Company seeking real estate dominance

COPT has 9 commercial properties in Howard

Howard Business

January 15, 2001|By TaNoah Morgan | TaNoah Morgan,SUN STAFF

As crane heads rise out of a dirt pit in the Gateway office park and workers erect a building near the park's entrance, Randall M. Griffin gets his company one step closer to being No. 1.

Corporate Office Properties Trust, a real estate investment trust, is making a name for itself among REITs traded on the New York Stock Exchange. It already has more class-A office space in the Baltimore-Washington corridor than any other commercial landlord, and the company has established a huge footprint in the market surrounding Baltimore-Washington International Airport.

But Griffin wants something more in the county where his company still lags behind the Rouse Co. in the value of its commercial real estate. He wants dominance.

"The dominance is a big issue," said Griffin, president and chief operating officer of the small REIT that analysts say has done a decent job of making its presence known in markets it has entered.

"It matters a lot in office real estate," Griffin said. "You have large office parks with tenants who continue to grow. They want a landlord who can accommodate space. If they have to consolidate or move quickly, they know they can come to us."

The philosophy has paid off locally, where COPT had 24 percent of the market share in the Baltimore-Washington corridor by the third quarter of last year. That number is expected to increase, Griffin said.

Nine of those properties, with a total of 811,000 square feet of space, are in Howard County, and many of his clients - including Ciena Corp. and Magellan Behavioral Health Inc. - are the companies that have made the county a high-tech hotbed. This year, the company expects to be the fourth-largest taxpayer in Howard, holding a 10 percent market share, Griffin said.

County records show that COPT didn't even appear in the top 10 in the list of highest taxpayers as of June last year, but each of the properties is held under the name of a different limited liability corporation, and not COPT, making it difficult for the county to track the company as a taxpayer.

Whether county budget managers recognize the company's tax base or not, COPT has "served the county well," said Dick Story, chief executive officer of the Howard County Economic Development Authority.

"They have been the single most recent best partner for economic development" in the county, Story said. "Much of the county's success has been driven by the fact that they have been willing to risk their capital on Howard County office space. Because of that, a number of really good companies have moved to Howard County or been able to expand and stay" in Howard.

From the time that Constellation Real Estate - an arm of Baltimore Gas and Electric - merged with COPT in 1998, the emerging company has grown to dominate markets in Maryland, Pennsylvania and New Jersey, growing from $190 million in assets to $824 million by the end of the third quarter last year, Griffin said.

Dividends have increased along with earnings, company records show, earning it a strong nod from investment firms.

"COPT is being viewed seriously by investors," said Anatole Pevnev, an analyst with McDonald Investments who said the company's share growth rate based on funds from operations was 10 percent last year. "They work well with the county governments. COPT is rounding out the Gateway property and making it an integral part of Columbia."

Some analysts think the company is ripe for other, larger REITs to buy, if COPT doesn't buy some smaller groups first.

"They will either become part of a larger company or grow," said David Fick , an analyst with Legg Mason Wood Walker Inc., who said COPT is one of the smaller REITs on the New York Stock Exchange. "There are very few other REITs that can survive at this level."

Although some analysts worry about the company's high debt - COPT carries a 56 percent debt-to-market capitalization ratio - many investment firms, including McDonald and Legg Mason Wood Walker, rate the company a buy.

"This is a very professional management team," Fick said. "They have a highly focused market group. They've got a defensive portfolio with above-average growth. New tenants coming into the market consistently look to them."

Griffin said the debt is not a problem for the company because 65 percent of it is long-term, fixed debt and his clients have long-term leases. In the future, Griffin said, he plans to continue buying and building in Howard County. He predicts COPT will own 20 office buildings in Howard in a year.

"We're very committed to growing this company," he said.

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