When it comes to success, Corporate Office Properties Trust has certainly found the key. It constructs and leases buildings to the federal government and defense contractors and locates them in select, geographic areas.
One of these areas is the Westfields Corporate Center in Chantilly, and COPT has already become a major player there. Just ask Bill Keech, who built Westfields.
"I'm very pleased that they have buildings and properties [here]," he said. "Corporate Office Properties Trust is the caliber of company I like to see in Westfields. It has experience and has created a similar office park in Maryland that stresses the same quality of development that Westfields does."
COPT is a suburban-office, real-estate investment trust. Its stock is traded on the New York Stock Exchange, and it provides a way for individual investors to invest in real estate without actually owning it.
"We have $1.6 billion in total enterprise value and own 118 properties in the Mid-Atlantic," said Randall Griffin, president and chief operating officer of the company. "About 70 percent is in the Greater Washington region."
COPT OWNS 8.5 million square feet of office space in Chantilly and along the Dulles/Route 28 Corridor. "We own 12 percent of that market, making us the largest owner," said Griffin. "We didn't start investing in Northern Virginia until November 2001, and today we've invested $253 million in Reston, Herndon and Chantilly — and this is just the beginning."
The company owns 1.2 million square feet in the National Business Park in Annapolis Junction, Md. Directly across from the National Security Agency, it boasts tenants such as Boeing, Titan, Booz-Allen & Hamilton and Raytheon. And, said Griffin, "We're trying to duplicate that here [in Westfields]."
* The first building it purchased in Westfields, in November 2001, was the former headquarters of Contel. A 56-acre site, it's now called Washington Technology Park and houses Computer Sciences Corp. and General Dynamics. It's 470,000 square feet and is fully leased — and the grounds have room for expansion.
* Next came The Greens I and II, 311,000 square feet of office space bought in August 2002. Building I houses The Aerospace Corp. and Bldg. II is the Northern Virginia home to Boeing, Titan, Booz-Allen & Hamilton and Raytheon.
* The 88,000-square foot Greens III followed. It's a three-story building earmarked for The Aerospace Corp., which has a 10-year lease. Construction began Aug. 1 and should be completed by August 2004.
* COPT bought The RidgeView trio of buildings in July. Building I, 127,000 square feet, houses several small tenants. Rolls Royce operates out of the 69,000-square-foot building II, and government contractor Omniplex occupies the same-size building III.
* In August 2002, COPT purchased the 33-acre parcel that originally was to have been WorldCom's headquarters. It's in the middle of Conference Center Drive and will be called Park Center.
The tenants will be government agencies and/or defense contractors. "We're designing a secured campus, 550,000 square feet," said Griffin. "It will meet all the security [standards] required by the [federal] government."
* COPT ALSO plans a 210,000-square-foot expansion of the Washington Technology Park. It's already submitted applications to the county for building permits and hopes to start construction in early 2004. As always, Griffin expects no problem leasing the space. "There's a lot of demand," he said.
The company's phenomenal success is all the more striking, given the fact that the Northern Virginia office market is 17 percent vacant, but COPT's buildings are full. "As a company, we're 92 percent leased and expect to return to 94 percent by year end," said Griffin. And he's quite frank about the reason.
"We have large tenants," he explained. "A lot are defense contractors that have to be in these [business] parks to service their clients, so we have a significant advantage."
As of June, 39 percent of COPT's entire revenue was from the intelligence community and defense contractors. In September, that figure rose to more than 40 percent.
"We developed a relationship with them, over 12 years ago, and understand their business," said Griffin. "We do a lot of work for them, and we're fair and responsive to their needs."
Computer/communications and information/communication companies are also important tenants, as are those in the fields of consulting/professional services and health care/pharmaceuticals. Some 63 percent of COPT's revenue comes from tenants such as the federal government, Computer Sciences Corp., AT&T, Unisys, Northrup Grumman Corp., Ciena Corp., VeriSign Inc. and Booz-Allen & Hamilton.
"On average, we have five leases per tenant for the top 20 companies [in our buildings]," said Griffin. And these companies average 58,000 square feet per lease.
It's no wonder, then, that COPT is yielding great returns for its investors. Over the past four years, said Griffin, his company consistently outperformed the Morgan Stanley REIT (real-estate investment trust) Index, the Dow Jones Industrial, S&P 500 and NASDAQ.
"In a tough market, between 1999-2002, we've been able to give investors a 172-percent return on their investment," he said. "We're the No. 1, equity [common stock] REIT in the country. Only eight companies in the past four years did better on the whole, S&P 500 than we did."
And this year's good news is that the percentage of 2003 investment returns is already higher than last year's — and the year is not yet done. "We should be at about a 220-230-percent return for five years [including 2003]," said Griffin. "It's pretty remarkable."
He said COPT stock began at $14.03/share and, as of Sept. 18, was at $18.50/share. The company even pays dividends and has increased them, too, by 82 percent over the past four years.
"We build and buy and, when we start the year, we know what 90 percent of our revenue will be," said Griffin. "It's a very safe, solid business."
COPT chose to develop in the Westfields Corporate Center because it attracts the very tenants the company specializes in serving — those geared off the government and the defense industry.
"Obviously, their activity and interest shows they're optimistic about the future, and I think that bodes well for all of us around here," said Supervisor Michael R. Frey (R-Sully). "If there are people spending that kind of money, it means there's a lot going on here."