- The Washington Times - Monday, February 23, 2004

First Potomac Realty’s first financial quarter as a public company was a busy one.

The Bethesda real estate investment trust spent nearly half of the money it raised from its initial public offering in October on four industrial and flex properties and expanded its real estate portfolio in the Washington area.

Shares of the company rose 7 cents to close at $20.15 on the New York Stock Exchange yesterday, up 25 percent since the IPO and 10 cents below the company’s all-time high on Jan. 22.

First Potomac said that by the end of 2003, it raised about $118 million from its IPO, spending $60 million on the properties, which include two industrial buildings in Alexandria and flex buildings in Beltsville and Glen Allen, Va.

Flex buildings are properties that can be used as warehouse or office space.

First Potomac last week said it lost $6.3 million in the fourth quarter of 2003, compared with an $800,000 loss during the fourth quarter of 2002, when the company was not yet public. Revenue rose to $5.59 million in the fourth quarter for 2003, from $3.66 million during the comparable quarter in 2002.

Analysts have been bullish on the company since it went public, and said the fourth quarter net loss was largely the result of accounting and other expenses associated with the IPO.

On the surface, First Potomac’s acquisitions look like nothing to brag about. The four properties total about 591,000 square feet, but are less than 70 percent leased. Company executives said they are confident the buildings will be fully leased within a year.

“As hot as the commercial market is, rather than pay up for a fully leased building, they are looking to manage these properties and lease them up,” said Christopher Lucas, an analyst with Ferris, Baker Watts, an investment bank based in Washington. “For the size of the portfolio, you’re not talking about a lot of space, so I don’t think it’s unrealistic.”

Mr. Lucas does not own shares of First Potomac, but Ferris, Baker Watts does business with the company and received fees for its work on the IPO.

First Potomac controls 34 buildings on 15 properties in the areas around Baltimore, Washington, Richmond and Norfolk. More than 94 percent of the properties’ 2.5 million rentable square feet are leased.

First Potomac Executives said the IPO has not only given them cash to pay down debt and buy properties, but has raised the company’s stature.

“We feel that as a public company and with the high profile that we have today … we’re able to source more deals than we were able to at this time last year,” said First Potomac’s President and Chief Executive Officer Doug Donatelli, in a conference call.

Analysts said First Potomac will make an attractive investment, because it will pay a hefty dividend. The company announced a 10 cent dividend for the fourth quarter, and said it plans to pay out 75 percent to 80 percent of its funds from operations in dividends.

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