CEO Milkovich Engineers Sale of Company Following Strategy to Shed Assets, Increase Investor Value
Robert Milkovich, CEO and Chief Operating Officer of First Potomac Real estate Trust. Following an 18-month ‘crash course’in boosting investor worth under CEO Robert Milkovich, Bethesda, MD-based Very first Potomac Real estate Trust (NYSE: FPO )has accepted a buyout deal from Federal government Properties Income Trust(Nasdaq: GOV )for $1.4 billion in cash and financial obligation assumption. Federal government Residence Earnings Trust, which is managed by the operating subsidiary of alternative possession management company The RMR Group Inc. (Nasdaq: RMR)based outside Boston, accepted pay $11.15 per share in cash ($683 million in total). GOV likewise accepted choose up the tab for approximately $418 countless First Potomac’s financial obligation and assume roughly $232 million of exceptional mortgage financial obligation.
GOV mainly owns properties bulk leased to the United States federal government and other government occupants.
The money per share for the deal is less than First Potomac’s stock closing rate yesterday (June 27) of $11.35/ share, and lower than the closing rate of the last five trading days. First Potomac’s stock has actually traded as high as $11.44/ share over the last 12 months.
First Potomac likewise concurred not to pay any circulations to its investors before the transaction with GOV closes.
First Potomac preserves the list price represents a premium of 9.3% to its 30-trading day volume weighted average price ended April 24, 2017, the last trading day before market rumors concerning a possible sale started circulating. On April 24, FOP stock closed at $10.61/ share.
The deal undergoes the approval of at least a bulk of FPO’s typical investors.
First Potomac’s board tapped Milkovich to take over as the REIT’s CEO following the abrupt resignations of previous CEO Douglas Donatelli and Chief Investment Officer Nicholas Smith in 2015. He formerly worked as primary running officer. First Potomac’s market capitalization had taken a hit from investors concerned over the slow leasing activity in its portfolio of mostly rural office around Washington, DC, which experienced an uncommon slowdown in workplace leasing activity as an area coming out of the economic downturn.
First Potomac owns a portfolio of office and commercial properties mostly in the city Washington, DC, market. The portfolio includes 39 homes (74 structures) with 6.5 million square feet that was 92.2% leased as of March 31, 2017. The REIT reported that federal government and other investment-grade occupants represent 43.9% of its overall annualized rental income.
“Over the last 18 months we have worked vigilantly to refine the business’s portfolio, strengthen the balance sheet, and enhance First Potomac’s corporate governance,” stated Milkovich in a statement announcing the sale arrangement. “This deal and the appealing worth that investors will receive shows the effective execution of these efforts.”
“The acquisition of FPO allows GOV to broaden its company technique to consist of the acquisition, ownership and operation of office homes leased to both federal government and economic sector occupants in the metropolitan Washington, DC, market location,” said David Blackman, president and chief operating officer of Newton, MA-based GOV. “Outside of the urbane Washington, DC, GOV will continue to focus on obtaining, owning and operating office homes that are bulk rented to federal government renters.”
Government Characteristic Earnings Trust said it expects to realize $11 million of annual basic and administrative expenditure cost savings compared with FPO on a stand-alone basis.
GOV anticipates to fund the offer by offering shares and extra financial obligation, including senior unsecured notes, home mortgage funding and/or bank financial obligation, as well as earnings from the sale of some homes.
Citigroup is serving as special financial advisor to GOV and Sullivan & & Worcester LLP is serving as legal counsel to GOV. Wells Fargo Securities/ Eastdil Guaranteed is functioning as special monetary consultant to First Potomac, and Hogan Lovells United States LLP is functioning as legal advisor.