Corporate Office Properties Trust announced that it sold off 1.5 million square feet of office space for $179 million this month as it continues its move out of suburban Maryland business parks and focuses more on federal security tenants and private military contractors.
The Columbia company’s sales list included 24 operating buildings plus its troubled project at Fort Ritchie in Washington County, where it wrote off a $28 million investment as a total loss last year after reports of contamination stalled plans for a mixed-use development at the former base. Also listed among the sold assets is 400 Professional Drive, a 130,000-square-foot building in Gaithersburg.
“We have completely exited Montgomery County and Fort Ritchie,” Roger Waesche, COPT’s president and CEO, said in a second-quarter earnings conference call. “We continue to recycle proceeds into strategic projects with visible demand and where we believe we will continue to see long-term demand once the federal budget issues are resolved.”
The company does not have an ongoing acquisition target, but said it continues to pursue opportunistic buys, including its $49.6 million purchase of a 202,000-square-foot class A building in Herndon, Va., that is 99 percent leased to General Dynamics Information Technology.
While the company has expanded investments in military and security office projects in Colorado and Alabama, its business park footprint has shrunk, especially in Maryland. The percentage of its revenues derived from properties in the state surrounding Washington and Baltimore has fallen to 11 percent, down from 19 percent in March 2011, Waesche said.
Since announcing its strategic reallocation plan in April 2011, COPT has disposed of $394 million of properties comprising about 3.2 million operational square feet and adjacent land, realizing net proceeds after closing adjustments and repayment of property-specific debt of about $323 million. These properties represented 31 percent of the firm’s total leases, but only 15 percent of its consolidated operating square feet that were in place at March 31, 2011.
Asset sales are the firm’s best source of capital, and the company still has about $170 million worth of properties available for disposal under its reallocation program. But no more sales are planned this year.
In the short term, the company remains challenged by political uncertainty, with a 10 percent cut in federal military spending threatened if Congress doesn’t act by the end of the year. But ongoing programs that have added tens of thousands of jobs in Maryland are beginning to pay off for COPT, which has invested heavily in Howard and Anne Arundel counties near Fort Meade and in Harford County near Aberdeen Proving Ground. Both bases were big winners in the Pentagon’s most recent realignment and closure program.
Waesche cited a recent $2 billion procurement that was released to a prime contractor connected to the Defense Information Systems Agency relocation to Fort Meade as a spur to office demand at COPT’s National Business Park at the base’s southwest gate and Arundel Preserve at the northwest gate.
In addition to returning the 591-acre Fort Ritchie property to developer PenMar Development of Cascade, COPT sales included the following:
— A 120,000-square-foot building in Frederick.
— 13 buildings in Columbia totaling 352,000 square feet.
— A 75,000-square-foot building in Anne Arundel County.
— Five locations in Baltimore County totaling 840,000 square feet.
Bank trades foreclosed apartments for $58M
A joint venture between Dragone Realty Investments of Laurel and a fund managed by Pacific Coast Capital Partners bought a 930-unit garden apartment complex in District Heights for $58 million, according to CBRE Capital Markets, which brokered the deal.
The Residences of Suitland Parks was sold by Federal Home Loan Mortgage Corp., which acquired it at a foreclosure sale last year for $62 million, state records show.
The circa 1960 property was marketed by CBRE as a turnaround asset, offering large units that are far below market rents for modern, class A apartments. The average unit is 950 square feet and rents for $1,061 per month. The effective rent for class A units in southern Prince George’s County is $1,620, according to Delta Associates midyear market report.
“Residences of Suitland Parks, in dire need of a capital commitment for some time, is now poised for the kind of sound buyer planning and investment that will complete a slate of property updates and compliment (sic) the redevelopment of rental communities in that sub-market,” Mike Muldowney, executive vice president at CBRE, said in a news release.
The apartment complex is about three miles from the Suitland Metro station at 6501 Hil-Mar Drive and two miles from the newly renovated Census Bureau headquarters.
“The financing structure allows maximum flexibility for property renovation and upgrades, as well the time necessary to properly manage lease-up,” said Maury Zanoff, executive vice president of CBRE Capital Markets Group.
Firm pays $12M for Landover industrial building
Exeter Property Group of Plymouth Meeting, Pa., paid $12 million for an industrial building in Landover, according to CBRE, which arranged the sale.
NPV Direct Invest of Boston sold 7100 Old Landover Road, a 251,227-square-foot warehouse whose major tenant is the federal Department of Education.
The property offers quick access to the Capital Beltway, sitting at the entrance to the Ardwick/Ardmore Industrial Park at Routes 50 and 202.
“In-fill locations, particularly inside the Washington, D.C., beltway such as 7100 Old Landover will be able to maintain high occupancy levels and push rental rates as tenants prefer to locate as close as possible to Washington,” CBRE Senior Vice President Bo Cashman said in a statement.
Three new leases at Atrium at Rock Spring in Bethesda
Lincoln Property announced three new leases at the Atrium at Rock Spring Park in North Bethesda, including 57,604 square feet for the National Institute of Allergy and Infectious Diseases.
The 235,417-square-foot building at 10401 Fernwood Road also has renewals of 15,558 square feet for Science Applications International and 22,749 square feet for SRA International.
The Atrium is owned by a joint venture led by Meritage Properties and GTIS Partners.
Two Baltimore Inner Harbor properties sell at auction
The Brookshire Suites, a 97-room hotel in Baltimore’s Inner Harbor, sold for $7.85 million at auction Thursday, marking its second foreclosure sale in less than a year.
The sale was posted by auction.com, which did not disclose the buyer. The property is on the corner of Lombard and Calvert streets, two blocks north of the water.
Brookshire Lodging defaulted on a $7.65 million loan in April 2011 and an affiliate of lender Morgan Stanley Mortgage Capital bought back the property for $6 million in October.
Auction.com also conducted the online auction for the Sun Life building three blocks away from the hotel. Sky Management Services bought the property at 20 S. Charles St., marking the second foreclosure auction of the property in little more than a year.
LNR acquired the 12-story, 121,438-square-foot building in June 2011 for $4.5 million, state records show. CSG Partners defaulted on a loan in 2011 after paying $9.3 million for the building in 2008.
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