.0 million mortgage, a draw
on its unsecured revolving credit facility and available cash. The Company anticipates owning a 95%
interest in the joint venture when it is fully capitalized.
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