12/17/2014 | by
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Government Properties Executive Says Tenants Using Space More Efficiently

David Blackman, president and chief operating officer of Government Properties Income Trust (NYSE: GOV), joined REIT.com for a video interview at REITWorld 2014: NAREIT’s Annual Convention for All Things REIT at the Atlanta Marriott Marquis.

Government Properties is an office REIT that focuses on properties that are leased to federal and state government agencies in the United States. Blackman said fundamentals in that segment of the office market are “pretty good.” Like many office tenants, government agencies are seeking more efficient use of their space, according to Blackman.

“We’ve been spending a lot of time with our tenants trying to make sure that they’re fully utilizing the space and that we can meet their needs as their leases come up for expiration,” Blackman said.

Blackman described current pricing levels as “aggressive,” with assets trading at “historically low” cap rates in light of the abundance of capital available in the market.

In terms of evaluating potential acquisitions, Blackman said the firm specifically targets assets that are majority-leased to government tenants.

“We believe that one of the things investors like about our company is the safety and surety of our distribution, so we don’t think it makes sense to take the risk of owning a building before we have a tenant in place,” he said.

Addressing misperceptions about Government Properties, Blackman pointed to the idea that the firm’s government tenants are either downsizing or preparing to move out of their current facilities. However, Government Properties maintains a strong tenant retention rate, according to Blackman. Whereas office companies tend to look at a retention rate of approximately 70 percent as high, according to Blackman, Government Properties has a retention rate of roughly 85 percent.