Q&A: Corporate Office Properties Trust CEO says firm well positioned for BRAC, government cutbacks

By Marjorie Censer
Monday, November 1, 2010

Randall M. Griffin is chief executive of Corporate Office Properties Trust, a Columbia-based real estate investment trust that specializes in large office parks next to government agencies.

The company has a major business park in Annapolis Junction, near Fort Meade, and plans to soon start building office space near the new National Geospatial-Intelligence Agency campus in Springfield. COPT is also increasing its role as a data center provider, buying a 233,000-square-foot data center in Manassas earlier this year.

The company's focus comes as the commercial real estate industry is being buffeted by the economic downturn; COPT itself reported last week that funds from operations, an important industry measure, had declined slightly from a year ago.

Capital Business recently interviewed Griffin. What follows are edited excerpts from that conversation:

How do you identify markets of interest?

We have evolved a strategy where we try and locate large office parks adjacent to government demand drivers ... Our game plan is that 65 percent of our revenue by 2012 would come from "super core," which consists of the U.S. government, the defense IT contractors that service the government and then the data that services both of those categories. ... Today, at the end of the second quarter, it was 57 percent.

COPT also owns data centers. Are you concerned about the government's initiative to consolidate data centers?

It's not really that they're reducing. They're trying to go to cloud computing and regionalization, recognizing that the data is actually increasing exorbitantly. ... We're right in the middle of exactly that trend, and we think it makes sense.

In general, is there a uniqueness to serving the government and defense contractors?

The first uniqueness is we can't talk about most of it, and that's part of the difficulty. ... You have to basically build SCIFs, which are [sensitive] compartmentalized information facilities that are then inspected and certified by the government and have to be run 24/7 by very exacting standards. ... You really have to make that decision in the front end -- whether you're going to design a building to those standards or not. I think very few people in the country understand that or do that, and yet there's a significant requirement and demand on the part of the government.

How do you identify areas that may be boom areas, such as Fort Meade?

We ... have built [the Fort Meade-area business park] into a very major park, where we've just broken into the third and final phase. When we're finished, it'll be a 5 million-square-foot office park. ... What we didn't anticipate -- but we're fortunate to take advantage of it -- is [Fort Meade] would be a major winner in the [Pentagon base realignment and closure program announced in 2005]. So now you have three additional agencies moving in and then also the Cyber Command has been set up there. ... We specifically went out after 2005 to try to secure the best locations that we could, tied into the BRAC announcements. At Aberdeen Proving Ground, ... we have a site right outside the north gate, which is [what] the contractors and employees use. ... At National Geospatial down in Springfield, we announced this year Patriot Ridge, which is basically 1 million square feet ... that overlooks the NGA building.

How do you position for potential defense budget cuts?

If you're a defense contractor who is in weapons systems, you may be at risk. Do you need more battleships? Do you need more aircraft carriers? Those are things that get reevaluated and either eliminated or delayed. ... If you are contractors that really support the intelligence operations and now cybersecurity, you're going to find that those by and large will not be decreased. That's where we operate.

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