COPT CEO Sees Strong Fundamentals in Core Office Markets

Roger Waesche, Jr., president and CEO of Corporate Office Properties Trust (NYSE: OFC), joined REIT.com for a CEO Spotlight video interview at REITWorld 2015: NAREIT’s Annual Convention for All Things REIT at the Wynn Las Vegas.

COPT primarily focuses on U.S. government tenants in the defense and information technology sectors. Waesche commented that pricing remains very strong for office product in the firm's core markets as a result of solid fundamentals and strength in the capital markets.

On the fundamentals side, supply is benign, and demand continues to grow, Waesche said. On the capital side, debt is readily available, according to Waesche. Meanwhile, underwriting is positive, he said.

Waesche pointed out that COPT made two opportunistic acquisitions in 2015. Since then, the company has been a seller. COPT has sold $154 million in assets real this year, with another $250 million in the queue to be sold either in 2015 or 2016.

“We won’t be an acquirer for some time,” he noted.

Meanwhile, Waesche emphasized that development continues to be the company’s engine of growth. From 2012 to 2014, COPT averaged 1 million square feet of development leasing per year, Waesche said, and the expectation is that COPT will get close to that number for 2015.

COPT also has a shadow development pipeline ranging from 800,000 square feet to 1.5 million square feet. This shadow pipeline involves working with tenants on build-to-suit projects.

“We think some of that will get realized, and we expect to have very strong development starts and leasing in 2016,” Waesche said.

Turning to the impact of mobile technology on the company, Waesche said the 75 percent portion of the portfolio that caters to the defense intelligence community has largely been immune, as much of the work in this sector needs to be done in secure offices.

In the 25 percent portion of the regional office portfolio that encompasses commercial tenants, Waesche said he sees a change.

“We’re starting to see the pendulum swing backwards. Culture, cooperation, teamwork and productivity are becoming very important influences to the corporate enterprise. Having the team together in one location is starting to be more important than having offsite working models,” he said.