- The Washington Times - Thursday, October 16, 2003

Two-and-a-half years ago, executives at Corporate Office Properties Trust had a vision that — at the time — was downright laughable.

They wanted to expand the Columbia, Md., company’s portfolio of office properties to Northern Virginia, home of half-empty buildings and landlords desperate to replace tenants that were lost to the collapse of the technology sector.

It was a risk that is starting to pay off. Corporate Office Properties has spent more than $400 million on office buildings since the beginning of 2001, nearly two-thirds of it on buildings in Northern Virginia. The results have been surprising: Vacancy rates of less than 10 percent and investor returns that have outperformed the Dow Jones, Nasdaq and S&P; 500.

Corporate Office Properties bought three buildings in Chantilly totaling 266,000 square feet in July, and bought two buildings with 167,000 square feet in Herndon.

The company now owns nine buildings in Northern Virginia, with three more on the way. Three of the existing buildings are located in the Herndon submarket, which is still struggling with record-high vacancy rates. But those three buildings—comprising 570,000 square feet — are more than 97 percent leased.

“You have a market that’s nearly 17 percent vacant and here we are full and expanding,” said Rand Griffin, the firm’s chief executive officer.

The company’s secret: a heavy reliance on government-oriented tenants, which are stable, credit-worthy and willing to sign long leases. About 39 percent of the company’s tenants are either federal government agencies or major defense contractors.

Corporate Office Properties Trust is sticking to a philosophy it started in the area between Washington and Baltimore, where tenants flocked to suburban office parks near Fort Meade and the National Security Agency. The company owns about 70 buildings in Maryland, including 11 fully leased buildings in the National Business Park, near Route 32 and the Baltimore-Washington Parkway.

The lure of Virginia was the National Reconnaissance Office, which builds and operates the country’s surveillance satellites. Corporate Office Properties now owns six buildings in the Westfields Corporate Center, located in Chantilly just minutes from the NRO and Washington Dulles International Airport.

“Our tenants are corporate credit tenants,” Mr. Griffin said. “We have security clearance, which is important, and we have multiple relationships.”

Corporate Office Properties has three more properties under development or in the design stage at Westfields Corporate Center, including one 88,000-square-foot building that is fully preleased. The company also has plans for three more buildings totaling 376,000 square feet at the National Business Park.

In other news …

• New Boston Fund and the Meridian Group sold Virginia Square Plaza, a 10-story, 158,230-square-foot building in Arlington. Principal Financial Group paid $51.8 million for the property.

• Akridge Real Estate Services and Seaton Benkowski announced they would fund and develop two downtown projects — a 163,000-square-foot office and retail project called Carroll Square at 975 F St. NW, and a 300,000-square-foot office building located at 700 Sixth St. NW.

Tim Lemke can be reached at tlemke@washingtontimes.com or 202/636-4836.

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