- The Washington Times - Thursday, July 28, 2005

Mid-Atlantic real estate firm Corporate Office Properties Trust yesterday reported second-quarter profits that show the war on terrorism can be good for business.

Revenue rose to $78.65 million, or 33 percent higher than the second quarter of 2004.

“We are reporting an excellent quarter,” Randall M. Griffin, the company’s chief executive officer said during a conference call with industry analysts.

The Columbia, Md., real estate investment trust is one of the Washington area’s largest office property owners, with 147 properties totaling 12.2 million rentable square feet.

Much of its office park space is leased to government defense agencies and contractors.

Defense agencies and contractors make up about 47 percent of the company’s customers. The rest are corporate clients from technology or other companies commonly found around the Beltway.

Often they work in buildings Corporate Office Properties Trust designed with blast-proof glass to protect against bombs, a special film embedded in windows to prevent eavesdropping with microwaves, and a lack of exterior signs to avoid giving clues about the business of its inhabitants.

Net income increased in the second quarter of 2005 to $9.12 million (14 cents per diluted share) from $8.84 million (13 cents per diluted share) a year earlier. Diluted shares take into account the value of stock options and warrants.

In each of the last three years, the company’s stock value on the New York Stock Exchange (OFC) has risen about 41 percent. Its shares rose 64 cents yesterday to $33.52.

“They targeted certain areas that would grow due to increased federal spending on defense and intelligence agencies,” said Mary Petersen, senior adviser for Cassidy & Pinkard, a Washington regional commercial real estate firm. “They’ve obviously had a good strategic vision expanding in their market.”

The company is poised to profit from Defense Department plans to relocate many of its facilities under the Base Realignment and Closure Act (BRAC).

Under BRAC, intelligence and military facilities in densely populated areas, like Washington, would be moved into suburban campus settings where they can be more easily defended.

“Overall, we think it’s a net positive for us,” Mr. Griffin said.

If Congress approves, one of the moves would relocate about 5,300 employees to Fort Meade, Md., and the surrounding area.

Fort Meade is near the National Security Agency and next to the National Business Park, a 230-acre, 1.5 million-square-foot office park built by Corporate Office just off the Baltimore-Washington Parkway near Baltimore-Washington International Airport.

All of the property is leased to the tenants such as defense contractors Titan Corp., Booz Allen Hamilton Corp. and General Dynamics Corp. Four new buildings are under construction.

“They’ve been systematically buying product adjacent to government defense facilities,” said John Guinee, managing director at Legg Mason Wood Walker, a financial firm. “Their growth is very, very solid because of an excellent land inventory.”

Corporate Office Properties Trust owns another office park in Chantilly, near Washington Dulles International Airport. Its tenants include the National Reconnaissance Office, which controls government satellites.

It plans to build another $250 million to $300 million office park on 600 acres at the former Fort Ritchie Army base in Cascade, Md. It also is expanding into the San Antonio and Colorado Springs areas.

One of trust’s biggest customers is the U.S. Army Corps of Engineers, although few of the engineers actually use the buildings. Instead, they prepare them for intelligence operatives whose names and agencies Corporate Office Properties Trust might never know.

The company started as a real estate investment trust called Royale Investments in 1988 for retail clients. After it merged in 1998 with Constellation Real Estate Group Inc., the company refocused on defense contracts, propelling it to its current growth rate.

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