Properties Leased to Government Tenants Sold for $231 Million

Properties leasing space to government agencies seems to be a “hot” trend (see the “Investcorp” article). Riding this wave is Government Properties Income Trust (GOV), which has just entered into a series of agreements to purchase 15 properties for approximately $231 million. The properties, which are being acquired from HRPT Properties Trust (HRP), are primarily leased by government tenants.

GOV is a former one hundred percent owned subsidiary of HRP, which still owns common shares of GOV. When GOV completed its final public offering in June 2009, it was given a right of first refusal to purchase HRP-owned properties that are, for the majority, leased to government tenants, including the 15 properties that are part of the recent agreement.

GOV expects to earn $20.5 million a year in annualized net operating income, including straight-line rents recognized under generally accepted accounting principles (GAAP). In addition, the purchases will bring tenant and geographic diversity to GOV. Eleven additional government agencies and one new state government tenant will be added to GOV’s tenant roster. GOV will gain properties in four more states; it currently owns properties in 20 states and the District of Columbia.

The purchases of the 15 properties are expected to close in phases by March 31, 2011.