Attached files
file | filename |
---|---|
EX-23.1 - EX-23.1 - FIRST POTOMAC REALTY TRUST | c19495exv23w1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): July 1, 2011
FIRST POTOMAC REALTY TRUST
(Exact name of registrant as specified in its charter)
Maryland | 001-31824 | 37-1470730 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
7600 Wisconsin Avenue Bethesda, Maryland |
20814 |
|
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (301) 986-9200
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 8.01. Other Events
During the period from April 28, 2010 to April 8, 2011, First Potomac Realty Trust (the Company)
purchased eleven consolidated real estate properties and completed two additional acquisitions
through unconsolidated joint ventures, all of which were previously disclosed in press releases
furnished as exhibits to Current Reports on Form 8-K. The consolidated acquisitions included a
vacant office building that was purchased with the intent to fully redevelop the property and a
newly constructed vacant office property with no prior operating history. In addition, one of the
unconsolidated joint ventures referred to above acquired a newly constructed property with no prior
operating history. Under the rules and regulations of the Securities and Exchange Commission,
these properties are individually insignificant but, in the aggregate, are significant. Regulation
S-X requires the presentation of audited statements of revenues and certain expenses for a majority
of the individually insignificant properties when acquired properties are individually
insignificant, but significant in the aggregate. In particular, the Companys acquisitions in the
fiscal year ended December 31, 2010 were significant in the aggregate. In addition, properties
acquired subsequent to December 31, 2010 are also significant in the aggregate. As a result, the
Company is presenting statements of revenues and certain expenses for 500 First Street, NW and
Redland Corporate Center (a majority of all 2010 acquisitions) and 840 First Street, NE and One
Fair Oaks (a majority of all 2011 acquisitions).
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Properties Acquired.
1. | 500 First Street, NW, acquired June 30, 2010: Independent Auditors Report Statements of Revenues and Certain Expenses for the three months ended March 31, 2010 (unaudited) and year ended December 31, 2009 Notes to Statements of Revenues and Certain Expenses |
||
2. | Redland Corporate Center, acquired November 10, 2010: Independent Auditors Report Statements of Revenues and Certain Expenses for the nine months ended September 30, 2010 (unaudited) and the period from July 1, 2009 (inception) to December 31, 2009 Notes to Statements of Revenues and Certain Expenses |
||
3. | 840 First Street, NE, acquired March 25, 2011: Independent Auditors Report Statement of Revenues and Certain Expenses for the year ended December 31, 2010 Notes to Statements of Revenues and Certain Expenses |
||
4. | One Fair Oaks, acquired April 8, 2011: Independent Auditors Report Statements of Revenues and Certain Expenses for the three months ended March 31, 2011 (unaudited) and year ended December 31, 2010 Notes to Statements of Revenues and Certain Expenses |
(b) Pro Forma Financial Information.
The following pro forma financial statements reflect the Companys completed 2010 and 2011
acquisitions.
1. | Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2011. |
|
2. | Notes to Pro Forma Consolidated Balance Sheet as of March 31, 2011. |
2
3. | Unaudited Pro Forma Consolidated Statement of Operations for the three months ended March 31, 2011. |
|
4. | Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2010. |
|
5. | Notes to Pro Forma Consolidated Statements of Operations. |
(d) Exhibits.
Exhibit No. | ||
23.1 |
Consent of Independent Registered Public Accounting Firm |
3
FIRST POTOMAC REALTY TRUST
PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
(UNAUDITED)
The following pro forma financial information of First Potomac Realty Trust (the Company)
have been prepared to provide pro forma financial information with respect to certain acquisitions
that the Company has completed since April 28, 2010, as well as certain other adjustments described
below.
The unaudited pro forma condensed consolidated balance sheet as of March 31, 2011 reflects
adjustments related to the Companys acquisition of One Fair Oaks as if it had occurred on March
31, 2011.
The unaudited pro forma consolidated statement of operations for the three months ended March
31, 2011 assumes that all of the following occurred on January 1, 2010 (collectively, the 2011
Acquisitions) :
| The acquisition of 840 First Street, NE for approximately $97.7 million on March 25,
2011, including the assumption of a $57.2 million mortgage, fair valued at $56.5 million
at acquisition; and |
||
| The acquisition of One Fair Oaks for approximately $60.3 million on April 8, 2011,
including the assumption of a $52.4 million mortgage loan, fair valued at $52.9 million
at acquisition. |
The unaudited pro forma consolidated statement of operations for the year ended December 31,
2010 assumes that all of the following occurred on January 1, 2010:
| The acquisition of 500 First Street, NW for approximately $67.8 million on June 30,
2010, partially funded with a new $39.0 million mortgage loan; |
||
| The acquisition of a 97% interest in Redland Corporate Center for approximately $86.4
million on November 10, 2010; and |
||
| The 2011 Acquisitions. |
In the opinion of the Companys management, all adjustments necessary to reflect the effects
of these acquisitions and other transactions have been made. The unaudited pro forma financial
information is presented for illustrative purposes only and is not necessarily indicative of what
the Companys actual results of operations or financial condition would have been had the
transactions described above occurred at the beginning of the periods presented, nor does it
purport to represent the future results of operations or financial condition of the Company. The
unaudited pro forma consolidated financial statements and accompanying notes should be read in
conjunction with the financial statements included in the Companys Quarterly Report on Form 10-Q
for the three months ended March 31, 2011 and the Companys Current Report on Form 8-K dated June
13, 2011 for the year ended December 31, 2010.
4
FIRST POTOMAC REALTY TRUST
PRO FORMA CONSOLIDATED BALANCE SHEET
As of March 31, 2011
PRO FORMA CONSOLIDATED BALANCE SHEET
As of March 31, 2011
(Unaudited, in thousands)
One Fair Oaks | Pro Forma | |||||||||||
Historical | Acquisition | First Potomac | ||||||||||
(A) | (B) | Realty Trust | ||||||||||
Assets |
||||||||||||
Rental property, net |
$ | 1,326,027 | $ | 50,833 | $ | 1,376,860 | ||||||
Cash and cash equivalents |
18,681 | (9,009 | ) | 9,672 | ||||||||
Escrows and reserves |
13,504 | 3,794 | 17,298 | |||||||||
Accounts and other receivables, net
of allowance for doubtful accounts of
$3,351 and $3,246, respectively |
8,602 | | 8,602 | |||||||||
Accrued straight-line rents, net of
allowance for doubtful accounts of
$893 and $894, respectively |
13,549 | | 13,549 | |||||||||
Note receivable, net |
24,760 | | 24,760 | |||||||||
Investment in affiliates |
23,994 | | 23,994 | |||||||||
Deferred costs, net |
22,260 | 199 | 22,459 | |||||||||
Prepaid expenses and other assets |
14,966 | | 14,966 | |||||||||
Intangibles assets, net |
54,673 | 7,083 | 61,756 | |||||||||
Total assets |
$ | 1,521,016 | $ | 52,900 | $ | 1,573,916 | ||||||
Liabilities |
||||||||||||
Mortgage loans |
$ | 391,573 | $ | 52,900 | $ | 444,473 | ||||||
Exchangeable senior notes, net |
30,076 | | 30,076 | |||||||||
Senior notes |
75,000 | | 75,000 | |||||||||
Secured term loans |
100,000 | | 100,000 | |||||||||
Unsecured revolving credit facility |
116,000 | | 116,000 | |||||||||
Accounts payable and other liabilities |
34,342 | | 34,342 | |||||||||
Accrued interest |
3,736 | | 3,736 | |||||||||
Rents received in advance |
7,234 | | 7,234 | |||||||||
Tenant security deposits |
5,620 | | 5,620 | |||||||||
Deferred market rent, net |
5,676 | | 5,676 | |||||||||
Total liabilities |
769,257 | 52,900 | 822,157 | |||||||||
Noncontrolling interests in the Operating Partnership |
37,420 | | 37,420 | |||||||||
Total equity |
714,339 | | 714,339 | |||||||||
Total liabilities, noncontrolling interests and equity |
$ | 1,521,016 | $ | 52,900 | $ | 1,573,916 | ||||||
See accompanying notes to unaudited pro forma consolidated balance sheet.
5
FIRST POTOMAC REALTY TRUST
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2011
(UNAUDITED)
AS OF MARCH 31, 2011
(UNAUDITED)
(A) Reflects the historical consolidated balance sheet of First Potomac Realty Trust (the
Company) as of March 31, 2011. See the historical consolidated financial statements and notes
thereto included in the Companys Quarterly Report on Form 10-Q for the three months ended March
31, 2011.
(B) Reflects the Companys acquisition of One Fair Oaks, which the Company acquired on April
8, 2011 for approximately $60.3 million. This acquisition was funded through the assumption of a
$52.4 million mortgage, fair valued at $52.9 million and available cash. The purchase price of this
property has been allocated among the building (on an as-if vacant basis), land, tenant
improvements, leasing commissions, the origination value of leases and the fair value of at, above
or below market leases. The fair value of One Fair Oaks assets are preliminary as the Company
continues to assess its initial fair value determination of its assets. The weighted average
amortization period for all the intangible assets associated with One Fair Oaks was 7.0 years.
6
FIRST POTOMAC REALTY TRUST
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2011
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2011
(unaudited, in thousands, except per share amounts)
840 | One | |||||||||||||||||||
First | Fair | Other | ||||||||||||||||||
Historical | Street, NE | Oaks | Transactions | |||||||||||||||||
(A) | (B) | (B) | (C) | Pro Forma | ||||||||||||||||
Revenues |
||||||||||||||||||||
Rental revenue |
$ | 32,359 | $ | 1,544 | $ | 1,304 | $ | | $ | 35,207 | ||||||||||
Tenant reimbursement |
8,111 | 1,081 | 610 | | 9,802 | |||||||||||||||
Total revenues |
40,470 | 2,625 | 1,914 | | 45,009 | |||||||||||||||
Operating expenses |
||||||||||||||||||||
Property operating |
10,958 | 611 | 435 | | 12,004 | |||||||||||||||
Real estate taxes and insurance |
4,002 | 378 | 158 | | 4,538 | |||||||||||||||
General and administrative |
4,008 | | | | 4,008 | |||||||||||||||
Acquisition costs |
2,185 | | | (1,695 | ) | 490 | ||||||||||||||
Depreciation and amortization |
12,770 | 2,393 | 669 | | 15,832 | |||||||||||||||
Impairment of real estate assets |
2,711 | | | | 2,711 | |||||||||||||||
Total operating expenses |
36,634 | 3,382 | 1,262 | (1,695 | ) | 39,583 | ||||||||||||||
Operating income (loss) |
3,836 | (757 | ) | 652 | 1,695 | 5,426 | ||||||||||||||
Interest and other expenses, net |
7,527 | 910 | 894 | 126 | 9,457 | |||||||||||||||
(Loss) income from continuing operations |
(3,691 | ) | (1,667 | ) | (242 | ) | 1,569 | (4,031 | ) | |||||||||||
(Loss) income from continuing
operations attributable to
noncontrolling interests |
134 | 71 | 11 | (71 | ) | 145 | ||||||||||||||
(Loss) income from continuing operations
attributable to First
Potomac Realty Trust |
(3,557 | ) | (1,596 | ) | (231 | ) | 1,498 | (3,886 | ) | |||||||||||
Less: Dividends on preferred shares |
(1,783 | ) | | | | (1,783 | ) | |||||||||||||
Net (loss) income from continuing
operations available to common
shareholders |
$ | (5,340 | ) | $ | (1,596 | ) | $ | (231 | ) | $ | 1,498 | $ | (5,669 | ) | ||||||
Loss from continuing operations per share: |
||||||||||||||||||||
Basic and diluted |
$ | (0.12 | ) | $ | (0.12 | ) | ||||||||||||||
Weighted average common share outstanding: |
||||||||||||||||||||
Basic and diluted |
49,234 | 49,234 |
See accompanying notes to unaudited pro forma consolidated statement of operations.
7
FIRST POTOMAC REALTY TRUST
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2010
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2010
(unaudited, in thousands, except per share amounts)
500 First | Redland | |||||||||||||||||||||||||||
840 First | One Fair | Street, | Corporate | Other | ||||||||||||||||||||||||
Historical | Street, NE | Oaks | NW | Center | Transactions | |||||||||||||||||||||||
(A) | (B) | (B) | (D) | (D) | (C) | Pro Forma | ||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||
Rental revenue |
$ | 111,860 | $ | 7,546 | $ | 5,215 | $ | 2,072 | $ | 4,045 | $ | | $ | 130,738 | ||||||||||||||
Tenant reimbursement |
26,687 | 4,790 | 2,544 | 650 | 2 | | 34,673 | |||||||||||||||||||||
Total revenues |
138,547 | 12,336 | 7,759 | 2,722 | 4,047 | | 165,411 | |||||||||||||||||||||
Operating expenses |
||||||||||||||||||||||||||||
Property operating |
33,714 | 2,715 | 1,795 | 739 | 1,175 | | 40,138 | |||||||||||||||||||||
Taxes and insurance |
12,954 | 2,077 | 604 | 430 | 1,060 | | 17,125 | |||||||||||||||||||||
General and administrative |
14,523 | | | | | | 14,523 | |||||||||||||||||||||
Acquisition costs |
7,169 | | | | | 1,972 | 9,141 | |||||||||||||||||||||
Depreciation and amortization |
42,613 | 9,572 | 2,674 | 1,103 | 2,055 | | 58,017 | |||||||||||||||||||||
Impairment of real estate assets |
2,386 | | | | | | 2,386 | |||||||||||||||||||||
Contingent consideration related
to property |
710 | | | | | | 710 | |||||||||||||||||||||
Total operating expenses |
114,069 | 14,364 | 5,073 | 2,272 | 4,290 | 1,972 | 142,040 | |||||||||||||||||||||
Operations income (loss) |
24,478 | (2,028 | ) | 2,686 | 450 | (243 | ) | (1,972 | ) | 23,371 | ||||||||||||||||||
Interest and other expenses, net |
33,115 | 3,264 | 3,576 | 1,098 | | 3,335 | 44,388 | |||||||||||||||||||||
Loss from continuing operations |
(8,637 | ) | (5,292 | ) | (890 | ) | (648 | ) | (243 | ) | (5,307 | ) | (21,017 | ) | ||||||||||||||
Loss from continuing operations
attributable to noncontrolling interests |
174 | 295 | 50 | 39 | 22 | 296 | 876 | |||||||||||||||||||||
Net loss from continuing operations available to
common
Shareholders |
$ | (8,463 | ) | $ | (4,997 | ) | $ | (840 | ) | $ | (609 | ) | $ | (221 | ) | $ | (5,011 | ) | $ | (20,141 | ) | |||||||
Loss from continuing operations
per share: |
||||||||||||||||||||||||||||
Basic and diluted |
($0.25 | ) | ($0.56 | ) | ||||||||||||||||||||||||
Weighted average common
share outstanding: |
||||||||||||||||||||||||||||
Basic and diluted |
36,984 | 36,984 |
See accompanying notes to unaudited pro forma consolidated statement of operations.
8
FIRST POTOMAC REALTY TRUST
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS
STATEMENTS OF OPERATIONS
(A) Reflects the Companys historical consolidated statements of operations for the three
months ended March 31, 2011 and the year ended December 31, 2010. See the historical consolidated
financial statements and notes thereto included in the Companys Quarterly Report on Form 10-Q for
the three months ended March 31, 2011 and the Companys Current Report on Form 8-K dated June 13,
2011 for the year ended December 31, 2010.
(B) Reflects the operating results of 2011 completed acquisitions, including depreciation and
amortization expense and an adjustment to rental revenue related to allocation of the purchase
price to tenant improvements, customer and tenant relationships, the origination value of leases
and the fair value of at, above or below market leases.
Interest expense arising from assumed mortgage debt with fair values and effective interest
rates as follows: $56.5 million and 6.05% for 840 First Street, NE; and $52.9 million and 6.72%
for One Fair Oaks.
Property operating expenses have been adjusted to eliminate historical management fees for
properties managed by the Company since acquisition.
(C) Reflects acquisition costs associated with the 2011 acquisitions treated as incurred
effective January 1, 2010. Other expense includes the impact of interest expense associated with
borrowings incurred on the Companys revolving line of credit to partially fund the 2010 and 2011
acquisitions.
(D) Reflects the operating results of 2010 completed acquisitions, including depreciation and
amortization expense and an adjustment to rental revenue related to allocation of the purchase
price to tenant improvements, customer and tenant relationships, the origination value of leases
and the fair value of at, above or below market leases.
The adjustment to noncontrolling interests reflects the allocable share of the properties
operating results and the impact of other transactions.
Interest expense arising from assumed mortgage debt associated with 500 First Street, NW with
a fair value and effective interest rate of $39.0 million and 5.79%, respectively.
The Companys excess of distributions over earnings related to its participating securities
are accounted for as a reduction in total earnings attributable to common shareholders in the
Companys computation of earnings or loss per share. For the three months ended March 31, 2011 and
the year ended December 31, 2010, the Companys loss from continuing operations was increased by
$0.1 million and $0.6 million, respectively, related to its excess distributions over earning in
the calculation of its loss from continuing operations per share.
A one-eighth percentage point fluctuation in the variable interest rate applicable to the debt
instruments used to acquire 840 First Street, NE, 500 First Street, NW and Redland Corporate Center
would result in a change in annual interest and other expenses of $0.2 million.
9
INDEPENDENT AUDITORS REPORT
The Board of Trustees and Shareholders
First Potomac Realty Investment Trust:
First Potomac Realty Investment Trust:
We have audited the accompanying statement of revenues and certain expenses (as defined in
note 2) of 500 First Street, NW for the year ended December 31, 2009. This statement is the
responsibility of management. Our responsibility is to express an opinion on this statement based
on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and certain expenses is free of material
misstatement. An audit includes consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and
certain expenses. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the statement of
revenues and certain expenses. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenues and certain expenses was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange Commission Rule 3-14 of
Regulation S-X and is not intended to be a complete presentation of the revenues and expenses of
500 First Street, NW. As described in note 2, the accompanying statement of revenues and certain
expenses excludes some expenses of the property, and may not be comparable with those expenses
resulting from the proposed future operations of 500 First Street, NW.
In our opinion, the statement referred to above presents fairly, in all material respects, the
revenues and certain expenses (described in note 2) of 500 First Street, NW for the year ended
December 31, 2009, in conformity with accounting principles generally accepted in the United States
of America.
/s/ KPMG LLP
McLean, Virginia
June 30, 2011
June 30, 2011
10
500 FIRST STREET, NW
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
Three months ended March 31, 2010 (unaudited) and Year ended December 31, 2009
2010 | 2009 | |||||||
(unaudited) | ||||||||
Revenues: |
||||||||
Rental |
$ | 767,679 | $ | 3,070,715 | ||||
Tenant reimbursement and other |
253,828 | 1,283,765 | ||||||
Garage |
73,368 | 293,232 | ||||||
1,094,875 | 4,647,712 | |||||||
Certain expenses: |
||||||||
Real estate taxes |
206,061 | 847,781 | ||||||
Utilities |
118,218 | 473,085 | ||||||
Payroll and Administrative |
66,673 | 238,433 | ||||||
Service contracts |
89,842 | 354,352 | ||||||
Management fees (note 4) |
30,000 | 120,000 | ||||||
Repairs and maintenance |
47,346 | 323,710 | ||||||
Insurance |
9,849 | 38,000 | ||||||
Other |
18,293 | 54,092 | ||||||
586,282 | 2,449,453 | |||||||
Revenues in excess of certain expenses |
$ | 508,593 | $ | 2,198,259 | ||||
See accompanying notes to statements of revenues and certain expenses.
11
500 FIRST STREET, NW
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
Three months ended March 31, 2010 (unaudited) and Year ended December 31, 2009
(1) Background
On June 30, 2010, First Potomac Realty Trust acquired the ownership interests in 500 First
Street, NW, a 129,000 square foot commercial office property in Washington, D.C.
(2) Summary of Significant Accounting Policies and Other Matters
(a) Basis of Presentation
The accompanying statements of revenues and certain expenses and have been prepared for the
purpose of complying with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission.
The statements exclude certain items, such as mortgage interest and depreciation and amortization,
and accordingly, the statements are not representative of the actual operations for the period
presented and also may not be comparable to the expenses expected to be incurred in the proposed
future operations of 500 First Street, NW. Based on reasonable inquiry, management is not aware of
any material factors relating to 500 First Street, NW other than those described above that would
cause the reported financial information not to be necessarily indicative of future operating
results.
The accompanying unaudited statement of revenues and certain expenses reflects all adjustments
necessary to present fairly certain expenses of the 500 First Street, NW, for the three month
period ended March 31, 2010. Interim results are not necessarily indicative of full year
performance.
(b) Revenue Recognition
The straight-line basis is used to recognize rent revenues over the terms of the respective
leases.
(c) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and judgments that
affect the revenues and expenses recognized during the reporting period. Actual results could
differ from those estimates.
(d) Subsequent Events
First Potomac Realty Trust has evaluated the need for disclosures and/or adjustments resulting
from the subsequent events through June 30, 2011, the date the statements of revenues and certain
expenses were available to be issued.
(3) Tenant Leases
The building was fully leased to one tenant at December 31, 2009. The total minimum rents to
be received from the tenant under the noncancelable operating lease in effect at December 31, 2009,
were as follows:
2010 |
$ | 4,360,392 | ||
2011 |
4,360,392 | |||
2012 |
4,360,392 | |||
2013 |
4,360,392 | |||
2014 |
4,360,392 | |||
Thereafter |
6,903,954 | |||
Total |
$ | 28,705,914 | ||
12
(4) Management Fees
500 First Street, NW has a management agreement that provides for management fees based upon a
percentage of rental revenues and for reimbursement of certain direct costs, including on-site
management costs incurred in operating the building. Management fee expenses during the three
months ended March 31, 2010 (unaudited) and the year ended December 31, 2009 were $30,000 and
$120,000, respectively.
13
INDEPENDENT AUDITORS REPORT
The Board of Trustees and Shareholders
First Potomac Realty Investment Trust:
First Potomac Realty Investment Trust:
We have audited the accompanying statement of revenues and certain expenses (as defined in
note 2) of Redland Corporate Center for the period July 1, 2009 (inception) to December 31, 2009.
This statement is the responsibility of management. Our responsibility is to express an opinion on
this statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and certain expenses is free of material
misstatement. An audit includes consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and
certain expenses. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the statement of
revenues and certain expenses. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenues and certain expenses was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange Commission Rule 3-14 of
Regulation S-X and is not intended to be a complete presentation of the revenues and expenses of
Redland Corporate Center. As described in note 2, the accompanying statement of revenues and
certain expenses excludes some expenses of the property, and may not be comparable with those
expenses resulting from the proposed future operations of Redland Corporate Center.
In our opinion, the statement referred to above presents fairly, in all material respects, the
revenues and certain expenses (described in note 2) of Redland Corporate Center for the period July
1, 2009 (inception) to December 31, 2009, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
McLean, Virginia
June 30, 2011
June 30, 2011
14
REDLAND CORPORATE CENTER
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
Nine months ended September 30, 2010 (unaudited) and the period July 1, 2009 (inception) to December 31, 2009
2010 | 2009 | |||||||
(unaudited) | ||||||||
Revenues: |
||||||||
Rental |
$ | 3,577,6579 | $ | 794,493 | ||||
Other |
3,419 | 11 | ||||||
3,581,076 | 794,504 | |||||||
Certain expenses: |
||||||||
Real estate taxes |
785,823 | 241,844 | ||||||
Utilities |
404,928 | 163,271 | ||||||
Payroll and administrative |
157,599 | 63,628 | ||||||
Service contracts |
238,962 | 44,628 | ||||||
Management fees (note 4) |
27,315 | 18,210 | ||||||
Repairs and maintenance |
68,106 | 8,368 | ||||||
Insurance |
75,967 | 49,889 | ||||||
Other |
186,644 | 72,477 | ||||||
1,945,344 | 662,315 | |||||||
Revenues in excess of certain expenses |
$ | 1,635,732 | $ | 132,189 | ||||
See accompanying notes to statements of revenues and certain expenses.
15
REDLAND CORPORATE CENTER
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
Nine months ended September 30, 2010 (unaudited) and the period from July 1, 2009 (inception) to December 31, 2009
(1) Background
On November 10, 2010, First Potomac Realty Trust purchased a 97% economic interest in the
joint venture that owns Redland Corporate Center, a commercial office property in Rockville,
Maryland, and formed FP Redland, LLC, a Delaware limited liability company, for the purpose of
owning and holding commercial rental properties. Redland Corporate Center has two buildings with
an aggregate 247,000 rentable square feet.
(2) Summary of Significant Accounting Policies and Other Matters
(a) Basis of Presentation
The accompanying statements of revenues and certain expenses have been prepared for the
purpose of complying with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission.
The statements exclude certain items, such as mortgage interest and depreciation and amortization,
and accordingly, the statements are not representative of the actual operations for the period
presented and also may not be comparable to the expenses expected to be incurred by FP Redland, LLC
in the proposed future operations of Redland Corporate Center. Based on reasonable
inquiry, management is not aware of any material factors relating to Redland Corporate Center other
than those described above that would cause the reported financial information not to be
necessarily indicative of future operating results.
The accompanying unaudited statement of revenues and certain expenses reflects all adjustments
necessary to present fairly certain expenses of the Redland Corporate Center for the nine month
period ended September 30, 2010. Interim results are not necessarily indicative of full year
performance.
(b) Revenue Recognition
The straight-line basis is used to recognize rent revenues over the terms of the respective
leases.
(c) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and judgments that
affect the revenues and expenses recognized during the reporting period. Actual results could
differ from those estimates.
(d) Subsequent Events
FP Redland, LLC has evaluated the need for disclosures and/or adjustments resulting from the
subsequent events through June 30, 2011, the date the statements of revenues and certain expenses
were available to be issued.
16
(3) Tenant Leases
Redland Corporate Center was leased to two tenants at December 31, 2009. The total minimum
rents to be received from the tenants under noncancelable operating leases in effect at December
31, 2009 were as follows:
2010 |
$ | 2,444,373 | ||
2011 |
4,226,547 | |||
2012 |
4,690,313 | |||
2013 |
4,690,512 | |||
2014 |
4,927,753 | |||
Thereafter |
31,304,266 | |||
Total |
$ | 52,283,764 | ||
(4) Management Fees
Redland Corporate Center has a management agreement that provides for management fees based
upon a percentage of rental revenues and for reimbursement of certain direct costs, including
on-site management costs incurred in operating the buildings. Management fee expenses during the
nine months ended September 30, 2010 (unaudited) and the year ended December 31, 2009 were $27,315
and $18,210, respectively.
17
INDEPENDENT AUDITORS REPORT
The Board of Trustees and Shareholders
First Potomac Realty Investment Trust:
First Potomac Realty Investment Trust:
We have audited the accompanying statement of revenues and certain expenses (as defined in
note 2) of 840 First Street, NE for the year ended December 31, 2010. This statement is the
responsibility of management. Our responsibility is to express an opinion on this statement based
on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and certain expenses is free of material
misstatement. An audit includes consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and
certain expenses. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the statement of
revenues and certain expenses. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenues and certain expenses was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange Commission Rule 3-14 of
Regulation S-X and is not intended to be a complete presentation of the revenues and expenses of
840 First Street, NE. As described in note 2, the accompanying statement of revenues and certain
expenses excludes some expenses of the property, and may not be comparable with those expenses
resulting from the proposed future operations of 840 First Street, NE.
In our opinion, the statement referred to above presents fairly, in all material respects, the
revenues and certain expenses (as defined in note 2) of 840 First Street, NE for the year ended
December 31, 2010, in conformity with accounting principles generally accepted in the United States
of America.
/s/ KPMG LLP
McLean, Virginia
June 30, 2011
June 30, 2011
18
840 FIRST STREET, NE
STATEMENT OF REVENUES AND CERTAIN EXPENSES
Year ended December 31, 2010
2010 | ||||
Revenues: |
||||
Rental |
$ | 7,143,901 | ||
Tenant Reimbursement |
4,790,078 | |||
11,933,979 | ||||
Certain expenses: |
||||
Real estate taxes |
2,042,184 | |||
Utilities |
1,121,170 | |||
Service contracts |
747,581 | |||
Management fees (note 4) |
124,191 | |||
Repair and maintenance expense |
138,591 | |||
Insurance |
34,423 | |||
Payroll and administrative |
405,557 | |||
Other |
177,873 | |||
4,791,570 | ||||
Revenues in excess of certain expenses |
$ | 7,142,409 | ||
See accompanying notes to statement of revenues and certain expenses.
19
840 FIRST STREET, NE
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
Year ended December 31, 2010
(1) Background
On March 25, 2011, First Potomac Realty Trust (First Potomac) purchased 840 First Street,
NE, a 249,000 square foot commercial office property located in Washington, D.C, and simultaneously
formed FP 840 First Street, LLC, a Delaware limited liability company, for the purpose of owning
and holding commercial rental properties.
(2) Summary of Significant Accounting Policies and Other Matters
(a) Basis of Presentation
The accompanying statement of revenues and certain expenses relates to 840 First Street, NE
and has been prepared for the purpose of complying with Rule 3-14 of Regulation S-X of the
Securities and Exchange Commission. The statement excludes certain items, such as mortgage interest
and depreciation and amortization, and accordingly, the statement is not representative of the
actual operations for the period presented and also may not be comparable to the expenses expected
to be incurred by FP 840 First Street, LLC in the proposed future operations of 840 First Street,
NE. Based on reasonable inquiry, management is not aware of any material factors relating to 840
First Street, NE other than those described above that would cause the reported financial
information not to be necessarily indicative of future operating results.
(b) Revenue Recognition
The straight-line basis is used to recognize rent revenues over the terms of the respective
leases.
(c) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and judgments that
affect the revenues and expenses recognized during the reporting period. Actual results could
differ from those estimates.
(d) Subsequent Events
FP 840 First Street, LLC has evaluated the need for disclosures and/or adjustments resulting
from the subsequent events through June 30, 2011, the date the statement of revenues and certain
expenses were available to be issued.
(3) Tenant Leases
840 First Street, NE was occupied by one tenant at December 31, 2010. The total minimum rents
to be received
from the tenant under the noncancelable operating lease in effect at December 31, 2010, were as
follows:
2011 |
$ | 7,845,756 | ||
2012 |
8,077,246 | |||
2013 |
5,447,915 | |||
Total |
$ | 21,370,917 | ||
20
(4) Management Fees
840 First Street, NE has a management agreement that provides for management fees based upon a
percentage of rental revenues and for reimbursement of certain direct costs, including on-site
management costs incurred in operating the buildings. Management fee expenses during the year ended
December 31, 2010 were $124,191.
21
INDEPENDENT AUDITORS REPORT
The Board of Trustees and Shareholders
First Potomac Realty Investment Trust:
First Potomac Realty Investment Trust:
We have audited the accompanying statement of revenues and certain expenses (as defined in
note 2) of One Fair Oaks for the year ended December 31, 2010. This statement is the responsibility
of management. Our responsibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and certain expenses is free of material
misstatement. An audit includes consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and
certain expenses. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the statement of
revenues and certain expenses. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenues and certain expenses was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange Commission Rule 3-14 of
Regulation S-X and is not intended to be a complete presentation of the revenues and expenses of
One Fair Oaks. As described in note 2, the accompanying statement of revenues and certain expenses
excludes some expenses of the property, and may not be comparable with those expenses resulting
from the proposed future operations of One Fair Oaks.
In our opinion, the statement referred to above presents fairly, in all material respects, the
revenues and certain expenses (as defined in note 2) of One Fair Oaks for the year ended December
31, 2010, in conformity with accounting principles generally accepted in the United States of
America.
/s/ KPMG LLP
McLean, Virginia
June 30, 2011
June 30, 2011
22
ONE FAIR OAKS
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
Three months ended March 31, 2011 (unaudited) and Year ended December 31, 2010
2011 | 2010 | |||||||
(unaudited) | ||||||||
Revenues: |
||||||||
Rental |
$ | 1,114,241 | $ | 4,456,959 | ||||
Tenant reimbursement |
610,196 | 2,543,963 | ||||||
1,724,437 | 7,000,922 | |||||||
Certain expenses: |
||||||||
Real estate taxes |
145,756 | 552,998 | ||||||
Utilities |
180,102 | 610,899 | ||||||
Payroll and Administrative |
44,782 | 171,246 | ||||||
Service contracts |
109,154 | 488,675 | ||||||
Management fees (note 4) |
46,739 | 186,017 | ||||||
Repairs and maintenance |
93,023 | 401,906 | ||||||
Insurance |
12,319 | 51,115 | ||||||
Other |
8,423 | 122,649 | ||||||
640,298 | 2,585,505 | |||||||
Revenues in excess of certain expenses |
$ | 1,084,139 | $ | 4,415,417 | ||||
See accompanying notes to statements of revenues and certain expenses.
23
ONE FAIR OAKS
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
Three months ended March 31, 2011 (unaudited) and Year ended December 31, 2010
(1) Background
On April 8, 2011, First Potomac Realty Trust acquired One Fair Oaks, a 214,000 square foot
commercial office building located in Fairfax, Virginia, and formed FP One Fair Oaks, LLC, a
Delaware limited liability company, for the purpose of owning and holding commercial rental
properties.
(2) Summary of Significant Accounting Policies and Other Matters
(a) Basis of Presentation
The accompanying statements of revenues and certain expenses have been prepared for the
purpose of complying with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission.
The statements excludes certain items, such as mortgage interest and depreciation and amortization,
and accordingly, the statements are not representative of the actual operations for the periods
presented and also may not be comparable to the expenses expected to be incurred by FP One Fair
Oaks, LLC in the proposed future operations of One Fair Oaks. Based on reasonable inquiry,
management is not aware of any material factors relating to One Fair Oaks other than those
described above that would cause the reported financial information not to be necessarily
indicative of future operating results.
The accompanying unaudited statement of revenues and certain expenses reflects all adjustments
necessary to present fairly certain expenses of One Fair Oaks for the three month period ended
March 31, 2011. Interim results are not necessarily indicative of full year performance.
(b) Revenue Recognition
The straight-line basis is used to recognize rent revenues over the terms of the respective
leases.
(c) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and judgments that
affect the revenues and expenses recognized during the reporting period. Actual results could
differ from those estimates.
(d) Subsequent Events
FP One Fair Oaks, LLC has evaluated the need for disclosures and/or adjustments resulting from
the subsequent events through June 30, 2011, the date the statements of revenues and certain
expenses were available to be issued.
24
(3) Tenant Leases
One Fair Oaks was fully leased to one tenant at December 31, 2010. The total minimum rents to
be received from the tenant under the noncancelable operating lease in effect at December 31, 2010,
were as follows:
2011 |
$ | 5,026,320 | ||
2012 |
5,156,010 | |||
2012 |
5,289,072 | |||
2014 |
5,425,594 | |||
2015 |
5,533,805 | |||
Thereafter |
5,671,147 | |||
Total |
$ | 32,101,948 | ||
(4) Management Fees
One Fair Oaks has a management agreement that provides for management fees based upon a
percentage of rental revenues and for reimbursement of certain direct costs, including on-site
management costs incurred in operating the buildings. Management fee expenses during the three
months ended March 31, 2011 (unaudited) and the year ended December 31, 2010 were $46,739 and
$186,017, respectively.
25
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
FIRST POTOMAC REALTY TRUST
July 1, 2011
/s/ Barry H.
Bass
Barry H. Bass
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. | ||
23.1
|
Consent of KPMG LLP |