Roger Waesche, president and CEO of Corporate Office Properties Trust (NYSE: COPT), joined REIT.com for a CEO Spotlight interview at REITWorld 2012: NAREIT’s Annual Convention for All Things REIT at the Manchester Grand Hyatt in San Diego.
Corporate Office Properties Trust, headquartered in Maryland, focuses primarily on serving the specialized requirements of U.S. government and defense information technology tenants in the Washington, D.C., region.
Waesche said the threat of sequestration, the overall government budget deficit and questions surrounding government spending have created a “cloud of uncertainty” during the past year and a half for many of the company’s tenants.
“Our particular customer constituency has been very unwilling to make long-term commitments to space, and they’ve taken the opportunity to defer decisions as best as they can, so there is some pent-up demand,” he said, adding that it will probably take until the summer of 2013 to clear up the situation concerning government spending.
However, there are pockets of opportunities in cyber security in the Baltimore-Washington corridor where Waesche said he anticipates growth.
“There are also pockets of growth in Huntsville, Ala., where there are certain missions that have been given appropriations that have allowed them to push forward, notwithstanding the uncertainty in the overall budget,” Waesche said.
The company has spent time repositioning its balance sheet in 2012 by taking advantage of the bank term-loan market and extending $370 million in debt. Corporate Office Properties Trust sold more than $300 million in assets in 2012 and held a preferred offering and an equity offering. Those also allowed the company to pay down its debt.
“So, as we go into 2013, we have zero outstanding on our $800 million line of credit and we have very minimal debt securities,” he said. “In terms of overall leverage, over time we would like to reduce it and we’ll do that through asset sales over the next year or so.”
When it comes to new development, Waesche said the company has been working with some of its customers on longer-term commitments that they hope to act on once the government budget uncertainty dissipates.