Issuer: First Potomac Realty Trust (FPO)
Security: 7.75% Series A Cumulative Redeemable Preferred
Optional Redemption: 1/18/2016
Conversion rights: Upon the occurrence of a Change of Control, you will have the right (subject to the special optional redemption right to redeem your Series A Preferred Shares) to convert some or all of your Series A Preferred Shares into a number of common shares of beneficial interest, par value $0.001 per share (or equivalent value of alternative consideration), equal to the lesser of (NYSE:A) the quotient obtained by dividing (i) the sum of (x) $25.00, plus (y) an amount equal to any accrued and unpaid dividends, whether or not declared, to, but not including, the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a record date for a Series A Preferred Share dividend payment and prior to the corresponding Series A Preferred Share dividend payment date, in which case the amount pursuant to this clause (i)(y) shall equal $0.00 in respect of such dividend) by (ii) the Common Share Price, and (NYSE:B) 2.187 (the Share Cap), subject to certain adjustments and provisions for the receipt of alternative consideration.
As it is a re-opening, the price has to be adjusted in order to set the yield at market yields. The issue has been trading at $25.68 to yield 7.61%. Perhaps the price will be lowered to give incentive to buy the re-opening, but not by much.
To be honest, I am not a big fan of the REIT given their concentration in the DC area and their inability to cover fixed charges. Add this to the fact that the REIT has approximately an 81% occupancy rate (new purchases with lower occupancy rates - including one 99% vacant - have lowered the rate from their existing portfolio's 84%), and is active in buying new properties, and you have a recipe for underperformance (IMHO). There are other non-rated REITs that are more attractive from a yield standpoint (EXL-B at 8%, IRC-A at 7.9% for example - although a different sector, namely retail) and other better capitalized, more diverse office/industrial REITs available (DRE-L at 6.62% or PSB-R at 6.40%) although they have lower yields.
Just my thoughts, published on my instablog so my followers get the info instead of wider distribution.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.