- The Washington Times - Monday, October 4, 2004

Corporate Office Properties Trust has an edge in providing real estate for government and defense companies, according to analysts covering the Columbia, Md., company.

But several say the real-estate investment trust’s stock is nearing its price peak for the year.

Corporate Office, which owns 135 office properties, has spent $230 million in acquisitions this year.

Corporate Office entered Tysons Corner last month with the purchase of the Pinnacle Towers for $112.5 million. Additionally, it expanded its presence in Chantilly last week by buying an office building in the Westfields Corporate Center for $21.7 million.

The company has an attractive business with the federal government because of its ability to build and manage highly secure office properties, said analyst Andrew Rosivach with New York investment bank Credit Suisse First Boson LLC.

But Mr. Rosivach, who rated the company as “underperform,” said he was concerned the federal government’s defense spending would drop from its current levels and cut into Corporate Office’s revenue.

“Dependence on one industry, even with a positive outlook, has concentration risk if the outlook becomes sour,” said Mr. Rosivach in his most recent report. Mr. Rosivach does not own any stock but Credit Suisse has business with Corporate Office.

Forty-five percent of Corporate Office’s business comes from government agencies and defense contractors, said company spokeswoman Mary Ellen Fowler.

Francis X. Greywitt III, an associate vice president at KeyBanc Capital Markets, countered that the company’s dependency on government spending is not a large risk.

“It looks like the growth is still there in the intelligence and defense agencies,” he said, rating the company as an “aggressive buy.”

Mr. Greywitt does not own any of the stock. KeyBanc, a Cleveland division of McDonald Investments Inc., is seeking a business relationship with the company.

But senior REIT analyst Richard Anderson said investors should not expect the stock to have a lot of upside movement. He rated the company as “neutral.”

“I’m not suggesting to sell the stock, but a lot of the company’s positive news is priced into the stock already,” said Mr. Anderson with Maxcor Financial Inc., the New York broker-dealer subsidiary of Maxcor Financial Group Inc.

Mr. Anderson does not own any shares of Corporate Office and Maxcor has no business with the company.

Corporate Office’s shares closed yesterday at $26.51 on the New York Stock Exchange, up $1.44 from a week earlier at $25.07. The stock mainly has stayed in the $20 range for the last six months.

The spate of acquisitions last month followed a stronger second quarter for the company. Sales for the quarter ended June 30 rose 32 percent to $53.9 million from $40.9 million in the comparable 2003 period.

Funds from operations, a good measure of REIT income, also surged 44 percent to $21.4 million (50 cents per diluted share) from $14.9 million (38 cents) in the previous year. Diluted earnings include the value of convertible warrants and stock options.

The company reported profits of $4.4 million (13 cents) compared with a loss of $7.5 million (30 cents) a year earlier.

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