A Philadelphia company has become the latest out-of-town property investor to acquire a slice of Baltimore's commercial real estate pie from local ownership, adding velocity to a trend that began late last year.
Corporate Office Properties Trust's $72 million acquisition of 12 buildings near the Baltimore-Washington International Airport marks its first purchase since it completed a public offering late last month.
"We've developed a strategy to expand nationally, and we're using Baltimore as the jumping-off point to begin executing that strategy," said Clay W. Hamlin III, the real estate investment trust's president and chief executive. "It's an attractive acquisition that we believe has an upside in terms of rental rates, and it makes some sense because it's less than 100 miles from our headquarters."
The collection of Linthicum buildings, totaling 815,400 square feet, increases the REIT's portfolio by 44 percent.
With the purchase, announced yesterday, Corporate Office Properties owns 29 buildings with 2.7 million square feet. The REIT, formed last year when Royale Investments Inc. spent $170 million to buy out Shidler Group's mid-Atlantic office portfolio, also owns buildings in Philadelphia, Harrisburg, Pa., and Princeton, N.J.
The company, which raised $78 million through an offering April 23, has a total market capitalization of about $300 million, Hamlin said.
The transaction involves the majority of properties developed for $140 million by Airport Square Cos. on a 220-acre tract beginning in the late 1960s.
In the past year, Highwoods Properties Inc., Berkshire Realty Co. and First Industrial Realty Trust -- founded by Corporate Office Properties' Chairman Jay H. Shidler -- have spent nearly $300 million to acquire the commercial portfolios of local developers Riparius Development Corp., Questar Properties Inc. and P. F. ,, Obrecht & Sons, respectively.
"It's an excellent deal for them," Gregory E. Masi, an associate vice president of the Carey Winston Co., a Washington-based real estate company, said of the Corporate Office Properties purchase. "The properties have premier locations near the airport, and they have an extremely well-located road network, with public transportation, access to both Baltimore and Washington and lots of hotels nearby.
"In the next three years, they should be able to achieve significant returns on their investment," Masi added.
As part of its acquisition, Corporate Office Properties intends to invest about $2 million to upgrade the Airport Square buildings, which are currently 97 percent occupied by Ciena Corp., Booz-Allen & Hamilton, the National Security Agency and other tenants.
"We could find more glamorous trophy properties out there, but we're very comfortable with this transaction," Hamlin said.
The REIT plans to spend $450 million this year to boost its portfolio in an effort to control more than $1 billion worth of office projects.
Pub Date: 5/05/98