COPT Continues Tapping Intelligence Market Near NSA

As large amounts of recently built office space sit empty in the region, with vacancies at 20%, some of the highest rates in a decade, Corporate Office Properties Trust (COPT) last month accomplished two rare feats in the current market. The Columbia office developer had a festive groundbreaking for a new office building, with music and food for hundreds of guests, and even rarer still, the 157,000-square-foot building was fully leased before the shovels hit the ground.

The tenants for the $26 million structure at 2720 Technology Drive in the National Business Park in Annapolis Junction at Route 32 and the Baltimore-Washington Parkway, will be more than 600 employees of the Titan Corp.'s National Intelligence Solutions division. This reflects COPT's long-term strategy to be the landlord for government, defense and intelligence contractors.

Last year, this sector represented 39% of COPT's $132 million in rental revenues. "We believe it will approach 50% of our revenue by the end of the year," COPT President Randall Griffin told shareholders at the company's annual meeting in May.

The company, the largest owner of office space in the Baltimore-Washington corridor, 95% of it occupied, and the third largest taxpayer in Anne Arundel County after the utility companies, also continued its foray into the Northern Virginia market. Last month it paid $71.2 million for a 404,000-square-foot building in Herndon, Va., fully occupied by VeriSign, a large provider of infrastructure services for the Internet and telecommunications carriers. In mid-May, COPT had $160 million in offers out on office buildings, and "none of these properties are on the market," Griffin said, yet the company is able to make the acquisitions about half the time.

The company sold 5.2 million of common shares to finance the Virginia purchase, and while the COPT share price took a brief tumble at the end of May, it returned within two weeks to all-time high values.

At the groundbreaking, Griffin referred to National Business Park as the "crown jewel of the company," a project developed by Constellation Real Estate. COPT already owns all 10 office buildings in the park and is completing its 11th building, a 120,000-square-foot building at 140 National Business Parkway. Griffin said, "you'll see us continuing construction starts later this year" in a newly opened 108-acre addition to the park that was once the Cedar Knolls detention center and will accommodate another 1.3 million square feet in new space, nearly doubling the space it already owns there.

The Titan Corp. tenants typify the growth that COPT is expecting in the defense and intelligence sectors. "This has been quite a journey," said division president Peter Ward. In 2000, "we were in a warehouse in Columbia." The company division moved to Annapolis Junction only last year, according to Mary Jo Potts, corporate vice president for administration, who traveled from the company's San Diego headquarters for the event.

Titan Corp. is a $1.5 billion company with 10,500 employees, and is now one of the 15 largest defense contractors for information technology. In the last two months, it received "the largest single award in Titan history," said Potts, open-ended, long-term contracts from the Defense Threat Reduction Agency to provide engineering services related to many aspects of weapons of mass destruction, including nuclear weapons.

The Titan folks on Technology Drive will support the nearby National Security Agency with professional services, systems engineering and hardware, but "our principal focus is training," Ward said. The division is a subcontractor on both the Groundbreaker and the Trailblazer programs, major outsourcing initiatives at NSA, the Department of Defense's main signals intelligence gatherer and also its main guardian of information security. Ward said 90 to 95% of his staff have bachelor's degrees, and 30 to 35% have advanced degrees.

The new defense contracts in the area have created intense demands for engineers and scientists who can gain Top Secret security clearances. "You never have enough people," Ward said. But "we have almost no attrition," and "we're doing fairly well in hiring." Yet it still takes 18 months to two years to obtain the highest security clearances, while "secret clearance only take a month," he said. "The agency is helping us to get more work that can be done without top secret clearance," and the company is trying to identify potential hires among students still in school so they can begin the clearance process early.

But when the corporation runs an employment ad in the Washington Post, despite specifying that U.S. citizenship is required, Ward said, "70% of the resumes will be from foreign nationals."